Banque de France Bulletin no. 241: Article 4 Large French banking groups are increasingly concentrating their international activities in the euro area

By Bottineau Isabelle, Coffinet Jérôme, Le Meur Chloé

Thematic: Financial stability and financial system

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The large banking groups studied in this Bulletin (BNP Paribas, BPCE Group, Crédit Agricole Group, Crédit Mutuel Group, Société Générale and HSBC Continental Europe) had total consolidated assets of EUR 8,073 billion at the end of 2021, accounting for 86% of France’s total banking sector.

Their footprint extends well beyond national borders: in Europe they are classified as “significant institutions” and have been directly supervised by the European Central Bank since 2014. Four of them (BNP Paribas, BPCE, Crédit Agricole and Société Générale) also qualify as “global systemically important banks”.

The successive crises that have unfolded since 2008 – the financial crisis, the sovereign debt crisis, the public health crisis and then the war in Ukraine – have had knock-on effects on French banks’ foreign activities. The latter have become increasingly concentrated in the euro area in recent years, at a time when the growing integration of the Banking Union is making cross-border operations in the region less risky.

1 French banking groups have significant international exposure which is concentrated in a core of developed countries

The French banking system is one of the most internationalised in the world

At the end of September 2021, French banks’ foreign claims accounted for 11% of the total foreign exposures of global banks (see Chart 1). This figure, which exceeds their global market share of bank assets, illustrates the extent to which they have become internationalised. The French banking system ranks fourth worldwide in terms of the size of its foreign claims. Its internationalization rate, which measures its foreign exposures as a share of total exposures, stands at 39% compared to 21% for Japan, 24% for the United States and 25% for Germany. Based on this indicator, however, the French banking sector is less internationalised than those of the United Kingdom (56%), Spain (49%), the Netherlands (49%) Switzerland (47%) and Canada (46%) (see table). Foreign claims have risen particularly sharply since the end of 2017 (see Box 1), reaching EUR 3,764 billion for French banks at the end of 2021. The respective shares of claims within France and outside France have remained largely stable, indicating that both domestic and foreign exposures have risen at a similar pace. However, the six large French banking groups have all increased their foreign claims in the last decade (see Box 2).

This internationalisation is being driven by French banks’ local presence

The internationalisation of the large French banking groups is being facilitated by their local presence in host countries in the form of subsidiaries (around 1,100 at the end of 2021). The majority of these subsidiaries are financial corporations (see Chart 2). More than half of foreign banking activities are carried out via subsidiaries of credit institutions, although their number has declined significantly since 2018.

Activity is concentrated in a core of developed countries

French banks are present on all continents (see Chart 3), but have a particularly strong footprint in Europe and North America. Excluding Brazil and Mexico, their claims vis-à-vis Latin American countries remain fairly modest; the same applies to Africa, where only a few countries exceed the threshold of EUR 5 billion of total exposures. Large French banks’ foreign counterparties are primarily located in Europe (53%), followed by the Americas (26%) and Asia (16%). The major emerging economies or BRICS account for 6% of total foreign counterparties. …