The meeting of the Heads of State and Government of the euro area, held at the Elysée Palace on 12 October, with the participation of the President of the ECB, provides Europe with a structured and coherent framework: •  possibility of recapitalising banks;  •  guaranteeing new medium-term bank debt (1-5 years), via, in France, a EUR 320 billion funding vehicle;  •  revisiting the accounting rules, with the recent reforms of the IASB – international accounting standard-setters – and introducing greater flexibility in mark-to-market accounting rules, allowing assets for which there is no longer a market to be valued at amortised historical cost. Moreover, the European Investment Bank will be mobilised to support European SMEs. Lastly, long-term discussions will commence on the best way to regulate finance and how it may better serve economic development. 2  BIS Review 129/2008  3. The position of French banks and credit  Our banks are not immune to the crisis. They have direct exposures, in particular through US monoline insurers. They have had to make sometimes substantial write-downs. They are also impacted indirectly by the seizing up of certain markets and the rise in their refinancing costs. That said, our banks are sound and profitable. It is worth recalling four facts that, in the current period of turmoil, are often overlooked: •  The solvency ratios of French banks are high, and much higher than the minima imposed by the prudential regulation.
They have clearly demonstrated their will to take action when necessary. But governments are also intervening to bolster banks’ solvency and soundness. In this context and in order to ensure that national measures for dealing with the crisis are consistent, the international community is taking a collective stand. The G7 plan of action is a major step forward. It sets out clear principles to be applied by the whole international community – in particular the IMF’s International Monetary and Financial Committee – with a view to giving structure to national actions. It expounds the following principles: •  taking decisive action to prevent the failure of financial institutions;  •  taking all necessary steps to unfreeze credit and money markets;  •  ensuring that banks and other major financial intermediaries can raise capital as needed;  •  ensuring that national deposit insurance and guarantee programmes are robust;  •  ensuring accurate valuation and transparent disclosure of assets, as well as consistent implementation of high quality accounting standards. Thanks, in particular, to France’s leading role in discussions, Europe is organising itself.