Introducing the plan, the economy minister, Edmond Alphondry, stressed that the package had been devised in such a way that no taxpayers' money would be needed at any stage.
The arrangements constitute the second rescue of the troubled bank in two years, and involve a complete restructuring of the bank's finances and operations. The bank's losses are estimated at Fr50bn.
The rescue entails a state guarantee for Fr130bn of assets and loans, which will be moved into a separate state-backed company. It is anticipated that the bank's future profits will be used to cover most of the losses, and a proportion of the profits will be drawn directly from the bank on an annual basis.
The position will be reviewed in December 1997, and again in five years' time, when the question of the bank's privatisation will be considered. Mr Alphandry conceded, however, that it could take 20 years for the bank to cover its liabilities through the goverment's scheme.
In an attempt to narrow down its operations, Crdit Lyonnais will withdraw from all operations outside Europe, and in Europe will retain only its commercial banking arm. In future its activities will be concentrated in France. Large job losses are predicted. Thomson, the state-owned French industrial giant will keep its 20 per cent stake and equity account for its share of the losses.
First signs that the bank was in difficulty emerged late in 1991, and a parliamentary committee was set up to find out what had gone wrong. A rescue plan involving Fr23.2bn in public money and guarantees was implemented in 1993, and a new chairman, Jean Peyrelevade, was appointed to oversee restructuring.
Late last year, however, it became apparent that the bank's difficulties were far greater than had been thought and would need substantially more funds.
Yesterday, Mr Alphondry said that about Fr28bn in losses were the result of the property crash. A further Fr10bn losses stemmed from poor industrial investment.
He denied media reports that embezzlement had played a large part, although three former employees of Crdit Lyonnais affiliates have already been arrested and charged with fraud.
In a desperate attempt to prevent the Crdit Lyonnais debacle becoming an election issue, the French prime minister, Edouard Balladur, said earlier this week that those responsible for the losses should be found and punished. There is no sign, however, that anyone else will be implicated.
The parliamentary report on the losses two years ago was severely critical of the Jean-Yves Haberer, then head of the bank, and what were described as serious errors of judgement in lending - but found no grounds for suspecting criminal liability.
The seriousness with which the government is taking the current crisis at Crdit Lyonnais was evident from the way in which yesterday's rescueannouncement was handled. It was made by the minister , flanked by the current head of the bank, Mr Peyrelevade, and the head of the Bank of France, Jean- Claude Trichet.
All took pains to emphasise the principles behind the rescue:
o to ensure the bank's return to solvency
o to observe European competition policy
o not to give further grounds for other banks to feel that Crdit Lyonnais is unfairly subsidised
o the need to avoid any injections of taxpayers' money.
Five weeks before the first round of the French presidential elections, this last consideration is crucial - although many experts believe it is impossible.
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