5. Co-operative Banking in France

Excluding the data of the European System of Central Banks (ESCB).

These two indicators were 3.6% and 70.2% respectively in 2008 (ECB 2017).

Despite the increasing capabilities of the French banking system, as in other continental countries, the proportion of banking assets to the total assets of the financial sector has continually decreased in the aftermath of the international financial crisis, falling from 70% in 2008 to 63.5% in 2016, thus evidencing the ongoing disintermediation process which characterizes many developed bank-oriented financial systems.

Our calculations for 2016 on the ECB’s data contained in the Report on Financial Structures (ECB 2017).

Following discussions with the European Commission, the French authorities officially notified the Commission of the scheme to inject capital into certain banks on 3 December 2008. The scheme was intended for “fundamentally sound” banks which were under pressure to increase their capital owing to the financial crisis. The French authorities intervened via the creation of the Société de prise de participation de l’État (SPPE), a state-owned investment company, whose mission was to invest in securities issued by the beneficiary banks. The securities took the form of hybrid capital instruments (subordinated debt securities classified as non-core Tier 1 capital) to be remunerated at a fixed rate for the first five years and at a variable rate thereafter. Under the scheme, the intervention of the French authorities was capped at € 21 billion. The French authorities announced that their intervention was initially limited to € 10.5 billion. In 2009, the government agreed to expand recapitalization to an additional € 10.25 billion. Two commercial joint-stock banks, BNP Paribas and Société Générale, and four co-operative banks, Crédit Agricole, Banque Populaire, Caisses d’Epargne, and Crédit Mutuel, received capital injections in 2008. In 2009 Crédit Agricole and Crédit Mutuel decided not to participate in the second phase of SPPE intervention, although other banks did (Woll 2014). The scheme included obligations for the beneficiary banks to finance the real economy. These obligations were to be monitored both locally and nationally (European Commission IP/08/1900, IP/09/158 and IP/09/461). The SPPE recapitalization support was available until the end of August 2009 (Woll 2014).

One further measure taken by the French authorities on 16 October 2008 was the legal authorization to set up a refinancing scheme to stabilize the financial markets. The French authorities decided to make use of a structure set up for this purpose, the société de refinancement des activités des établissements de crédit (SRAEC—refinancing company for the activities of credit institutions), which was the only institution to enjoy a state guarantee. SRAEC had the right to issue securities guaranteed by the state with a view to making loans to credit institutions against collateral up to an amount not exceeding € 265 billion. The credit institutions had to pay a premium over and above the normal market price and to make commitments regarding their conduct (IP/08/1609 and IP/09/750). SRAEC’s activities were limited to five years. The SRAEC was jointly owned by the six big banks and the government, which held 66% and 34% respectively. Access to the state-backed mechanism was requested by other financial institutions which signed an agreement with the SRAEC. It ended its issuing activity in late 2009 and remained in place merely to manage the reimbursement of existing securities that had not reached their maturity. (Woll 2014).

See European Commission IP/09/722. As reported by Hardie and Howarth (2009), the role of the government was fundamental in driving the merger between Caisse d’Epargne and Banque Populaire, as without its ultimatum and aid, the banks would likely have failed to agree on the merger.

For the sake of full disclosure, we report the number of members of UK building societies, which totaled 23 million members at the end of 2017 (EACB 2017), although this is beyond our field of analysis.

See BPCE’s Annual Report for the year-end 2017.

The total number of domestic and international customers served by Crédit Agricole is 52 million. The governance ratio increases to 46.19%, if we compute it as the ratio of co-operative members to total individual customers of the 39 regional co-operative banks holding the apex of Crédit Agricole.

Data reported by BPCE’s Financial Report for the year-end 2017.

Crédit Agricole is a leader in the agricultural, professional, and business markets, holding shares of 83%, 34%, and 36% respectively. Data refer to different sources reported in Crédit Agricole’s Financial Report for the year-end 2016.

