French Banks Research Articles

Cost Management for IT Activities: A Case Study in the IT Division of a French Bank Using Activity-Based Costing

The costs of information technology (IT) activities have been increasing rapidly these recent years, due to the technological sophistication and more market-oriented strategies that complexify the value chains of the firms. Many of these expenses do not relate to individual products but are associated to customers, market segments and distribution channels. In this context, the companies try to understand the cost of selling their products and services. This is the reason why customer-driven and market-oriented cost management approaches have gained in popularity.In this paper, we review in a first part the strategic cost management stream and the way we can give a customer orientation to cost management processes, based on the Activity-based costing (ABC) method. In a second part we present a case study that takes place in the IT division of a French Bank that has developed an ABC method since several years. We describe how the ABC model has evolved toward a process that enables to compare the performances of different customers. With this case study, we will conclude about the new forms of management controls and controllers that emerge.

Impact of cerebro-spinal fluid biomarkers of Alzheimer’s disease in clinical practice: a multicentric study

CSF biomarkers of Alzheimer's disease are well validated in clinical research; however, their pragmatic utility in daily practice is still unappreciated. These biomarkers are used in routine practice according to Health Authority Recommendations. In 604 consecutive patients explored for cognitive disorders, questionnaires were prospectively proposed and filled. Before and after CSF biomarker results, clinicians provided a diagnosis and an estimate of their diagnostic confidence. Analysis has compared the frequency of diagnosis before and after CSF biomarker results using the net reclassification improvement (NRI) method. We have evaluated external validity comparing with data of French Bank National of AD (BNA). A total of 561 patients [Alzheimer's disease (AD), n = 253; non-AD, n = 308] were included (mean age, 68.6 years; women, 52 %). Clinically suspected diagnosis and CSF results were concordant in 65.2 % of cases. When clinical hypothesis and biological results were discordant, a reclassification occurred in favour of CSF biomarkers results in 76.9 %. The NRI was 39.5 %. In addition, the results show a statistically significant improvement in clinician confidence for their diagnosis. In comparison with BNA data, patients were younger and more frequently diagnosed with AD. Clinicians tend to heavily rely on the CSF AD biomarkers results and are more confident in their diagnoses using CSF AD biomarkers. Thus, these biomarkers appear as a key tool in clinical practice.

The End of the “French Paradox”?

The purpose of this article is to provide a short- to medium-term analysis of the overall performance of the French economy. Unfortunately, this subject is all too frequently discussed in a manner that is perhaps not as clear as it could be. As a French economist trained in the United States, I hope to briefly outline what I feel are the major issues concerning the French economy in a way that I hope carries a few less biases than usual. First, we need to be clear that the performance of the French economy relative to most OECD countries has been less than what the underlying strengths of the country would lead one to expect. This problem is producing ongoing difficulties with the public finances. Without faster growth, paying for the social benefits the population prefers is becoming increasingly difficult. Third, slower growth coupled with structural impediments in the labor market are combining to produce shockingly high levels of unemployment among the young. As in much of Europe such reforms will be difficult but the need for change is pressing. Fourth, French banks are fortunately in rather good shape and problems in the financial system are not a major concern. Putting these factors together illustrates the “paradox” that is the French economy. This is a highly developed country whose economic performance in many ways is disappointing. However, France is, after all, a democracy. Navigating the country out of this paradox can be done, but only in a way that is French. Thinking that France will somehow transform itself into Germany is delusional. On the other hand, France needs to avoid becoming a larger version of Italy.

How Do Anticipated Changes to Short‐Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies

In this paper, we argue that banks anticipate short‐term market rates when setting interest rates on loans and deposits. In order to include anticipated rates in an empirical model, we use two methods to forecast market rates—a level, slope, curvature model, and a principal components model—before including them in a model of retail rate adjustment for four retail rates in four major euro area economies. Using both aggregate data and data from individual French banks, we find a significant role for forecasts of market rates in determining retail rates; alternative specifications with futures information yield comparable results.

Measuring the performance of hierarchical organizations: An application to bank efficiency at the regional and branch levels

The measurement of performance has long been of central interest to both managers and management accounting researchers. As noted by Otley (1999), performance management is a preoccupation of management control systems researchers. In this study, we are concerned with coherence considered at two levels: (i) between the hierarchical organization and performance evaluation, and (ii) throughout the decision-making process between a hierarchical organization's various levels of decision-making. We do this by developing a system of performance measures from a prescriptive approach and a methodological basis rooted in operational research. Such a system of performance measurement ensures consistency between the different levels of a hierarchical structure. More specifically, we propose a means of measuring performance that captures both the overall performance and the contributions of the separate levels within an organization's hierarchy. The proposed measurement is based on an extension of standard frontier efficiency models to the situation where the “business units” being evaluated consist of two different levels within a hierarchical organization. Generally, the lower-level unit is responsible for “operations,” which can be assessed by using a measure of technical efficiency; higher-level units are assumed to make “strategic” decisions, which can be assessed by using a measure of allocative efficiency. We motivate and illustrate our method using data on 1585 branches of a major French bank.

