'French banks in Greece being monitored'

French banks have big interests in Greek banking but their risk exposure to the crisis in Greece is not a concern, the head of France's central bank said yesterday.

Bank of France governor Christian Noyer said the exposure of French banks, which have subsidiaries in Greece, was about €50 billion. He also said that the French central bank was monitoring the risks.

Mr Noyer spoke one day after European Central Bank chief Jean-Claude Trichet sought to dismiss concerns that Greece was at risk of defaulting on its massive debt.

The exposure of French banks in Greece has not sparked a "particular concern" but regulators are "closely" watching developments, Mr Noyer said on the sidelines of the presentation of the banking commission's annual report.

Greece's Emporiki Bank is owned by French group Credit Agricole and Geniki is controlled by Societe Generale.

The exposure of French banks in Greece is "a risk that we are monitoring closely but which is, very largely, a risk for Greek customers," Mr Noyer said.

Their exposure to Greek debt, he added, is comparable to that of other European banks.

Greece's borrowing costs soared to record high levels on Thursday amid growing doubts it can repay its debt despite repeated pledges of help from the European Union and the International Monetary Fund.

Jean-Pierre Jouyet, the head of France's financial markets watchdog, said financial markets were testing Europe's management of the crisis in Greece.

"The markets tested Europe, its organisational strength and its capacity to apply the rules of economic governance and its commitments made... with regards to Greece," Mr Jouyet told BFM radio on Thursday.

Greece's massive public deficit, which is more than four times higher than EU limits, has sparked the biggest crisis in the euro's decade of existence.

Last month, the EU approved a contingency rescue plan for Greece involving the IMF to provide a safety net and help bring down the country's borrowing costs, but the lack of details has unnerved the markets, analysts said.

"Europe will fulfill its duty,"Mr Jouyet said. "But what the markets are saying is, 'when and how'?"

Greece must urgently raise new funds to cover debt maturing next month.

But analysts pointed to a lacklustre bond issue last week, when the government raised five billion euros, as a bad sign for Greece.

"The last Greek bond issue, on March 29, did not attract very strong demand despite the European agreement," said BNP Paribas analyst Frederique Cerisier, noting the "uncertainty" surrounding Athens' ability to raise €10 billion by late May to cover its obligations.