ECB's Noyer said French banks are solid and well capitalized and among the most solid in the world. At the same time he also said that the French government has resources to sustain the system. The comments come after reports said the Belgian state, shareholders and Belgium's regional and municipal governments are working on a plan to put EUR 7 bln into Belgian Bank Dexia. Dexia has come under pressure after being forced to bail out FSA, its New York based bond insurance unit. French state owned Caisse des Depots et Consignations holds 11.9% of Dexia and French Finance Minister Lagarde said that it "will certainly take its reponsibility as a shareholder" while stressing that Dexia is a Belgian bank under Belgian supervision. The banking crisis is spreading to Europe and while Noyer seemed confidence that the U.S. will find a "good solution" to the crisis, he also said that the rejection of Paulson plan is "bad news".
Meanwhile, ECB's Gonzalez-Paramo said central banks will address funding issues. He added that the ECB's flexible framework has worked well and that coordinated actions have been effective at the short tend but admitted that "significant tensions persist in global money markets" and that volatility remains "elevated". The executive board member also urged markets to take notice of the pledge by central banks and governments "to take action as needed, individually and collectively" to protect the integrity of the financial system". Nothing in the comments that would suggest a change in the ECB's monetary policy.