Proposals for Reform: A French Perspective

The paper first analyzes where France stands in the global picture, and then describes how it is trying to keep the current financial crisis in check. The 2008 French Bank Relief Act created both a financing company and a recapitalization company to help financial institutions via a government guarantee. The relief plan also gave way to a Strategic Investment Fund, and a “Big Loan” program is being implemented. Other interventions, which are more structural, include the reform of securitization, hedge funds, and rules for executive compensation. Finally, the paper proposes a few paths for reform.

Saving the Banks

How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone. Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business–government relations banks were able to entertain with public decision makers. Still, “crony capitalism” accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British, and French bank bailout, we show that countries with close one-on-one relationships between policy makers and bank management tended to develop unbalanced bailout packages, while countries where banks negotiated collectively developed solutions with a greater burden-sharing from private institutions.

Towards a Theoretical Understanding of the Recurrence of Crises Embracing the Issue of Organizational Learning: An Illustration with the Case of Two Hostile Takeover Bids Faced by Société Générale (1988, 1999)

In this article, we try to better understand the relationship between learning and crisis through the analysis of recurrent crises. Our study focused on two successive and similar crises experienced by the same organization, namely two hostile takeover bids a French bank (Société Générale) had to cope with in 1988 and 1999. From a literature review within the fields of organizational learning and management crisis, we proposed an analytical grid making it possible to get a better understanding of crisis‐induced lesson‐drawing processes. We then used that grid to analyse and compare the learning processes implemented during the two crises under study. This comparison leads us to suggest that lack of organizational learning is one factor that accounts for crisis recurrence. Conversely, proactive crisis management behaviour – resulting from double‐loop learning – seems to be the most fruitful behaviour to adopt in order to prevent a recurrent crisis and produce long‐term effects in the organization.

Groupement des Cartes Bancaires: The General Court Reinforces the Enforcement of Competition Policy in the Financial Sector

The General Court has upheld the European Commission's decision which found that Groupement des Cartes Bancaires had breached Article 101 by introducing a series of pricing measures which had the object and effect of restricting competition to the benefit of the major French banks that control the Groupement.

Modelling and Measuring Business Risk and the Resiliency of Retail Banks

The recent banking crisis has revealed the existence of strong resiliency factors in the retail banking business model. On average, retail banks suffered less than other financial institutions from unexpected market changes. This paper proposes a new methodology to measure retail banks' business risk, which is defined as the risk of adverse and unexpected changes in banks' profits coming from sudden changes in the banks' activities. This methodology is based on the efficiency frontier methodology, and, more specifically, on the duality property between the directional distance function and the profitfunction. Using the distance function to compute banks' profitability, we take the distance to the frontier of best practices as a measure of profit inefficiency, ie of unexpected losses related to underperformance. In this approach, shifts in the efficiency frontier induced by adverse shocks to banks' volumes serve as a measure of business risk. This measure of profit volatility allows a measurement to be made of the impact of volume changes on banks' profits. This method is applied to a database containing halfyearly regulatory accounting reports over the 1993-2011 period for more than 90 French banks running a retail banking business model. Our results verify a low level of business risk in retail banking, thus confirming the resiliency of the retail banks' business model.

How Do Anticipated Changes to Short-Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies

In this paper we argue that banks anticipate short-term market rates when setting interest rates on loans and deposits. In order to include anticipated rates in an empirical model, we use two methods to forecast market rates - a level, slope, curvature model and a principal components model - before including them in a model of retail rate adjustment for four retail rates in four major euro area economies. Using both aggregate data and data from individual French banks, we find a significant role for forecasts of market rates in determining retail rates; alternative specifications with futures information yield comparable results.

Greek Drama on a Global Stage

Greek Drama on a Global Stage

French banks, retailers to pilot biometric payment method

French banks, retailers to pilot biometric payment method

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

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.

New Patterns of Recruitment and Training in German, UK and French Banks - An Attempt to Analyse Sectoral Regulatory Systems from a Dynamic Perspective