BPCE claims that the distance in urban areas from a sales outlet is less than 10 minutes, while in rural areas it is less than 20 minutes. See BPCE’s Financial Report for the year-end 2017.

For more details on the history of Crédit Agricole, see Crédit Agricole’s website.

The Law of 1941 concerned the regulation and organization of banking activity; that of 1945 stated the nationalization of the Bank of France and that of the large private banks, and further regulated the organization of credit intermediation.

The three existing central bodies are recognized in Art. L511-30 of the French Monetary and Financial Code.

To this end, no current or foreseen material practical or legal impediment must be in place to allow the prompt transfer of own funds or repayment of liabilities from the central body to the local/regional bank. See Art. 113(6)(e) of the CRR.

Provided prior consultation of the governing bodies of the legal entities involved in the transactions has taken place.

See Art. L 512-26 of the French Monetary and Financial Code.

Data provided by the Financial Report of Crédit Agricole Group for the year-end 2017.

See the comments of O’Neill (2016) at https://​www.​euromoney.​com/​article/​b12knybs22ybt5/​cr%C3%A9dit-agricole-cedes-to-pressure-on-structure?​copyrightInfo=​true.

See Art. L 512-35 of the French Financial and Monetary Code.

See Art. L. 512-43 of the French Financial and Monetary Code.

See Annual Report of Crédit Agricole Group for the year-end 2017.

See Annual Report of Crédit Agricole Group for the year-end 2017.

See Annual Report of Crédit Agricole Group for the year-end 2017.

As a legacy of the past public nature and role of Crédit Agricole, the Director of the apex is still appointed by joint decree of the Minister of Finance and the Minister of Agriculture thus revealing, despite the privatization of the network, its key role within the French economy.

See the functions of the Fédération Nationale du Crédit Agricole (FNCA) on https://​www.​creditagricole.​info/​fnca/​dev_​7165/​la-federation-nationale-du-credit-agricole?​dlink=​true.

Shares in the holding company SAS Rue La Boétie may not be transferred outside the regional banks’ network and any trading of these shares is governed by precise transfer and pricing agreements. The share held by regional banks and the above-mentioned agreement renders Crédit Agricole S.A. immune to takeover bids. The remaining capital of the apex institution is held by institutional investors (30%), individual investors (8.7%), employees (4.6%), and the Treasury (0.1%).

More precisely, the remaining capital of the apex institution in 2016 is held by institutional investors (30%), individual investors (8.7%), employees (4.6%), and by the Treasury (0.1%). See Crédit Agricole’s Financial Report at year-end 2016.

See Art. L. 511-31, L. 511-32, and R. 512-18 of the French Monetary and Financial Code.

Under this guarantee, the potential commitment of each regional bank is equal to the sum of its share capital and reserves. Further details may be found in the analysis of the hedging of liquidity and solvency risks provided in Crédit Agricole’s Financial Report at the year-end 2017.

Such as popular savings plans (Livret d’épargne populaire), sustainable development passbook accounts (Livret de développement durable), home purchase savings plans and accounts, youth passbook accounts, and Livret A passbook savings accounts.

For a more detailed description of the internal financial mechanism within the Group, see its Financial Report at year-end 2017.

For a more detailed description of the internal financing mechanisms of Crédit Agricole, see its Financial Report at year-end 2017.

See Crédit Agricole Group’s Financial Report for the year-end 2017.

Natixis derives from the transformation of Natexis (owned by Banque Populaire) and Ixis (owned by Caisse d’Epargne).

See IP/09/158.

See IP/09/722.

See BPCE Group’s Financial Report at year-end 2017.

See BPCE Group’s Financial Report at year-end 2016 and 2017.

See BPCE Group’s Financial Report at year-end 2017.

See Art. L 512-2 of the French Monetary and Financial Code.

BPCE Group’s Financial Report for the year-end 2017.

As stated in BPCE’s articles of association and reported in BPCE’s Financial Report for the year-end 2017.

