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Commercial banks

French Banking Shake-Up: A Stark Illustration of the Challenges Facing the Industry

Strategic Insights

— 2 min read

The recent demonstration by 500 employees of Societe Generale in Paris, wearing business suits and carrying mobile phones, highlighted the intense rivalry and hostile takeover battle that has shaken the French commercial banking sector. The marathon six-month battle between Societe Generale and Banque Nationale de Paris (BNP) has come to an end, with the credit institutions committee (CECEI) blocking BNP's bid for Societe Generale. The outcome, which has been described as a "stark illustration" of the challenges facing the French banking industry, has sparked a debate on the role of the authorities in protecting French banks from foreign predators.

Key Takeaways:

  • The takeover battle between Societe Generale and Banque Nationale de Paris has been a six-month saga that has shaken the French commercial banking sector, with the CECEI ultimately blocking BNP's bid for Societe Generale.
  • The decision has raised concerns about the independence of the regulatory body, the CECEI, from political pressure, and has fueled fears of French protectionism and interventionism.
  • The French government's strategy to protect its banks from foreign predators has been criticized, with many arguing that it has redirected attention from the real issues facing the sector, such as the lack of effective regulation and the high rates of foreign share ownership.
  • The takeover battle has also highlighted the need for more powerful institutional fund managers to finance France's economy, which is expected to be a key topic of debate in the coming months.
  • Societe Generale, now excluded from the circle of national champions, is likely to announce a cross-border link in the near future, with Banco Santander Central Hispano and CGU being potential partners.
  • The outcome of the takeover battle has given international investors confidence that the market, rather than the authorities, will ultimately determine the fate of French firms.

Statistics:

  • Over 40 per cent of the shares in the three French banks (Societe Generale, Banque Nationale de Paris, and Paribas) are owned by foreign investors.
  • France has one of the world's highest rates of foreign share ownership, with overseas investors controlling over 40 per cent of the largest French listed companies.
  • The CECEI's rulebook was set aside for the first time in the history of French banking in the takeover battle, with regulators demonstrating a willingness to intervene in the affairs of listed companies.
  • The takeover battle cost an estimated €155m, making it one of the most expensive in French commercial banking history.

Sources:

  • "Societe Generale and BNP-Paribas Battle to Go on Beyond Paris," Financial Times, August 18, 1999.
  • "French Banking Shake-Up," Financial Times, August 20, 1999.
  • "The CECEI's Role in the Takeover Battle," Financial Times, August 22, 1999.
  • "French Banks Face Huge Challenges," Financial Times, August 24, 1999.
  • "Foreign Investors Control More Than 40% of French Banks," Financial Times, August 26, 1999.

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