Bank of France Governor Christian Noyer said on Tuesday no French bank was close to bankruptcy and there was no reason for stock markets to collapse since the companies listed on them are solid.
Noyer, who is also on the European Central Bank's Governing Council, declined to comment on speculation that the world's main central banks would cut rates on Tuesday but said they needed to act calmly and avoid a pickup in inflation.
Western governments and central banks were facing demands for coordinated action on Tuesday after Australia responded to the escalating global financial crisis by cutting official borrowing costs sharply. "Everyone must understand that our banks are solid … and obviously none of them risk going bankrupt or even running into serious difficulty," Noyer told Europe 1 radio, adding that he saw no sign of people withdrawing their money from French banks.
"None of them are in a situation close to bankruptcy, far from it. French banks fundamentally have no problems and are fundamentally solid," he added, speaking before stock markets opened across Europe.
Noyer repeated President Nicolas Sarkozy's pledge that the state would ensure French depositors would not lose money in their bank accounts because of the financial market crisis.
He left open the possibility, however, that the amount officially guaranteed on French bank accounts would be increased from the current level of 70,000 euros ($95,130).
"Maybe we will do that. I don't know," he said when asked if the limit would be increased to 100,000 euros.
European stock markets suffered record losses on Monday, but Noyer said he saw no reason for markets to collapse, even though he said he did not know what would happen.
"We have no reason to think that the stock markets will collapse. There is no reason for that to happen. The companies behind them are companies that are fundamentally solid," Noyer said.
APPEAL FOR CALM
He declined to comment on interest-rate policy when asked if the world's main central banks had agreed to cut rates on Tuesday after Australia's slashed its benchmark cash rate by 100 basis points, its biggest single cut since 1992.
"I would say above all (world central banks should) do what they are doing, that is to say have a serene, thoughtful, grave approach, of course, and address the economic reality and the economy's needs. We absolutely must, for example, everywhere in the world, ensure there is no runaway inflation," he said.
Asked about the Bank of France's growth forecasts, Noyer said growth was currently "close to zero", adding: "whether in such and such a quarter it will be 0, -0.1, we can discuss it ad infinitum."
French gross domestic product fell by 0.3 percent in the second quarter and Economy Minister Christine Lagarde has said there is a real risk growth was negative in the third quarter, which would match the usual definition of a recession — two consecutive quarters of negative growth.
"We had a month of September which was a particularly tense month of September. Our hope is that during 2009, the economy will restart in Europe, in the United States, in France," he said.
Noyer said he supported Sarkozy's call for the leaders of the Group of Eight countries and some emerging market states to meet this year to overhaul the international financial system.
"I think the president's initiative of calling for a G8 meeting of heads of state and government is an excellent idea because we must at least show solidarity, a common will for action," he said.
There was no need in Europe, however, for a U.S.-style bank bailout scheme in Europe, he said, because the toxic debt that has plagued Wall Street firms was not as widespread across the Atlantic.
"The answer that was given was that we did not need a U.S.-type fund, and rightly so in my opinion," Noyer said.
