Banque de France

from Wikipedia, the free encyclopedia
Logo of the French Central Bank
Bank of France
Banque de France
Main entrance to the Banque de France
Main entrance to the Banque de France
Headquarters Paris , France
founding January 18, 1800
president François Villeroy de Galhau
country France
currency

Euro

ISO 4217 EUR
Currency reserves EUR 175 billion (2019)
Website

www.banque-france.fr

successor

European system of central banks (since 1999 )

List of central banks

The Banque de France (German " Bank of France ") is a central bank that today belongs to the European System of Central Banks . Before that, it secured the former French currency, the franc . It goes back to the foundation by Napoleon in 1800 and has its seat in Paris .

history

Forerunners of French paper money

In 1716 John Law opened the Banque Generale ; In 1718 the Banque Generale was acquired by the government and renamed Banque Royale . In 1720 the system of paper money issuance created by John Law to reduce the French national debt collapsed.

In 1790 the National Assembly decided to issue assignats , which should be covered by the church property confiscated by the revolutionaries. Due to its permanent decline in value, hardly anyone wanted to accept paper money in 1797 . Assignats and their successor currency, the territorial mandate, were given up and coins returned.

The founding years

The Bank of France was created on January 18, 1800 by Napoléon Bonaparte, who was then First Consul. New economic growth should be encouraged after the severe recession during the revolutionary period. It should be the task of the bank to issue banknotes payable on sight to the presenter in exchange for purchased commercial bills.

At that time, Great Britain and Sweden already had a central bank . The Bank of France, however, had a more limited role. The founding statutes of February 13, 1800 limited the business area to the city of Paris and did not protect it from competition from already existing similar institutions.

The drafters of the statutes had learned from the hard experiences of the fiasco of the bank founded by John Law in the Ancien Régime and the collapse of the assignats of the revolutionary government. They believed that the public distrust of paper money could only be overcome if the distribution of paper money was entrusted to an institution independent of the public purse. The Bank of France was therefore set up as a joint-stock company with a share capital of 30 million francs. Parts of it were drawn by Napoléon Bonaparte and various members of his retinue. Only the 200 largest shareholders were admitted to the Annual General Meeting. They appointed 15 members (régents), who formed the bank's administrative council ( Conseil général ), and three supervisory boards ( censeurs ), who oversaw the bank's management. The Council, for its part, elected three members to the Executive Committee, including one that was both its Chairman, Chairman of the Council and Chairman of the General Assembly.

The Bank of France began operations on February 20, 1800, although its capital was not yet fully paid up. On April 14, 1803, the bank received the first official privilege with the exclusive right to issue paper money in Paris for fifteen years.

The Bank of France suffered a number of difficulties in its early years, including a crisis in government finances and a decline in its gold holdings, which limited the redemption of banknotes. As a result, Napoleon introduced reforms that gave the government more control over bank management.

On April 22, 1806, a new law replaced the executive committee with a governor and two deputies. All three were appointed by the emperor. Two years later, an imperial decree dated January 16, 1808, issued the basic statutes ( statuts fondamentaux ), which regulated banking operations until 1936. The decree provided for "discount offices" ( comptoirs d'escompte ) to be opened in other French cities, where it justified the growth in trade. Another ordinance allowed the bank to buy the former villa of the Duke of Toulouse on Paris' Rue de la Vrillière as its headquarters.

In the 19th century

French Central Bank in Paris, engraving by Miss Byrne, 1829

The banknote issuance privilege granted to the bank in 1803 was extended in 1806 and renewed four times until 1945. It was gradually extended to the cities with "discount offices" and then to the whole of France when the bank took over local central banks.

Until 1848, the notes issued by the Bank of France were not legal tender with mandatory acceptance . In addition, there was no cover for the issue value, but the bank had to be able to exchange its banknotes for gold coins on request. The crisis triggered by the political upheavals in 1848 led to the imposition of the "compulsory currency", ie the waiver of the bank's obligation to take back its own banknotes. These became legal tender, and individuals and the government had to accept them for payment. Compensation for the imposition of the compulsory currency was the banknote cover . The maximum limit for the issue of notes was 350 million francs.

Compulsory currency and legal tender were abolished by the law of August 6, 1850, but reinstated during the Franco-Prussian War in 1870. The maximum limit was set at 1.8 billion francs. After 1877 there were no more changes to the status of banknotes as legal tender due to the country's financial situation. The maximum limit for the issuance of notes has been raised several times.

By 1848, the bank's operations outside Paris were limited to 15 branches and offices. In the second half of the 19th century, the branch network expanded very quickly and reached 160 locations in 1900. The expansion of the branch network went hand in hand with a steep increase in the volume of business. The financing of the economy grew rapidly under a deliberate policy of low interest rates and easy access to discount credit. Loans against collateral were introduced in 1834. At first they were only granted against government bonds; other securities were later gradually accepted. Customer relationships were also developed.

From 1900 until nationalization

The bank also helped secure the currency by buying and selling gold at fixed prices when the banknotes were convertible to gold. This activity ceased between 1914 and 1926. The bank was then officially authorized to intervene in the foreign exchange market to stabilize the franc. In return for the right to issue banknotes, the bank handled the government's cashier operations free of charge and granted it advances for financial needs.

