BNP Paribas Essay ⋆ Business Essay Examples ⋆ EssayEmpire

One of the most prominent European banks, BNP Paribas was formed in 2000 with the merger of the Banque Nationale de Paris and Paribas, two Parisian banks which, with Crédit Lyonnais (est. 1863) and Société Générale (est. 1864) constitute the “old banks” of France, established in the 19th century and foremost in prestige throughout the 20th. In 2007–08, the bank made headlines as one of several major foreign banks left vulnerable by the American subprime mortgage crisis.

Banque Nationale de Paris had been formed in 1966 by the merger of two 19th-century retail banks, Banque Nationale pour le Commerce et l’Industrie (BNCI) and Comptoir National d’Escompte de Paris (CNEP). Both banks had been nationalized at the end of World War II, along with Crédit Lyonnais and Société Générale, as part of France’s postwar reorganization of banking regulations. When the government decided to experiment with re-privatizing these banks decades later, BNP was the second to be privatized, in 1993, after the privatization of Société Générale proved successful. (Crédit Lyonnais followed in 1999.)

Paribas’s origins lie with the Banque de Crédit et Depot des Pays-Bas, which was founded in Amsterdam in 1863 and immediately opened a Parisian branch, helping to connect Parisian investors (still recovering from the havoc wrought on the French banking and finance industry by the regime changes of the first half of the century) with private banking throughout Europe. Only nine years after its founding, BCDPB merged with the Banque de Paris (est. 1869) to form the Banque de Paris et des Pays-Bas (BPPB) in January 1872.

BPPB was a public limited company, and began a relationship with Crédit Lyonnais early on, pairing with it to back part of a loan for the French government to repay war debts; a large portion of the funds for the loan was raised from across Europe, through the Pays-Bas connections. This kind of financial intermediation remained a primary pursuit of BPPB through the early 20th century, and it was instrumental in financing the French defense industry during World War I. Because it was not nationalized in the wake of World War II, it was able to become a more prominent commercial bank, and assisted and profited from the reconstruction of French industry.

The bank was eventually renamed Paribas, compressing the “Pari” of Paris and the “bas” of Pays-Bas. It became a focal part of the competition between BNP and Société Générale after both were privatized, as Société Générale attempted to buy out Paribas stock while BNP made attempts to acquire both Paribas and Société Générale. The bid for Paribas eventually succeeded, and BNP Paribas, formed in May of 2000, enjoyed a stronger position in the market. In 2007, when the American subprime mortgage crisis threatened three of BNP Paribas’s funds—Parvest Dynamic ABS, BNP Paribas ABS EURIBOR, and BNP Paribas ABS EONIA—the bank suspended their operation, precipitating the intervention of the European Central Bank for the first time since the financial panic following 9/11. A $130 billion loan at 4 percent interest was extended by the ECB in order to keep BNP Paribas’s announcement from causing further panic.

BNP Paribas has become the largest bank in the Eurozone by assets, and the second-largest by market cap. Just under half of its 162,000 employees work in Europe, and the bank’s branches are spread throughout 87 countries. In its home country, it is most active as a retail bank, having inherited Paribas’s extensive coverage—nearly 200 locations in Paris alone, another 2000 throughout the rest of the country, serving 6 million consumers. Its subsidiaries include Bank of the West in the United States, and the Italian bank BNL. The idiosyncratic scholar Nassim Taleb, best known for his writings on finance and the mathematics of rare occurrences—and for his prediction of the failure of Fannie Mae—once worked for BNP Paribas as a proprietary trader.

Bibliography:

Niall Ferguson, The Ascent of Money: A Financial History of the World (Penguin, 2008);
James Kanter and Julia Werdigier, “Big French Bank Suspends Funds,” New York Times (August 10, 2007);
Rehan Ul-Haq and Jorg Itschert, International Banking Strategic Alliances: Reflections on BNP/Dresdner (Palgrave Macmillan, 2004).

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