Bank of France Governor Christian Noyer has been met with skepticism over her insistence on Wednesday that French banks are generally in good health and that the French central bank — as well as Belgium's — would back troubled lender Dexia in order to ensure it has enough liquidity.
"It really did make me wonder whether or not mental competence is required to be on the board of the ECB (European Central Bank)," Jon Moulton, chairman of Better Capital and a well-known British investor, told CNBC Wednesday.
"It's incredibly optimistic. There are clearly some very obvious problems, and it's no use diminishing them. It's not going to make the problems go away."
Noyer's office did not immediately respond to a request for comment.
Noyer, who has been on the ECB's board since taking the job as governor of the Bank of France in 2003, told Europe 1 Radio: "We will ensure that there is enough liquidity... we will loan Dexia as much as it needs."
Noyer said that suggestions that supporting Dexia , which passed European Union bank stress tests just three months ago, would affect France's triple-A credit rating were "exaggerated and inexact".
It now looks likely that the Franco-Belgian lender will have to be broken up, with reports suggestingits Belgian arm will be nationalized.
The share price has plummeted this week after credit ratings agency Moody's said it was considering downgrading the bank over its exposure to Greek debt.
There are also increasing concerns that more European banks may have to be recapitalized as debt problems in some of the peripheral euro zone economiesrefuse to go away.
"The peripheral European problems and the debt issues are thrown back into the banking system, so it's a multi-directional problem," Jeremy Stretch, head of currency strategy at CIBC, said Wednesday.
The International Monetary Fund's European Department Director Antonio Borges said on Wednesday that Europe needs between 100 billion and 200 billion euro to recapitalize its banks.
"We need some kind of firebreak to be created and outlined," Stretch said. "The way to create that is to put a wall around those that are structurally impaired, and throw that (capital) back into the banking system to make sure that it has enough capital to withstand the coming losses."
"We know the losses are coming and it's a matter of 'when,' rather than 'if,'" he warned.