France and the International Financial Crisis: The Legacy of State‐Led Finance

Abstract

Abstract

Internationalised banking, alternative banks and the Single Supervisory Mechanism

“…In accordance with the financial trilemma, French interest in supranational supervision was sparked by the internationalization of the five largest French banks which all held a significant percentage of the assets in other EU member states and in the euro periphery specifically (Howarth 2013). However, the low aggregate internationalization and moderate concentration figures for the French banking system appear to contradict French ministry of finance preference on the transfer of all bank supervision to the ECB (Table 1; Figure 1, see appendix).…”

“…The central institutions and, in the case of the partlisted Crédit Agricole and Banques Populaires et Caisses d'Epargne (BPCE), specially created investment banks (Crédit Agricole Corporate and Investment Banks (CACIB) and Natixis), were highly internationalised. The international financial crisis resulted in significant losses from derivatives trading by both these investment banks and the central institutions (Howarth 2013). The one partial exception was Crédit Mutuel which nonetheless still held a significant percentage of its assets (14 per cent) outside of France.…”

“…In addition to 'fairness' concerns, the French government and banks also argued that the division into larger and smaller banks made little economic sense, given that banking crises often originated with smaller, fast-expanding banks (FBF 2012). French opposition to differential treatment also reflects French government insistence of a lack of a 'too big to fail' problem facing the large French banks given their 'mixed business' model and a longstanding strategy of constructing national champions engaged in a range of banking activities (Howarth 2013). The three largest alternative banking groups in France -Crédit Mutuel and BPCE (a federation of cooperative and former savings banks) and Crédit Agricole -also expressed concerns about direct ECB supervision, given their funding structure, but not outright opposition ( Determined German ministry of finance opposition to extending ECB direct supervision beyond the largest banks also reflects the limited reach of internationalization into the German banking system.…”

“…Second, the paper contributes to the (limited) comparative political economy literature on Varieties of Capitalism and the financial and sovereign debt crisis (Hall 2014) and specifically national banking systems and the recent crises (Hardie and Howarth 2013;Quaglia and Howarth 2013) by examining how the specific features of national banking systems can direct government preferences on both national and supranational financial regulation and supervisory frameworks. Third, this paper contributes to the emerging literature on the politics and political economy of Banking Union (Donnelly 2014;Howarth andQuaglia 2013, 2014;Schimmelfennig 2014;Salines et al 2012, Spendzharova 2014) which feeds into the vast literature on EMU and European economic governance, more generally, and national preference formation on EMU, more specifically (for example, Dyson 2000; Dyson and Featherstone 1999;Verdun 2000;Walsh 2000). specific, several public statements by ministers and ministry officials of these three countries at the time of the negotiations also appear to confirm this point.…”

The Comparative Political Economy Basel III in Europe

“…There is a literature exploring how domestic policy making / institutional frameworks shape financial regulatory choices, either through embedded legal frameworks that limit regulatory options (Howarth 2013) or through institutional frameworks that work to reinforce or diminish the influence of specific financial lobbies. In Germany, the federal structure of government and the central role of the Bundesrat (upper house) in law making help to explain the influence of the local savings banks and regional banks (Busch 2004;Deeg 1999).…”