The calm before the storm
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The calm before the storm

French banks are starting to restructure and consolidate. But they remain obsessed by the domestic market and are more concerned with market share than return on equity. All that will change with the euro. Rebecca Bream reports.

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The Crédit Lyonnais dilemma

French banking, particularly retail business but also investment banking, has for decades been shaped by government action. There is a division between privately-owned banks such as Société Générale and Paribas, and state-owned and mutual banks such as Crédit Agricole and Crédit Mutuel. Some regulations favour the mutual sector, such as the monopoly of distribution of the popular Livret A tax-free savings accounts held by Crédit Mutuel and the Caisses d'Epargne.

Rival bankers complain about the unfair competition and many recommend demutualization. "Some parts of the sector, like Crédit Agricole, are moving towards being more like commercial banks," says Société Générale's deputy chairman, Patrick Duverger. "But there is much room for improvement." Reform of the mutual sector will take place eventually, but whether through government initiative or by decree from the European Commission is unclear.

Although prime minister Lionel Jospin's socialist administration is thought to be less reform-minded than the previous government led by Alain Juppé, in June finance minister Dominique Strauss-Kahn did propose some low-key changes. "Recent decisions go in the right direction, but progress is too slow," says Bauduoin Prot, president and chief operating officer at BNP.

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