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

Abstract

Despite the far‐reaching liberalization of theFrench banking system over the past quarter century,French banks suffered far less in the international financial crisis (2007–2009) than banks in theUnitedKingdom andGermany. However, theFrench system also suffered far more—at least in the first stages of the crisis—than the banking systems ofSouthernEurope. By several measures,French banks were world leaders in financial innovation, and theFrench banking system was highly exposed to international market movements. The limited impact of the crisis, however, owed to the specificities ofFrench “market‐based banking.” Deliberate state action over the two decades prior to the crisis created a specific kind of banking system and encouraged forms of financial innovation, the unintentional consequence of which was the limited exposure to the securitization that caused the damage wrought during the financial crisis.