At a meeting today, the CNCE Supervisory Board authorised the CNCE Management Board to undertake discussions with Groupe Banque Populaire with a view to instigating a link-up between the two central institutions.

The operation, which would involve a merger between Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE) and the formation of a single central institution for two autonomous networks, would create France’s second-largest banking group.

The new group would possess over €40 billion in capital, €480 billion in savings and deposits, net banking income of €17.5 billion, 8,200 branches in France and close to 100,000 staff. It would be underpinned by two complementary networks, each preserving their identity and autonomy within the framework of a maintained decentralised model.

Groupe Caisse d’Epargne (GCE) would contribute its strengths and foremost market position to the new group.

GCE has one of the strongest financial positions in the market, with tier 1 capital of €18.2 billion as at 30 June, 2008. The regional Caisse d’Epargne banks enjoy excellent liquidity, with a ratio of customer loans/customer deposits of 110%. The Group is underpinned by three very-highly rated issuers – CNCE, Compagnie de Financement Foncier and GCE Covered Bonds – that provide fluid access to the debt capital markets. GCE also has several tens of billions of euros in assets that may be used as collateral to obtain funding from the European Central Bank. This financial strength is of key importance in light of the current refinancing pressures affecting banks.

GCE has developed a range of activities that now make it a comprehensive player in the banking, insurance and property arenas. The Group is a leading provider of financing to social housing organisations and local government. GCE has 26 million retail customers, to whom it is rolling out the extended offering of products and services built up over the last few years. This roll-out represents a source of extensive growth potential.

GCE is therefore in position to contribute a range of key strengths to the new group and thereby ensure not only its commercial potential, but also its financial solidity, as well as guaranteeing its liquidity and access to funding.

The Board plans to follow and validate discussions as and when they progress, with a view to creating a major new banking group.