Home French banking sector History of banks in France 5 - Between the state and the market (since 1945)  

5 - Between the state and the market (since 1945)  

31 january 2003

In 1945 the government of General de Gaulle nationalized the Banque de France and the four leading commercial banks that had national networks: the Crédit Lyonnais, the Société Générale, the Comptoir National d'Escompte de Paris and the B.N.C.I. The same law retained the main elements of the Vichy regulations and established an impenetrable barrier between the deposit banks, which had to give greater importance to the use of liquid assets, and the investment banks, which had avoided nationalization and were able to make long-term investments.


The state had thereby taken the essential aspects of credit in hand. For 20 years or so the nationalized banks devoted themselves to collecting short-term savings and supporting treasury issues, but they played only a secondary role in financing the reconstruction and modernization of the economy. It was the Treasury that mainly financed the first Plans, and it was the Caisse des Dépôts that aided the local communities and financed the construction of moderate, working-class housing. The
actual banks made up a cartelized sector in which they avoided competing
with each other. They hardly increased the number of their branch offices
between 1945 and 1959; they contented themselves with managing, without
risk, the resources that were naturally increased by the inflation at that time
and by the efforts of the state to favour the use of cheques.

Debré laws

At the time of the fifth Plan, however, when the pursuit of expansion required a considerable effort of investment, recourse was made to competition between the large banks. To this end, the 'Debré laws' of 1966/7 appreciably reduced the distinction between the investment banks and the deposit banks. They allowed the latter to increase the range of their resources (by receiving deposits for more than two years, for example) and especially to increase to a great extent their stock-sharing activities. All deposit banks were authorized to open new branch offices at will and to compete with each other; institutions from the public sector as well as from the private sector were also permitted to strengthen the ties that united them. Finally, Michel Debré prompted the merger between the C.N.E.P. and the B.N.C.I., which resulted in the largest French bank, the Banque Nationale de Paris (B.N.P.).


The credit System quickly responded to these solicitations. While the mutualistic firms pursued their sustained growth, the nationalized banks showed a new dynamism: in a matter of a few years they doubled their number of branch offices; almost all French families made use of some form of banking services, (following, inter alia, in 1968 the 'Matignon agreements' which led to wages being paid on a monthly basis as well as the obligation to deposit wages in bank accounts). These banks offered firms and private individuals a range of more and more diversified products (long-term and medium-term credit, export credit, project financing, personal loans, housing assistance, mutual funds, and so on). Their deposits tripled between 1966 and 1976, and since that time bank money has represented four-fifths of the total amount of money in circulation.

At the same time, the commercial banks enjoyed a veritable renaissance and launched into new undertakings. The Banque de Paris et des Pays-Bas (Paribas), which had incorporated the Compagnie bancaire from 1966 to 1973, and the Compagnie de Suez, which had bought the Banque de l'Indochine in 1972, were the centres of two very powerful financial groups. They confronted each other in 1968/9 over the control of the C.I.C. Ultimately, according to the terms of an agreement reached in 1971, Suez obtained control of the C.I.C. and gave up the B.U.P. to Paribas, which merged that company with the Crédit du Nord - an acquisition from 1968.

Oil crisis

The oil crisis of 1973 had repercussions, somewhat delayed, for the French banks. In 1982, a new wave of nationalisation arose, brought about by Pierre Mauroy. The investment banks were nationalized this time, like all banks with French capital that held deposits totalling more than a thousand million francs. From then on almost all-banking structures fell within either the public or mutualistic sectors.

A changing landscape

The influence, which the state long exerted over this system, did not prevent the landscape of the banking industry from changing. Big banks drew closer to Insurance companies; the largest of them engendered the formation of complex financial groups, and expanded further worldwide. Through extensive computerisation of their operations, French banks' management made substantial progress. In particular, it is worth noting the primacy of French banks in the area of credit cards, the largest and the most efficient of their kind at the time, a consequence of the new global networks which interconnected the various banks. In 1980 four French banks ranked among the top twenty worldwide in terms of deposit level: Crédit Agricole, BNP, Crédit Lyonnais and Société Générale. However, to increase their profitability, they still needed to improve their insolvency ratios substantially, as well as their equity level.

Source: Alain Plessis

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