The new central body, BPCE, was created by French law n° 2009-715 of 18 June 2009 replacing the two existing central bodies, Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE). It was set up via a business transfer by BFBP and CNCE. At the time of the deal, the French state underwrote € 3 billion of preference shares issued by BPCE. The preference shares had no voting rights but gave the French state the right to designate two representatives to the Supervisory Board. Within the state support package, equity warrants were subscribed by the French state allowing it to raise up to a maximum of 20% of the capital and voting rights, provided that BPCE had not previously repurchased the preference shares. See BPCE’s press release (2009) http://​www.​info-financiere.​fr/​upload/​CNS/​2009/​07/​FCCNS021475_​20090731.​pdf.

In accordance with Art. L. 512-12 and L. 512-86-1 of the French Monetary and Financial Code.

See BPCE Group’s Financial Report for the year-end 2016.

See BPCE Group’s Financial Report for the year-end 2017.

See Crédit Mutuel Group’s Activity Report for the year-end 2017.

See Crédit Mutuel-CM11 Group’s Financial Report for the year-end 2017.

In accordance with Art. R 512-20 of the French Monetary and Financial Code, local banks must have objectives that comply with the general principles of mutual credit, and in particular have a non-profit character, limit their activity to a territorial division, and establish the responsibility of members. They must respect the statutes, instructions,

and decisions of the National Confederation of Crédit Mutuel and the regional federation to which they must adhere in accordance with the provisions of Article L. 512-56.

According to Art. R.515-1, the French supervisory authority may issue a collective license to a local bank for itself and all of its affiliated local banks “when the liquidity and solvency of the local banks are guaranteed through this affiliation”. See Crédit Mutuel-CM11 Group’s Financial Report for the year-end 2017.

88.7% of CFCM’s capital is held by local co-operatives across 11 regional federations, while the rest is owned by the captive mutual insurance company of the network, ACM Vie SAM. See Crédit Mutuel, Financial report for the year-end 2016.

See Crédit Mutuel Arkéa Group’s Financial Report for the year-end 2017.

CIC was delisted in 2017. The decision was motivated by the need to simplify the Group’s structure and eliminate some of the regulatory and administrative constraints associated with the listing of the CIC shares as well as the related costs. See Crédit Mutuel-CM11 Group’s Annual Report for the year-end 2017.

In December 2016, the French Council of State noted that CNCM is the parent company in the union and that “in legal terms, and for as long as Crédit Mutuel Arkéa remains affiliated to the Crédit Mutuel network, there can be no question of any form of independence of this entity with regard to CNCM”.

See Crédit Mutuel Arkéa Group’s Financial Report for the year-end 2017.

The coordination committee meets monthly or upon request of a member of the general direction of the Confédération Nationale du Crédit Mutuel. It is made up of nine members representing the regional networks and the Confédération. See Crédit Mutuel, Financial report for the year-end 2016.

According to Article L. 511-31 of the French Monetary and Financial Code, CNCM is empowered to take all necessary measures to ensure the liquidity and solvency of each of its affiliated banks and that of the network as a whole. In the event that the management at the level of the regional affiliate proves to be inadequate to deal with the possible difficulties encountered, CNCM has the power to implement adequate solutions.

See Crédit Mutuel-CM11 Group’s Financial report for the year-end 2017.

Ibidem.

Volunteer directors are entitled only to the reimbursement of expenses incurred in connection with their duties.

See Crédit Mutuel-CM11 Group’s Financial Report for the year-end 2017.

See Crédit Mutuel Arkéa Group’s Annual Report for the year-end 2017.

See Crédit Mutuel CM11 and Arkéa Groups’ Annual Reports for the year-end 2017.

In 2012, Greece was granted a new financial aid package, while its debt was cancelled resulting in a severe haircut for private investors. Spain entered a difficult period, amidst doubts about the strength of its banking system, the deterioration of its public finances, record unemployment, and deepening recession. These concerns led risk premiums on sovereign debt to climb considerably, triggering bailouts for Greece, Ireland, and Portugal. Italy was not spared, with yields on its debt rising as well, despite the reforms undertaken by the government in charge at the time, led by Mario Monti.

