THE sale of Credit Lyonnais' 54 per cent stake in Woodchester Investments now appears increasingly likely, with the European Commission expected to insist that Credit Lyonnais (CL) sell all its remaining European banking operations outside France in return for the approval of a state rescue package.
Other demands could include a reduction of the troubled state-controlled bank's domestic branch network, considered by the Commission to be too expensive, and the sale of a considerable part of its wholesale banking interests, according to EU sources.
"Credit Lyonnais still has a lot to sell," said one official. There has been speculation for some time of a sale of its 54 per cent stake in Woodchester.
If approved by Mr Karel Van Miert, the Competition Commissioner and the 19 other Commission members, such tough demands are likely to trigger an angry reaction in France where ministers had been hoping to minimise cuts to the bank's once-extensive network.
People close to the restructuring negotiations in France argue that there is only limited scope to reduce CL's banking activities if it is to achieve the objectives set for it in a pre-privatisation plan being finalised.
They argue that apart from selling the bank's retail operations in Italy, Germany, Spain and Portugal, there is little room for additional disposals if CL is to meet its aim of remaining a universal bank in France, with a presence in other countries to serve large corporate clients.
They also say that sales would reduce the total price at which the bank could eventually be privatised and possibly trigger additional capital losses that would have to be covered by state aid.
But the Commission believes lesser demands would undermine its credibility as the EU body responsible for policing state aid. The new rescue plan, expected to contain state aid of up to 30 billion French francs (£3.32 billion), comes in addition to the Ffr49 billion provided in a first rescue plan two years ago.
The proposals will be designed to provide final aid ahead of privatisation of the bank at the end of next year or in 1999.
