The European Commission granted temporary approval yesterday (Thursday) to the French government’s state guarantees for Crédit Immobilier de France.

The Commission said in a statement that the Eu18bn guarantees are necessary to cover CIF’s “urgent liquidity needs” and to give it time to draw up a restructuring or orderly resolution plan, which France undertook to submit to the Commission within six months from the date of the temporary approval decision.

“The Commission acknowledges that the guarantee in favour of CIF is necessary to avoid a knock-on effect on the French banking system,” it said. “The Commission’s guidance on state aid for banks during the crisis states that the Commission may authorise rescue aid for six months in order to preserve financial stability.”

Included among commitments France has made are that CIF will respect an acquisition ban and a coupon and dividend ban, said the Commission, and that CIF will not increase its volume of business and stricter conditions will apply to granting new loans.

The Commission said it will take a final decision on the temporary guarantee as part of its assessment of the restructuring or orderly resolution plan.