Bank of France


The Bank of France, headquartered in Paris, is the central bank of France. Founded in 1800, it began as a private institution for managing state debts and issuing notes. It is responsible for the accounts of the French government, managing the accounts and the facilitation of payments for the Treasury and some public companies. It also oversees the auctions of public securities on behalf of the European Central Bank.
Today, it is an independent institution, and it has been a member of the Eurosystem of central banks since 1999. This consists of the European Central Bank, and the national central banks of all European Union members. Its three main missions, as defined by its statuses, are to drive the French monetary strategy, ensure financial stability and provide services to households, small and medium businesses and the French state.

History

Central banking before the Bank of France

The Kingdom of France's first experiment with a central bank was the Banque générale, set up by John Law at the behest of the Duke of Orléans after the death of Louis XIV. It was meant to stimulate France's stagnant economy and pay down its staggering national debt acquired from Louis XIV's wars, including the War of the Spanish Succession. It was nationalized in December 1718 at Law's request and formally renamed the Banque royale a month later. It saw great initial success, increasing industry 60% in two years, but Law's mercantilist policies saw him seek to establish large monopolies, leading to the Mississippi Bubble.
The collapse of the Mississippi Company and the Banque Royale tarnished the word banque so much that France abandoned central banking for almost a century, possibly precipitating Louis XVI's economic crisis and the French Revolution. Later successors like la Caisse d'escompte and la Caisse d'escompte du commerce used the word "caisse" instead, until Napoleon retook the term with la Banque de France in 1800.

Bank of France

In 1800, financial power in France was in the hands of about ten to fifteen banking houses whose founders, in most cases, came from Switzerland in the second half of the eighteenth century. These bankers were deeply involved in the agitations leading up to the French Revolution. When the revolutionary violence got out of hand, they orchestrated the rise of Napoleon, whom they regarded as the restorer of order. As a reward for their support, Napoleon, in 1800, gave the bankers a monopoly over French finance by giving them control of the new Bank of France. Banker Claude Périer drafted the first statutes and Emmanuel Crétet was the first governor. For the first fifteen years it was the sole issuer of bank notes in Paris, and this privilege was extended to other financially important cities and the rest of the country by 1848.
The Bank was also instrumental in the creation of the Latin Monetary Union in 1865. The countries of France, Belgium, Italy, and the Swiss Confederation established the LMU franc as a common bimetallic currency.
In World War I, the Bank sold short-term Treasury bonds abroad to help pay for wartime expenditures. France abandoned the gold standard shortly after the outbreak of war. Debts amounted to approximately 42 billion francs by 1919. Following the war, the Bank sought to re-establish the gold standard and acquired capital from a number of American and British banking syndicates to defend the franc from exchange-rate fluctuations. The Bank also began to hoard gold reserves and, at its peak, held 28.3 percent of the world's gold stock. Some scholars have asserted that this gold accumulation was a contributing factor to the Great Depression. Under Émile Moreau, Governor from 1926 to 1930, the Bank consolidated gold reserves created a stabilization insurance fund, and tested new monetary policies in the wake of a global depression.
In World War II, the Bank oversaw the transfer of gold reserves overseas, which mainly included Canada, the United States, and the French overseas territories. In 1945, the Bank was nationalized by Charles de Gaulle and became a state-owned institution. Existing shareholders received bonds to replace their shares in the company.
In 1993, the Bank of France was again reformed when it obtained independence from the state. It sought to establish credibility by promising to adhere to the single mandate of price stability. Jean-Claude Trichet, Governor from 1993 to 2003, was the final Governor of the Bank until the establishment of the European Central Bank in June 1998. Today, the ECB sets monetary policy and oversees price stability for all countries in the Eurozone, including France.

European System of Central Banks

On 1 June 1998, a new institution was created, the European Central Bank, charged with steering the single monetary policy for the euro. The body formed by the ECB, and the national central banks of all the member states of the European Union, constitute the European System of Central Banks. According to the Maastrict Treaty, the Bank would oversee the functioning of the payment system and conduct independent research on the French economy, while the newly established European Central Bank conducted monetary policy for the entire Eurozone. The French franc was replaced by the Euro on 1 January 1999.
Following the financial crisis of 2007-2008, the Bank of France implemented quantitative easing for the account of the ECB.
In 2010, the French government's Autorité de la concurrence fined eleven banks, including Bank of France, the sum of €384,900,000 for colluding to charge unjustified fees on check processing, especially for extra fees charged during the transition from paper check transfer to "Exchanges Check-Image" electronic transfer.
The Bank recently established a "Lab", located on the Rue Réaumur in Paris, where start-ups and small businesses work on blockchain, artificial intelligence, and virtual reality. The Bank is the first to set up a blockchain system.

Timeline

The Bank of France is responsible for three missions: monetary strategy, financial steadiness and services to the economy.

Monetary strategy

The Bank of France contributes to the design of the monetary policy of the euro zone and implements it in France.
It is also the guardian of currency: it prints euro bank notes and manages the circulation of bank notes and coins. It also participates in the fight against counterfeit money, by training bank employees, merchants, police, etc.
The Bank of France establishes France's balance of payments and manages part of the foreign exchange reserves of the ECB.

Financial steadiness

The Bank of France is responsible for overseeing the French financial sector, through its subsidiary ACPR. It assesses risks and weaknesses of the financial system.
It also monitors payment systems and means, and publishes the Financial Stability Review.

Services to the economy

The Bank of France provides services to households, businesses and the French state.

Households

The Bank of France is in charge of offering services households in severe financial difficulty. This includes the management of over-indebtedness, and the guarantee to an access to basic banking services for everyone, such as the right to a basic bank account.
It is also in charge of financial and economic education of the general public, by developing an economic culture among specific populations. This includes sensitizing high school students, providing online information and educational services, training social workers and the launch of the French Cité de l'économie et de la monnaie, a museum based in the 17th district of Paris, in 2019.

Businesses

The Bank of France provides company ratings for non-listed companies, which can for instance be used by business leaders to obtain credit from their bank. It also manages credit mediation and proposes support to very small businesses. The Bank of France publishes a number of economic surveys, national and regional statistics, destined to businesses.

Governance

The governor of the Bank of France is appointed by the president and is, as of 2019, François Villeroy de Galhau, since 1 November 2015. He presides over the Bank's General Council, the body responsible for deliberating on all matters relating to non-Eurosystem activities. The first deputy governor is Denis Beau and the second deputy governor is Sylvie Goulard.

Key figures

In 2017, the main key figures of the Bank of France are as follows: