French Prime Minister Edouard Balladur has called for heads to roll at the cash-strapped, state-backed bank Credit Lyonnais.
In a communique published last week, the prime minister called on economy minister Edmond Alphandery to find out which CL executives are responsible for the disastrous financial situation of the bank and “sanction” them.
Negotiations are currently going on to put together a second rescue package for Credit Lyonnais, which owns MGM and has a considerable cinema investment portfolio.
The bank is expected to announce 1994 losses of 10 billion francs ($2 billion), despite predictions in September from CL topper Jean Peyrelevade that the losses would not be more than $1.4 billion.
As part of the latest rescue package, CL is set to spin off about $16 billion of assets into a separate company that will be supported by government guarantees. Observers in Paris say that CL’s investment in MGM may be included in the new company. The bank has to sell MGM by May 1997.
This is the second time that Credit Lyonnais has spun off assets.
Last year $8.4 billion of shaky real estate credits were moved into a separate company and were partially guaranteed by the government.
Balladur, currently campaigning to become France’s next president, is under pressure to avoid yet another massive recapitalization of CL, which would be funded by the taxpayer.
The European Commission also is anxious to prevent an injection of public funds, which might distort competition with France’s private banks.
Early last week, European competition commissioner Karel Van Miert gave tentative support to the rescue package, describing it as “a good approach.”
But banking rivals are angry that CL does not appear to be about to sell off core assets including retail branches, preferring to part with nonstrategic investments such as the MGM screens in Britain, Denmark and the Netherlands.