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Commercial banks

France's Biggest Bank Takes Shape as Regulators Weigh Bid Options

Strategic Insights

— 1 min read

Regulators in France have set a timetable for investors to choose between rival projects from Banque Nationale de Paris (BNP) and Societe Generale (SG) to create the country's largest bank. The European Credit Institutions Committee (CECEI) is expected to clear BNP's latest offer, which includes a cash bonus for SG shareholders and a guarantee of future performance for Paribas shareholders. BNP's bid aims to create a bank with over $1,000 billion in assets, surpassing the combined assets of the two competing banks. The CECEI has expressed concerns about the cash bonuses, which it considers a "prudential concern." The regulator may impose new conditions, including a minimum capital ratio below which it would intervene to stop the bidding contest.

Key Takeaways:

  • The CECEI is expected to clear BNP's latest offer, which includes a cash bonus for SG shareholders and a guarantee of future performance for Paribas shareholders.
  • BNP's bid aims to create a bank with over $1,000 billion in assets, surpassing the combined assets of the two competing banks.
  • The CECEI has expressed concerns about the cash bonuses, which are considered a "prudential concern."
  • The regulator may impose new conditions, including a minimum capital ratio below which it would intervene to stop the bidding contest.
  • The Conseil des Marches Financiers, the financial markets regulator, will set a timetable for the offers.
  • Under French rules, BNP's and SG's offers for Paribas have to close on the same day.
  • BNP's separate bid for SG, which is already running, might be extended to match the other two.
  • The three banks are keen to end their battle before the end of the month to avoid distortion caused by the August summer holidays.

Statistics:

  • Over $1,000 billion: assets of the combined BNP and Paribas banks
  • 40 hours: intense talks between the three banks' heads to reach a negotiated settlement
  • One month: French tradition of taking a whole month off in August that threatens to distort the result of the offers if bankers and investors are away on their summer holidays
  • French rules: BNP's and SG's offers for Paribas have to close on the same day

Sources:

  • The Financial Times Limited 1999. Copyright Rights Reserved.

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