No Risk of Euro Zone Contagion: BNP CEO
The boss of French banking giant BNP Paribas has told CNBC that he sees no risk of contagion from the problems facing Greece, Portugal and Ireland.
“I think the situations of the three peripheral countries…are very different from any other European countries, so I don’t see the risk of contagion,” Baudouin Prot, the CEO of
BNP Paribas , said in an interview with CNBC.
“I think the Spanish economy is very different, and certainly Italy. So I don’t see really any other European country being close to, in terms of financial strain and difficulty, to the three peripheral countries.”
Calling for the periphery nations to live within their means, Prot said all three had the support of the euro zone and that he believes the credibility of the euro and the euro project has risen in recent months, as witnessed by the rise in the single currency.
Following S&P’s decision to put US debt on a negative outlook, Prot believes all countries with fiscal deficits need credible medium-term plans to get their houses in order.
“The American president has come up now with a plan to reduce the deficit; I think that in the United States, as in Europe, budget imbalances have to be significantly reduced, even if it is over time, and certainly no economy, whether US or Europe, can continue to go on with deficit and debt,” said Prot.
“This Standard & Poor’s downgrading was a reminder to every country of the world that budget and fiscal discipline is a mandatory feature of any policy mix in any part of the world.”
With the market unsure on the timing of monetary tightening from the Federal Reserveand the European Central Bank, Prot told CNBC that he believes the process will be gradual on both sides of the Atlantic.
BNP Will Pass Stress Test
Ahead of a new set of European stress tests, BNP’s boss said he was very confident of passing and that the new test is credible.
“The economic scenario is a real recession, and is really a serious stress test to which, also, they have added a capital market shock on top of an economic recession in the euro zone,” said Prot.
“What is really important — the Spanish have also started to do this, we've seen it also with Germany with the Landesbank — What is really important is to tackle and to have the weaker banks raising capital... even before the stress tests.”
The financial crisis has been very bad for the reputation of bankers all over the worldand Prot believes it will take time to turn this around.
“I think unfortunately, it will take time to repair the image. What we see at BNP Paribas, and we monitor that very closely, is that even if the image of the banks altogether has been very much damaged, the trust in my own bank, and even more so, the trust in my own branch manager to the people with whom I work with, at the bank, is still somewhere between 75 and 85 percent,” Prot said.
“The more you talk of banks generally, the more you get to the damage. And the more you get to my bank, my branch, the people who look after me, the more you have, still, a trust relationship that is fairly solid and is resisting well,” he added.