The French banking sector

In macroeconomic terms, the banking sector in France is of above-average importance compared with other European countries. In 2022, the balance sheet total of all banks was approximately 3.7 times the country’s total economic output. By comparison, the European average was 2.4 times the GDP. The development of the bank branch network in France is well above average, with 1,902 inhabitants per branch, compared to a European average of 3,228 inhabitants per branch.

In 2022, the portfolio of loans in danger of default at French banks was 1.9%, slightly higher than the average of 1.8% in other European countries. The cost-income ratio of French banks in 2022 was 68.6%, which was above the level of other European countries. Profitability, measured by return on equity, was below the level of other banks in Europe in 2022.

In 1984, the French banking and financial sector was deregulated by the French Banking Act. Since then, a number of mergers have led to the emergence of large banks. In terms of total assets, three French banks are now among the twenty largest banks in the world (BNP Paribas, Crédit Agricole and Société Générale).

In its 2022 final report of the annual Article IV mission, the IMF noted that France had been less affected than most EU countries by the energy crisis. However, economic activity slowed sharply and inflation is set to remain stubborn due to the loosening of energy price controls. Sustainable, expenditure-driven fiscal consolidation will prove crucial in the medium term in order to reconstruct buffers and set debt on a steady downward trajectory, whilst leaving room to accelerate investments in green and digital technologies.

The state-subsidised savings accounts (e.g., Livret A) are a special feature of the French banking market. The fixed interest rates for these savings deposits (currently 3%) are above the market level and the returns are both tax- and social security-free. However, the investment volume per savings book is limited (currently €22,950) and is used to finance social housing schemes.

The French savings banks – Caisse d’Epargne

The first French savings bank was founded in Paris on 22 May 1818. The savings banks, which were established by private initiative, were intended to make savings accessible to broad sections of the population. The savings deposits were transferred to the State Deposit Bank (Caisse des Dépôts), which used them for public financing and paid the savings banks a fee in return. As early as the 19th century, the promotion of the regional common good, including in the areas of social welfare and health promotion, was an important part of the savings banks’ remit (comparable to the public mission of the German savings banks). Since 1950, French savings banks have also been allowed to grant loans to municipalities.

In 2006, the cooperation between the French savings banks (Caisse d’Epargne) and the collective banks (Banques Populaires) started with the foundation of a joint subsidiary – Natixis. Numerous mergers in 2007 and 2008 reduced the number of French savings banks to 15 institutions. In 2009, the French savings banks and collective banks merged to form Groupe BPCE. The primary level of the 15 Caisses d’Epargne and 14 Banques Populaires will continue to operate under the existing brands.

In August 2013, Groupe BPCE carried out an internal restructuring and equalisation of its financial links. Until then, Natixis held 20% of the shares in each of the savings banks and collective banks through non-voting “certificats coopératifs d’investissement” (CCIs – cooperative investment certificates). Through a successful buy-back of the CCIs, the local savings companies became 100% owners of the savings banks again.

As of 1 May 2017, the Caisse d’Epargne Nord France Europe and Caisse d’Epargne Picardie savings banks merged to form the Caisse d’Epargne Hauts de France savings bank.

On 5 December 2017, the Banque Populaire Atlantique and Banque Populaire de l’Ouest merged to form the Banque Populaire Grand Ouest. In 2018, the Caisse d’Epargne Grand Est Europe was created and the merger between the Caisse d’Epargne d’Alsace and Caisse d’Epargne Lorraine Champagne-Ardenne was implemented.