BNP Paribas’s Funding Gap in Italy, Spain Tops $37 Billion

BNP Paribas SA, France’s largest bank, provides at least 30 billion euros ($37 billion) of parent funding support to its operations in Italy and Spain, an amount it is trying to shrink to meet new liquidity rules.

“These exposures drag like millstones hanging around their neck,” said Jacques-Pascal Porta, who helps manage 500 million euros at Ofi Gestion Privee in Paris and owns shares in BNP Paribas. “In reality, reducing these financings is a way to face euro implosion risks.”

The attempt to pullback reflects the bank’s effort to defend itself against the risk, however remote, of an exit from the euro of any of the euro-region’s troubled countries. Concern about a breakdown of the euro was heightened last month as Spanish and Italian government bond yields soared.

BNP Paribas’s “overall funding gap to Spanish affiliates” is less than 7 billion euros and total cross-border funding to Italian operations, including its branch network Banca Nazionale de Lavoro, or BNL, and consumer-finance unit Findomestic, is about 25 billion euros, Chief Operating Officer Philippe Bordenave said on a call with analysts today.

“We have progressively re-localized the funding policy,” Bordenave said. “We are adapting the way we are working.”

Operation Details

BNP Paribas’s funding support to Rome-based BNL has fallen to 18 billion euros from close to 30 billion euros at the end of 2010 and the French bank will keep reducing it, Bordenave said.

In Italy, BNP Paribas also runs Findomestic, a unit providing vehicle leasing and personal credit, which has about 10 billion euros in assets, the COO said.

BNP Paribas plans to cut funding support to BNL through securitizations and selling debt securities to savers locally, the COO said. BNL is also resuming debt issuances under its own name, Bordenave said.

In Spain, BNP Paribas businesses include about 15 billion euros of corporate loans and a 50 percent stake in mortgages company UCI, a joint venture with Spain’s Banco Santander SA, according to a 2012 presentation on the bank’s website. UCI has assets of 11.8 billion euros.

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