An unsatisfactory banking reform project

We need to review the state’s intervention framework

The bill of separation banking discussed in the National Assembly since February 12 seems technical to many. This is his main weakness: leading the debate in the labyrinth of banking techniques.

In fact, the two issues underlying the split of market activities and traditional credit and deposit activities are straightforward. The first is political: do we agree that the guarantee of the State is given to all the market activities of banks?


If it is no, then we should define the transactions we intend to grant: Softwarekv loans and deposit business and those used to hedge the exchange rate and associated rate risks, by simple operations.

As for the rest, why should French taxpayers give any guarantee? Are they involved in every bankruptcy of an industrial enterprise?

This public guarantee currently granted to market transactions is not insignificant since it allows our banks to finance themselves on the markets at an artificially low rate: according to the New Economics Foundation, it reported, in 2010, 48 billion euros. euros to French banks, of which more than 6 billion to BNP Paribas, 12 to Crédit Agricole, 5 to Société Générale, 24 to Groupe BPCE (Banque Populaire and Caisse d’Epargne).

We must not look elsewhere for the source of the extravagant bonuses received by 9000 French traders and their managers. Removing the state guarantee for these operations would also be a way to break the financial wage bubble.

It would, above all, ensure the safety of French deposits. Needless to say, according to the OECD [Organization for Economic Co-operation and Development], of the eight European banks closest to bankruptcy, there are four French institutions?

That their appeals for help to the European Central Bank (ECB) are third, in volume, after those of Spain and Italy? That our country has four institutions with systemic risk, where Germany has only one (Deutsche Bank)?


That the French banking asset represents 340% of our gross domestic product (against 85% in the United States)? That Dexia has already cost 12 billion French and Belgian taxpayers?

That the losses of Credit Agricole in 2012 could amount to 6 billion? That the French banks did their survival in 2008 only thanks to the 320 billion guarantee provided in disaster by the State?

The second issue of the split is none other than the financing of the French economy. Today, out of a total of 8,000 billion French bank balance sheets, only 10% is used to finance businesses.

And 12%, to household financing. The rest are market transactions: according to the Bank for International Settlements (BIS), 7% of financial derivative activities involve an institution of the real economy.

Which means that out of the $ 47 trillion associated with the derivatives activities carried out by BNP Paribas, $ 44 trillion (22 times the French GDP!) Does not have the counterpart of an enterprise in the real economy.

The financing of the European economy – and France is no exception – is so weak that the ECB itself is planning to take the place of private banks to finance the real economy.


As for the 200 billion bonds issued in 2012 by French banks to finance mortgage credit, if they gave birth to only 22 billion mortgages, it is because mortgage credit is a way to finance activities market, and not the other way around.

The model of the universal bank is, in truth, that of a mixed bank that diverts deposits from the French to finance priority, and with the guarantee of the State, market activities.

That’s why it’s a bad model. International investors, moreover, are not mistaken, they do not want to invest in universal banks.

Conversely, the more our credit and deposit banks are protected from the vagaries of the financial markets, the more secure, competitive and able to attract low-cost capital.

Amendments Baumel and Berger (the first considers that market makers must be strictly defined so that it does not cover speculative activities, the second considers that the market must be market-oriented beyond a certain threshold delivered at the discretion of Bercy) are they up to these challenges?

No. The state guarantee will continue to be granted to all banking groups, which will not have more incentive to finance the real economy than hedge funds.

Worse, hedge fund lending will still not be a spin-off. The deposits of the French will continue to be at the service of shadow banking and tax havens.


In addition, the subsidiary will not provide any security to the banking groups, given the decree of August 25, 2010 which authorizes that, in exceptional circumstances, the threshold of 25% (and not 10% according to the banks and Bercy ) the group’s equity commitment can be surpassed to save a distressed subsidiary.

Nothing will prevent a scenario like that of the insurer American International Group (AIG), bankrupted by its micro-subsidiary in 2008.

In addition, in case of disaster, the Governor of the Bank of France and the Director General of the Treasury may decide to dip into the deposit guarantee fund of the French to save a bank or even a hedge fund.

It will be up to them whether or not to commit the taxpayer’s money to avoid bankruptcy. Knowing that the banking will of BNP Paribas is already 1,800 pages, will it be of any use, when it will be decided in 48 hours to save, or not, an institution whose assets represent the French GDP?

The scenario of “banking resolution” that the bill makes most likely is, therefore, that of SNS reaal – the name of this Dutch bank which, however, deemed more secure than the General Society in 2011, has just been “saved” bankruptcy at the expense of Dutch taxpayers without any senior bonds being

This is why the debate on the banking split in France is just beginning.