In 1928 a gold cover of 35 percent of the banknotes was prescribed. In the same year 259 branches of the bank were represented in the country. On June 30, 1937, the Bank of France left the gold standard .

nationalization

A Banque de France ATM in Paris .

After the Popular Front won the 1936 elections, the government decided that it was no longer in the general interest for the bank to be run under private corporate law. The law of July 24, 1936 gave the government the power to intervene directly in bank management. The 15 councilors were replaced by twenty councilors, only two of which were elected by the general assembly. Most of the others were appointed by the government and were meant to represent the economic, social, and general interests of the nation. Another novelty was the election of a council member by bank staff. The only 200 main shareholders were not allowed to attend the Annual General Meeting. The 1936 law opened them to all shareholders. It also abolished the obligation that had existed since 1806 for the governor and his deputies to hold a certain number of shares in the bank.

This reform was accompanied by a codification of bank legislation. It marked a tightening of government power, but it was only the prelude to the nationalization of the bank, decided by the law of December 2, 1945, after France was liberated from German occupation. The law stipulated that the bank's capital of 182.5 million francs was to be transferred to the state on January 1, 1946. For each share the shareholders received 29 francs in cash plus a three percent government loan of 28,000 francs, which was to be repaid in twenty annual installments. The last three percent outstanding bonds of the Bank of France were redeemed on January 1, 1965, when interest payments ceased.

Although the reforms of 1936 and 1945 removed any remaining private control over bank management, they did not diminish the governor's role vis-à-vis the public sector, nor did they limit the bank's freedom to do its own thing.

post war period

The Nationalization Act of December 2, 1945 required an amendment to the banking statutes, the composition of the council and guidelines, taxation and duties before February 28, 1946. Taxation and duties were determined by the law of May 24, 1951, which governed the bank subject to general tax law, but left other questions in the balance. However, the changes in the role of the Bank of France since 1945 made it necessary to update the 1936 statutes because certain tasks were outdated and others appeared incomplete. These were in particular the organization and credit management.

The governor proposed a reform of the banking statutes in 1972, introduced by the law of January 3, 1973. The rules for banking activities and organization have been adapted and updated in terms of objectives and areas of responsibility. They managed operations and interventions with sufficient flexibility to allow changes if they should prove necessary. The structure of the council has been radically changed. Since then, councilors have been appointed on the basis of their own abilities and have not been appointed as representatives for various financial and economic sectors. The power of the council has been strengthened and the new legislation has placed fewer restrictions on banking activities. It only defined basic principles and allowed the Council to freely design the implementing provisions. A single board of directors has replaced the two state representatives since 1945, but its power was expanded to match the increased powers of the council.

The finance minister was given the right to approve the distribution of profits and the payment of dividends. This was a consequence of the nationalization that had made the state the sole owner of the bank.

European Integration

Facade of the Banque de France on the rue de la Vrillière

In 1993, a fundamental reform of the bank brought independence. The law of August 4, 1993 marked a turning point in the history of the Bank of France. The step towards independence was taken in order to ensure continuity and solidity of monetary and credit policy by breaking away from short-term considerations, which increased the credibility of their policies. Their commitment to price stability and independence from domestic politics was a necessary condition for the credibility of monetary and credit policy measures. This reform paved the way for the European Monetary Union. In 1998 the bank became a member of the European System of Central Banks. The law of August 4, 1993 has been in force in a modified form since January 1, 2001.

Cooperation with the European Central Bank

On June 1, 1998, the European Central Bank (ECB) was created as a new institution for a common currency within the European Union , the euro . The former central banks therefore gave up their national banknote privilege to this supranational institution. Monetary and credit policy is determined exclusively by the European Central Bank for the euro. It coordinates with the national institutes within the framework of the European System of Central Banks (ESCB). The Bank of France must therefore orient itself today in its monetary and credit policy to the ECB guidelines.

tasks

In addition to their support for the policy of the European Central Bank, their tasks are entrusted to banking supervision and the national economic and statistical accounts. The Bank of France has the power to issue guidelines for the French credit system.

criticism

In September 2010, the Banque de France and ten other banks were fined € 381.1 million by the Conseil de la Concurrence . The banks had made an agreement according to which they would charge their customers 4.3 cents check fees per check from January 2002 to July 2007 in order to generate extra profits. This affected 80% of the checks used in France. Check transactions in France were free until 2002. After the intervention of the banking regulator, which called the profits "illegal", this practice was stopped. The banks in this cartel were also fined for excessive fees totaling 3.8 million euros.

Web links

Commons : Banque de France  - Collection of images, videos and audio files

Individual evidence

  1. ^ France Foreign Exchange Reserves . tradingeconomics.com. Accessed on January 28, 2017 (English)
  2. ^ Collusion in the banking sector . Press release of the Autorité de la concurrence of September 20, 2010, accessed on February 9, 2011
  3. French banks are supposed to pay millions in: Handelsblatt of September 21, 2010, accessed on February 9, 2011