Die Krise but not La Crise? The Financial Crisis and the Transformation of German and French Banking Systems

Abstract

This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of financialization -defined here as the increased trading of risk. We focus on an apparent contradiction: why did the supposedly more protectionist and conservative German banking system suffer much higher losses than the more liberalized French system? This article also examines the responses of German and French banks and governments to the crisis and speculates how far these responses might limit future financialization and shape national banking systems.

Internationalised banking, alternative banks and the Single Supervisory Mechanism

“…The damage caused to some Landesbanks during the financial crisis, large government bailouts, Commission-imposed restructuring and stagnant lending placed them in a politically weakened position (Deeg and Donnelly, this volume). German federal governments and the Bundesbank have long called for the consolidation of banks in this sector (Hardie and Howarth 2009;Financial Times 14 September 2010). Clearly, the German preference to extend ECB direct supervision to the unstable Spanish cajas also encouraged compromise.…”

Protection of domestic bank ownership in France and Germany: The functional equivalency of institutional diversity in takeovers

“…Natixis, the small investment bank owned jointly by these two banks, recorded the highest losses of any French bank as a result of its involvement in the US subprime market (Hardie and Howarth, 2009 (Jabko and Massoc, 2012). The specific characteristics of the merger were designed by François Pérol, Sarkozy's chief economic adviser who previously had a key role in the setup of SPPE and SFEF, and who was then appointed as the first CEO of the newly merged group.…”

“…Fourth, the financial crisis of 2008-09 highlights the continuing insulation of German banks from foreign takeovers, but with the emerging activism of a new actor, namely the German federal government (Hardie and Howarth, 2009;Zimmermann, 2012). German policy-makers have been active in protecting banks listed on the stock market from unwanted takeover bids.…”

The Consequences of the Global Financial Crisis

“…In the spring of 2009, the state became the largest shareholder in BNP, holding 17 percent of nonvoting shares. The day after the hastily advanced refinancing, BNP announced its takeover of sections of Fortis Bank (Hardie andHowarth, 2009: 1033;Massoc and Jabko, 2012: 28). Thus, the French government was actively providing financial assistance enabling BNP-Paribas to exploit the crisis in pursuit of aggressive external expansion as hard-hit German and British banks retreated.…”

“…The final rescue plan allowed banks to issue preferred shares as collateral to government money in addition to subordinated debt, and to convert already issued debt to shares. Recapitalization involved boosting the capital ratios of six large French banks-Banque Populaire, BNP-Paribas, Caisses d'Epargne, Crédit Agricole, Crédit Mutuel, and Société Générale-through two €10.5 billion tranches handed out in December 2008and January-February 2009(EC, 2008Hardie and Howarth, 2009;Ministère de l'Economie, 2009;EIU, 2010;Massoc and Jabko, 2012: 17-18). There was certainly a highly statist dimension to the France banking bailout, and from a "new state activism" perspective, it is important to delineate what is novel, and what is more familiar within French responses to the GFC.…”