NEW YORK, April 22 Cyprus was a unique case that
justified "exceptional treatment", but its bailout was not a
precedent or a template for future crisis management, Bank of
France Governor Christian Noyer said on Monday.
Still, the bailout of Cyprus shows the euro area is more
robust today than it was a year ago as there were no spill-over
effects to other countries, he told an audience at the Paris
Europlace New York Financial Forum in New York.
"This is the first time in three years that a major crisis
in one euro area country has not affected others," said Noyer,
who is also a member of the European Central Bank Governing
Council. "While challenges remain, the actions taken have
increased our resilience to internal and external shocks."
Last month's 10 billion euro ($13 billion) deal to save
Cyprus from bankruptcy imposed major losses on big depositors
and raised worries that such a model could be used on other
countries that come under pressure.
Cyprus' huge financial sector, which attracted deposits from
rich foreigners, was an extreme situation of moral hazard and
such a banking model has no place in the euro area, said Noyer.
Despite the progress the euro zone has made, the stagnation
of bank credit is a major concern, particularly as it affects
small- to medium-sized firms, he said.
"Overall, the improvement in banks' funding situation has
not led to increased lending to the non-financial private
sector, which has declined in recent months."
Part of this is due to low demand and it may not reflect a
weakness specific to the euro area as banks in all advanced
economies try to repair their balance sheets after the global
financial crisis, said Noyer.
Ultimately, growth in the euro area will depend on the
ability to undertake the necessary structural reforms and
enhance competitiveness, said Noyer.