Stability of French banks

Angry manUnderstandably the doom-laden news from the world’s financial centres has made for considerable disquiet among average guys on salaries and pensions. It was just the other day that we had news pictures of panic-stricken depositors lining up to take their money out of the UK’s Northern Rock (in any event, none of them lost a penny). So is there anything to fear for those of us who do our retail banking with the place on our local Côte d’Azur high street?

Two points: firstly, as Bernard Jacquillat, an academic banking expert with no political axe to grind, has put it, “France’s banks are among the most solid in the world” and – in some ways – among the most prudent. Certainly, as anyone who’s had a mortgage here will know, they’ve never been in the business of handing out loans on a “self-certified” basis where what people say their income is gets accepted without any checking. Crazy, as US bankers have learned. On the other hand major French banks get involved with that sort of dodgy business through their international links, especially with America. Crédit Agricole – founded in 1894 as “the peasant’s bank” – has bragged for years of its worldwide activities (it’s currently in seventy countries). Its entanglement with the “subprime” or insecure loan business cost it an estimated €5 billion. Elsewhere talks are going on about a merger between the Banque Populaire Group and Caisse d’Epargne. The latter bank was not happy to learn about the activities of three CE traders which, while the crisis was in full spate, lost their bank €600 million.

Second point: in his policy speech in Toulon not so long ago, Nicolas Sarkozy declared “I will not accept that a single bank customer will lose a single euro because of these events.” But that’s not just an empty promise. Current French legislation already guarantees current and savings accounts up to €70,000 (and double that for joint accounts). If your bank is headquartered in another EU country and is not technically French then it’s that country’s legislation that applies (in Italy the guarantee is €100,000; in the UK £50,000 or €62,500). On the other hand, if your bank is from outside the EU it’s the French guarantee that applies. If you’re more or less relieved to know all that also expect, as trade commentators say, that bank charges will go up and loans will be more difficult to get. Yes, in sum, there is “trouble at bank” but for most of us there’s no need to panic.

From Riviera Reporter Issue 130: Dec 2008/Jan 2009