The losses suffered by the French banks were however lower than those of the United States, the United Kingdom, Germany, and other European countries, including the Netherlands. In the reconstruction of the loss rates reported by Howarth (2013) the incidence of securities write-downs on total bank assets was 2.6% for the United States, 2% in Germany, 1.8% for the Netherlands, 0.52% for the United Kingdom, and 0.38% in France.

See the Annual Report of Crédit Agricole Group for the year-end 2012.

This test is also known as Wilcoxon ranksum test or Mann-Whitney U test.

The sample of CBs from the Crédit Agricole Group comprises: Crédit Agricole Alsace Vosges, Crédit Agricole Alpes Provence, Crédit Agricole de l’Anjou et du Maine, Crédit Agricole d’Aquitaine, Crédit Agricole Atlantique Vendée, Crédit Agricole Brie Picardie, Crédit Agricole Centre France, Crédit Agricole Centre Loire, Crédit Agricole Centre-Est, Crédit Agricole Champagne-Bourgogne, Crédit Agricole de Charente Maritime Deux-Sèvres, Crédit Agricole de Normandie, Crédit Agricole des Savoie, Crédit Agricole du Finistère, Crédit Agricole de Franche-Comté, Crédit Agricole d’Ille-et-Vilaine, Crédit Agricole du Languedoc, Crédit Agricole de Loire Haute-Loire, Crédit Agricole de Lorraine, Crédit Agricole du Morbihan, Crédit Agricole Nord de France, Crédit Agricole Nord Est, Crédit Agricole Nord Midi-Pyrénées, Crédit Agricole Normandie-Seine, Crédit Agricole de Paris et d’Ile-de-France, Crédit Agricole Provence Côte d’Azur, Crédit Agricole de Pyrénées Gascogne, Crédit Agricole Sud Rhône Alpes, Crédit Agricole Toulouse 31, Crédit Agricole Touraine Poitou.

The sample of CBs from the BPCE Group comprises Banque Populaire Alsace Lorraine Champagne, Banque Populaire Auvergne Rhône Alpes, Banque Populaire Bourgogne Franche-Comté, Banque Populaire du Sud, Banque Populaire Grand Ouest, Banque Populaire Occitane, Banque Populaire Rives de Paris, Banque Populaire Val de France, BRED, Casden Banque Populaire, Crédit Coopératif, Caisse d’Epargne et de Prévoyance Aquitaine Poitou-Charentes, Caisse d’Epargne et de Prévoyance de Bourgogne Franche-Comté, Caisse d’Epargne et de Prévoyance Hauts de France, Caisse d’Epargne et de Prévoyance Loire Drôme Ardèche, Caisse d’Epargne et de Prévoyance Bretagne Pays de Loire, Caisse d’Epargne et de Prévoyance Côte d’Azur, Caisse d’Épargne et de Prévoyance de Midi-Pyrénées, Caisse d’Épargne et de Prévoyance de Rhône Alpes, Caisse d’Epargne et de Prévoyance du Languedoc-Roussillon, Caisse d’Epargne et de Prévoyance Grand Est Europe, Caisse d’Epargne et de Prévoyance Ile-de-France, Caisse d’Épargne et de Prévoyance Loire-Centre, Caisse d’Epargne et de Prévoyance Provence-Alpes-Corse.

The sample of CBs from the Crédit Mutuel Group comprises: Caisse Fédérale de Crédit Mutuel, Caisse Fédérale du Crédit Mutuel de Maine-Anjou et Basse-Normandie, Caisse Fédérale du Crédit Mutuel Nord Europe, Caisse Fédérale du Crédit Mutuel Océan, Crédit Mutuel Arkéa.

It is worth mentioning that regional banks’ customer deposits account for about 56% of the total group’s due to customers at the end of 2017. Own calculations on data reported in the Crédit Agricole’s Financial Report for the year-end 2017.