In this paper we examine debates concerned with national models of industrial organisation. One school of thought has argued that distinct national models, or business systems are a prevelent and enduring paradigm. Critiques of such an approach argue that common global competitive pressures will encourage greater convergence in organisation, so that national models will become outdated. We have argued that a sectoral approach to understanding the affect of contemporary supranational pressures on national regimes can provide a useful empirical analysis of these debates. Actors at the sectoral level represent a primary force for adaptation processes in national production systems because they are seeking concrete solutions to problems generated from global competitive pressures. To examine these debates we focus on competition and developments in the recruitment and training practices of the retail banking sector in Germany, Britain and France. The comparison reveals that market pressures have actually led to considerable changes in each of the national banking sectors, but that the outcomes are rather different. Between countries, there is considerable variation in the relative significance of price-, quality- and innovation-led competition in different market segments. This is also true for recruitment and training practices with which German, British and French banks have responded to changes in market competition. Furthermore the analysis shows that banks' recruitment and training strategies are not only shaped by national educational and training institutions, but that national educational and training institutions themselves have undergone changes which in turn have influenced labour supply in the banking sector. The explanation of differences between countries and changes over time, however, would remain fragmentary without specific training institutions and regulations at the level of the sector. These sectoral arrangements have not only significantly influenced recruitment and training practices at the company level. In all three countries, banks have also been actively involved in the reform of these sectoral institutions and regulations in order to adapt them to their changing demands. From these results, we conclude that the sector is an important intermediary arena in which actors negotiate changes in the regulatory systems between the company and the national level.

Two-way interplays between capital buffers and credit growth: Evidence from French banks

We assess the extent to which bank capital buffers exacerbate the cyclical behavior of credit. We empirically study the relationships between GDP growth, capital buffers and loan growth with firm-level data for French banks over the period 1993–2009. Based on panel data simultaneous equations and Granger causality tests, our findings point to mutually reinforcing mechanisms between capital buffers and loan growth, all the more as better quality capital is considered. Overall, those empirical results lend support to a countercyclical financial regulation focused on high-quality capital and loan growth smoothing.

Crisis, Performance and Corporate Social Responsibility (CSR) in the French Banking Industry: An Exploratory Study

This paper analyzes the impact of the current economic and financial crisis on French bank practices in terms of corporate social responsibility (CSR). From this perspective, we sought to determine whether French banks consider the current crisis as an opportunity to develop their CSR practices in an overall performance purpose or as a threat that would hamper these practices and incite the banks to focus on financial and economic performance at the expense of social and environmental concerns. The CSR practices of French banks are analyzed with respect to their business models, solvency and financial performance. To do so, we adopt an exploratory approach and begin with a content analysis of the annual reports from the main French banks for the period 2008-2010. We then conduct linear regressions to study the relationship between social performance, financial performance, solvency and the business model (mutual or commercial). Therefore, the main contribution of this paper is to provide an initial assessment of French bank CSR practices in the current crisis context and with respect to financial performance, quality and the business model.

An Overlooked Central Bank Rescue: How the Bank of France Ended the American Panic of 1907

Recent American and European financial crises prompt the questions: under what conditions do crises end, when does a rescue plan crystallize, and how does a rescue happen? I examine a successful rescue operation in the worst pre-Federal Reserve financial crisis, the Panic of 1907, with these questions in mind. Received tradition ascribes the resolution of that crisis to a series of efforts to expand domestic liquidity. In this event study, however, I find that it was direct intervention by France in American money markets that ultimately relieved the stringency by providing a new source of international liquidity. I challenge the notion that J. Pierpont Morgan saved the American markets by devising a series of ad hoc domestic liquidity measures during the crisis. While Morgan’s actions may have averted a settlement crisis at the New York Stock Exchange and provided temporary relief for equity prices, I find that it was the announcement by the Bank of France to accelerate its gold payments directly for American crops that ultimately reversed the downtrend in equity prices. I find evidence that signs of spill-over to the French banking and financial systems accompanied the French decision to rescue the United States. Furthermore, discussions among French bank regents reveal how the rescue operation met their competing mandates to provide liquidity while preserving rigorous quality standards for assets the Bank purchased in exchange for its liquidity provision. Implications are that rescues occur when a surplus-reserve central bank experiences signs of domestic stress, that central banks cooperate when it serves their self-interest, and that a collateralized rescue operation can provide systemic liquidity and maintain central bank portfolio quality.

Bank Credit, Asset Prices and Financial Stability: Evidence From French Banks

This paper analyses the effect of asset prices on credit growth in France and tries to disentangle credit demand and supply factors, both for the whole 1993-2010 period and during periods of financial instability. Using bank-level panel data at a quarterly frequency, stock price growth is shown to have a significant effect on lending growth over the whole period, but without credit supply factors being singled out. By contrast, housing price growth has a significant effect during periods of financial instability only, even after controlling for credit demand effects. These results show that credit demand factors do play a large role but also provide evidence of tighter credit constraints on households in financial instability periods.

Bank Credit, Asset Prices and Financial Stability: Evidence from French Banks

This paper analyses the effect of asset prices on credit growth in France and tries to disentangle credit demand and supply factors, both for the whole 1993-2010 period and during periods of financial instability. Using bank-level panel data at a quarterly frequency, stock price growth is shown to have a significant effect on lending growth over the whole period, but without credit supply factors being singled out. By contrast, housing price growth has a significant effect during periods of financial instability only, even after controlling for credit demand effects. These results show that credit demand factors do play a large role but also provide evidence of tighter credit constraints on households in financial instability periods.