Objective of the project: incorporate a new bank whose sole business purpose consists in granting medium and long-term loans and revolving credit facilities, exclusively euro-denominated, to its corporate members. This bank would be incorporated in France and supervised by the French banking authority (Autorité du Contrôle Prudentiel – “ACP”). There are several reasons why this project is appealing for corporates:
• diversify their funding sources in the prospect of the implementation of, among others, the Basel III regulation
• provide them with credit facilities “at cost” (thanks to low operating costs and to dividends)
• in case of market disruption, give them a dedicated access to the ECB refinancing operations
Targeted corporates: non-financial corporates, from any country, with a good credit quality (confirmed by a public or private credit rating). Risk diversification rules require at least 100 corporate members to start operations.
Strengths: as its clients are also its shareholders, they can afford to provide CFA with virtuous ground-breaking mechanisms which are not available to traditional banks:
• outstanding solvability (acknowledged by a rating agency), with self-adjustments of regulatory capital according to the changes in the credit portfolio
• credit facility pricing permanently (quarterly) adjusted according to the prevailing market conditions
• conservative asset-liability management, without any interest rate or currency risk, and strictly restricting maturity mismatch
• extreme transparency of the credit commitments thanks to the public disclosure of the shareholding (“look through”)
• governance avoiding conflicts of interests
• reputation of the corporate members
These features meet several expectations of the corporates (among which an attractive net cost of funding) and of the capital markets investors, from whom the bank will raise most of its own financing.
Timing: after initial works confirming the relevance and the viability of the business model, the documentation phase is to start by the end of 2011 in order to incorporate the bank in 2012 and to start lending operations a few quarters later.