AXA 
By The initiatives echo efforts elsewhere in Europe to bolster funding for SMEs, where a lack of capital is seen as a drag on economic recovery. In Britain the government has tried various initiatives including its flagship Funding for Lending programme, with mixed results.
The French Finance Ministry, grappling to revive an economy expected by economists to shrink about 0.3 percent this year, said on Wednesday it would loosen rules restricting insurers' ability to lend, allowing them to devote up to 5 percent of their balance sheets to corporate loans.
It said the change could eventually in theory free up 90 billion euros (£77.7 billion) in financing, although industry officials cautioned the short-term figure was likely to be "a few billion."
In a further bid to encourage private sector efforts, state bank Caisse des Depots, together with 17 insurers including AXA (>> AXA), is also launching a 1 billion euro fund specifically geared toward lending to mostly unlisted intermediate-sized companies.
Banks themselves will even get to benefit, as BNP Paribas (>> BNP PARIBAS) and Credit Agricole (>> CREDIT AGRICOLE), which themselves run sizeable insurance and asset-management operations, are among the investors in the newly launched fund.
"To my knowledge it's the first time that almost all the insurers have gotten involved in such a broad market initiative," Finance Minister Pierre Moscovici said at a news conference.
French companies have long depended on banks to provide some 80 percent of their financing, in stark contrast to the United States, where only 20 percent comes from banks and the rest from market sources.
DEFAULT RATES
While banks and some regulators have denied there is a credit crunch in France as banks cut lending to comply with tough new capital rules, many businesses have insisted otherwise and default rates for SMEs have been on the rise as the economy stagnates.
Lending to intermediate-sized companies fell 1.9 percent in May from a year before, according to Banque de France figures published on Tuesday, while credits to smaller companies edged up 0.4 percent.
Insurers, hungry to find higher return investments as sovereign and corporate bond yields remain low even after a recent bounce, welcomed the initiative.
In addition to AXA, the so-called Nova Fund will have as investors the insurance arms of BNP Paribas and Credit Agricole as well as CNP (>> CNP ASSURANCES) and Groupama, the finance ministry said.
The fund, to be managed by BNP Paribas Investment Partners and French fund manager Tikehau Investment Management, will lend to 30 or 40 companies at rates of about 200 basis points above French OAT government bonds, with loan terms of five to seven years, the ministry said. OATs were recently yielding just over 2 percent.
The fund represents one of the latest effort by insurers to broaden out their investments. Earlier this month a fund created by a group of French insurers said it had taken stakes in chemicals group Arkema and home appliance maker SEB.
AXA, France's largest insurer, had already been pushing into the corporate loan market through joint ventures with Societe Generale (>> SOCIETE GENERALE) and Credit Agricole and will continue to make most of its lending through such ventures, AXA Chief Investment Officer Laurent Clamagirand said in a phone interview.
Still, Clamagirand said the Finance Ministry moves were positive in that they are "a way to get capacity together, rather than each one going their own route."
As for AXA's joint ventures, they have so far loaned about 500 million euros to mid-sized companies in France and elsewhere in Europe and expect to reach about 1 billion by year-end, he told Reuters.
(Editing by Elena Berton and David Holmes)
By Christian Plumb and Yann Le Guernigou
