Regulation & Government

By the end of the 90s most of the French state-owned credit institutions had either been listed on the stock market or bought by other banks. Today, the French government retains a few key stakes in banking and insurance sectors by means notably of its ownership of the Post Office, the Caisse des Dépôts, and CNP Assurances and through them, stakes in some major financial industrial companies.

France has opted for separate and specialised regulation for the banking sector, the insurance sector and financial markets. It is however set within a framework of greater cooperation between supervisors.

The Banque de France monitors national monetary and financial indicators and implements the European Central Bank's policies. Since 2003, France strengthened its corporate governance requirements via the new Financial Markets Authority (Autorité des Marchés Financiers) - the body that oversees investments made into listed companies. Tighter domestic and foreign disclosure rules are now in application as a result of implementation of the EU Prospectus and Transparency Directives and two paramount deadlines in terms of compliance: December 2007's AML and January 2008's SEPA.

Subsectors

Stock market

• So as to continue seducing buyers, global markets have entered a frenetic phase of consolidation. Strategies have brought about transatlantic alliances as seen in the case of the NYSE and Euronext. Indeed, since April 2007, the French stock market is part of the new merger NYSE-Euronext which has become the first worldwide in terms of volume of actions traded.  The largest French companies are also quoted on exchanges outside France's CAC 40 index.
• The rather complex picture of current French and international fusions and acquisitions is largely a result of American regulations, frenzy over derivatives, and increased technological excellence.
• Whilst the London marketplace still holds a strong reputation, the NYSE-Euronext's autonomous decision-making centres based in Paris represent a key competitive advantage. Additionally, since a stockmarket's capacity to attract investors largely depends on its mastery of algorithmic systems, the new merger is highly promising as Euronext has long been recognized as a leader in this field of technological excellence. 
• Further to this, a generalized political and economic effort to increase the French market place worldwide can be observed. Several key measures worth noting include the creation of a ministerial High Committee to address questions of national competitiveness (notably regarding the legal lag), the creation of a professional body on the Paris regulatory market so as to encourage foreign entry, and fast-path procedures of convergence for mutual recognition of European IFRS and American GAAP standards, etc.

Banks

• The French banking sector accounts for 35 of the country's GDP and resembles that of its European neighbours with nevertheless certain differences in investments and a slight slowdown in funds raised in 2006.
• However, on the whole, the market's growth has been fast-paced in the last fifteen years thanks to assets becoming fully integrated into the globalisation process as well as other macroeconomic and regulatory changes.
• After much reshaping, the market is now endowed with substantial technical know-how, sustained profitability in certain lines of business, internal control procedures improving in line with international standards and sound financial structures.
• The number of inter and intra bank payment operations in 2006 was estimated to be worth €14.6 billion in 2006, a rise of 2.8% since the previous year.
• The performance of the French commercial banking industry is forecast to accelerate, with an anticipated CAGR of 4.5% for the period 2006-2011.
• France has the largest market in Europe in commercial paper. Corporate borrowers benefit from both the competition among banks and the proliferation in France of new financial instruments. In sight of this, 60% of French SMEs find it easy to get credit loans against a European average of 46%. According to the Banque de France, corporate debt rose by 9.4% in the year ending January 2007, to €1.31 trillion. 
• France contributes to 11.6% of the European retail lending market's value after the UK and Germany. It was found that 50.9% of French had credit loans at the end of 2006 and that the savings rate of French households represents 15.5% of available income, a slight decrease from the 15.8% three years earlier. Mortgage sales represented the most lucrative business area equalling approximately 80% of the market value. However, performance is set to decelerate slightly with an anticipated CAGR of 9.3% between 2006-2011.
• In 2007, 30% of the French population was estimated to hold personal bank accounts in several banks. This lack of loyalty is indicative of a moderate power in the face of suppliers. 
• Borrowing has also been boosted by leveraged buyouts, underdeveloped equity markets, historically low interest rates in the Euro area and narrow spreads because of tough competition in the French banking sector.
  

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Leading Industry Players

• The largest commercial banks in France are BNP Paribas, Société Générale, Crédit Agricole, and Groupe Caisse d'Épargne. 
• No distinction is made between bank types as they may have hybrid status and offer commercial, wholesale and investment-banking services with an international reach.
  

Marker concentration

• Despite its diversity, the French banking system is relatively concentrated, as shown not only by the piecemeal reduction in the number of establishments, but also by the dominant share of the activity held by the principal banks. Indeed, the M&A rush carried out in the last decade has considerably consolidated the competitive landscape and as a result can be perceived as a disincentive to smaller players incapable of outlaying high upfront capital investment. In total, 435 banking firms were operating in 2006. 
• Foreign players who already have an infrastructure in place may find entry easier especially considering this shakeout hasn't actually decreased business opportunities, but rather increased banking capacities.

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