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The Commission approved the French capital-injection scheme for banks. The scheme is intended for "fundamentally sound" banks which are under severe pressure to increase their capital owing to the financial crisis.
The French authorities will intervene via a state-owned investment company, which will invest in securities issued by the beneficiary banks. These securities will take the form of hybrid capital instruments and be remunerated at a fixed rate for the first five years and at a variable rate thereafter. The remuneration, which will average about 8%, will reflect the degree of solvency of each beneficiary bank via a credit default swap component, whereby remuneration is modulated according to the risk of default.
Under the scheme notified, the intervention of the French authorities is capped at EUR 21 billion. The French authorities have announced that their intervention will initially be limited to EUR 10.5 billion.