France's biggest listed bank BNP Paribas said its exposure to subprime risk was limited and manageable as it moved to reassure investors a week after rattling markets by freezing three of its funds.

French Economy Minister Christine Lagarde also sought to calm nerves on Friday, saying the country's banks were in good shape, but she said she would question BNP's chief executive, Baudouin Prot, about the way the bank had handled news of its problems.

Of course, I will ask Mr Prot for explanations as to how they managed that moment, she told RTL radio. I think they are looking again at how they communicate and manage this type of question.

BNP Paribas announced on Aug. 1 that it was not directly impacted by problems in the U.S. subprime mortgage market, but on Aug. 9 it said it was freezing 1.6 billion euros ($2.16 billion) worth of funds hit by the crisis, triggering a global drop in stock markets.

The bank had no immediate comment on Lagarde's questioning.

BNP's shares have fallen nearly 10 percent over the past week, but Alain Papiasse, the bank's head of asset management and services, played down worries over its subprime problems.

The direct exposure to subprime appears limited, and any losses should be manageable for the bank, he said on Friday on a conference call monitored in South Korea.

We should be one of the most resistant institutions to subprime, he said.

Subprime lenders offer loans to consumers with poor credit histories. In recent months, the number of subprime defaults in the United States has increased, raising concerns that losses in the housing market will have a negative impact on other parts of the economy.


Papiasse said BNP Paribas expected no risk to quarterly earnings from the potential exposure of these funds to subprime debt, since any potential risks were being held by investors.

The risk to quarterly earnings is zero, he said.

BNP Paribas shares rose as much as 3.1 percent to 76.98 euros in early Friday trade in Paris as markets overall rebounded from a slump on Thursday. The stock was up 1.11 percent at 75.50 euros in mid-morning trade.

Stratege Finance fund manager Jacques Tissier said Papiasse's comments were reassuring but added he would continue to steer clear of financial stocks such as BNP Paribas for now.

I am not going to add to my holdings until this crisis dies down, he said.

Including Friday's share price rise, BNP Paribas shares have still fallen by around 8 percent since the start of 2007, compared with a 9 percent fall in the DJ Stoxx European bank sector.

Last week BNP Paribas said it was barring investors from redeeming cash from the Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds, which account for less than 0.5 percent of funds under management for the euro zone's second-biggest bank by market capitalisation.

Valuation of the funds will resume as soon as liquidity returns to the market, and in case of a continued absence of liquidity, additional information on possible measures will be given to investors within a month, the bank said.