France - Banking and securities

The Banque de France, founded in 1800, came completely under government control in 1945. It is the bank of issue, sets discount rates and maximum discounts for each bank, regulates public and private finance, and is the Treasury depository. In 1945, a provisional government headed by Gen. de Gaulle also nationalized France's four largest commercial banks, and the state thus came to control 55% of all deposits. The four banks were Crédit Lyonnais, the Société Générale, the Banque Nationale pour le Commerce et l'Industrie, and the Comptoir National d'Escompte de Paris. In 1966, the Banque Nationale and the Comptoir merged and formed the Banque Nationale de Paris (BNP).

In 1982, Socialist President François Mitterrand nationalized 39 banks, bringing the state's control over deposits to 90%. Among leading banks nationalized in 1982 was the Crédit Commercial de France, but this bank and Société Générale were privatized in 1987 by the Chirac government. France's (and Europe's) biggest bank is a curiosity. Crédit Agricole, founded at the end of the last century, was for most of its life a federation of rurally-based mutual credit organizations. It has preserved its rural base and plays the leading role in providing farmers with state-subsidized loans. But since 1982 it has been allowed to pursue a policy of diversification, so that farmers today account for only 15% of its customers, and in 1988 it became an unquoted limited company with most of its capital held by the regional entities that make for its federal structure. In 1995 Crédit Agricole was listed as the eighth biggest bank in the world, being preceded by six Japanese banks and HSBC Holdings.

In 1999, BNP and rival Société Générale attempted to take over another private bank, Paribas. Concurrently, BNP was waging a takeover bid for Société Générale, itself. Ultimately, BNP won outright control of Paribas, but only 36.8% of the shares of Société Générale.

La Poste, the postal service, which in France is an independent public entity, also offers financial services and held about 10% of the market in 2002. By virtue of the Banking Act of January 1984, the main regulatory authority for the banking sector is the Commission Bancaire. It is presided over by the governor of the Banque de France. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $300.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $896.5 billion.

Public issues of stocks and bonds may be floated by corporations or by limited partnerships with shares. Publicly held companies that wish their stock to be traded on the exchange must receive prior authorization from the Stock Exchange Commission within the Ministry of Finance. In January 1962, the two principal Paris stock exchanges were merged. The six provincial exchanges specialize in shares of medium-size and small firms in their respective regions.

Measured by stock market capitalization, the Paris Bourse is the third largest in Europe after London and Frankfurt. The Lyon Bourse is the most active provincial stock exchange. MATIF (marché à terme des instruments financiers), the financial futures exchange, was opened in Paris in 1986 and has proved a success. The Société des Bourses Françaises (SBF), the operator of the French stock market, has been determinedly pursuing a policy of reform and modernization, and it expects to benefit from the liberalization of financial services brought about by the EU's Investment Services Directive (ISD). New French legislation, providing for the liberalization of financial services, has transposed the directive into national law.

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