France to question BNP

SEOUL/PARIS: France’s biggest listed bank BNP Paribas said its exposure to subprime risk was limited and manageable as it moved to reassure investors a week after rattling markets by freezing three of its funds. French economy minister Christine Lagarde also sought to calm nerves on Friday, saying the country’s banks were in good shape, but she said she would question BNP’s chief executive, Baudouin Prot, about the way the bank had handled news of its problems.

“Of course, I will ask Mr Prot for explanations as to how they managed that moment,” she told RTL radio. “I think they are looking again at how they communicate and manage this type of question.”

BNP Paribas announced on August 1 that it was not directly impacted by problems in the US subprime mortgage market, but on August 9 it said it was freezing E1.6 billion ($2.16 billion) worth of funds hit by the crisis, triggering a global drop in stock markets. The bank had no immediate comment on Lagarde’s questioning.

BNP’s shares have fallen nearly 10% over the past week, but Alain Papiasse, the bank’s head of asset management and services, played down worries over its subprime problems. “The direct exposure to subprime appears limited, and any losses should be manageable for the bank,” he said on Friday on a conference call monitored in South Korea. “We should be one of the most resistant institutions to subprime,” he said.

Subprime lenders offer loans to consumers with poor credit histories. In recent months, the number of subprime defaults in the US has increased, raising concerns that losses in the housing market will have a negative impact on other parts of the economy.