Crédit Lyonnais
Encyclopedia
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France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
. In the early 1990s it was the largest French bank, majority state-owned at that point. Crédit Lyonnais was the subject of poor management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
during that period which almost led to its bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
in 1993. It was acquired by another French bank (Crédit Agricole
Crédit Agricole
Crédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index....
) in 2003.
History
Founded in 1863 in LyonLyon
Lyon , is a city in east-central France in the Rhône-Alpes region, situated between Paris and Marseille. Lyon is located at from Paris, from Marseille, from Geneva, from Turin, and from Barcelona. The residents of the city are called Lyonnais....
by Henri Germain
Henri Germain
Henri Germain was a French banker and politician who was the founder of Le Crédit Lyonnais in 1863, in Lyon, France....
, Crédit Lyonnais was the biggest bank in the world by 1900. It was nationalised
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
in 1945, as was most of the banking sector in France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
after the war.
Following a change of leadership and frantic expansion starting in 1988, the bank was the subject of numerous financial scandals, contributing to a huge debt of around 150 billion French franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...
s (nearly €23 billion). This was caused by directors exaggerating investments and by problems with the bank's subsidiary companies.
Crédit Lyonnais became the leading lender to Hollywood studios in the 1980s. It also financed Giancarlo Parretti
Giancarlo Parretti
Giancarlo Parretti is an Italian financier.In 1989, he took over Cannon Film Group Inc. from Menahem Golan and Yoram Globus. Almost immediately, he made plans to take over the storied French studio Pathé, and changed Cannon's name to Pathé Communications...
's takeover of Metro-Goldwyn-Mayer
Metro-Goldwyn-Mayer
Metro-Goldwyn-Mayer Inc. is an American media company, involved primarily in the production and distribution of films and television programs. MGM was founded in 1924 when the entertainment entrepreneur Marcus Loew gained control of Metro Pictures, Goldwyn Pictures Corporation and Louis B. Mayer...
in 1990 for $1.25 billion. However, Paretti started looting
Looting
Looting —also referred to as sacking, plundering, despoiling, despoliation, and pillaging—is the indiscriminate taking of goods by force as part of a military or political victory, or during a catastrophe, such as during war, natural disaster, or rioting...
the company, fired most of the accounting staff, appointed his 21-year-old daughter to a senior financial post, and used company money to buy presents for several girlfriends. By June 1991, CL had had enough: under the terms of an April agreement that gave it control of Parreti's MGM stock, it fired Paretti and began a lawsuit against him. However, CL soon faced intense scrutiny for its dealings with Parretti. Overall, CL lost $5 billion from its Hollywood deals.
The bank avoided financial disaster by moving its debts and liabilities into a new state-owned company, Consortium de Réalisation (CDR). The creation of the CDR was highly controversial, as many did not believe that the French government
Government of France
The government of the French Republic is a semi-presidential system determined by the French Constitution of the fifth Republic. The nation declares itself to be an "indivisible, secular, democratic, and social Republic"...
should have bailed out the bank. The CDR notably agreed to pay US$525 million to the California Department of Insurance
California Department of Insurance
The California Department of Insurance , established in 1868, is the agency charged with overseeing the regulation of insurance regulations, enforcing statutes mandating consumer protections, educating consumers, and fostering the stability of insurance markets in the state of California...
in order to head off a lawsuit over the Executive Life
Executive Life Insurance Company
Executive Life Insurance Company was once the largest life insurance company in California. Its financial problems and subsequent insolvency in April 1991 shocked its policyholders and the financial world....
insurance scandal.
To allow the bailout, the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
imposed severe limitations, principally on the bank's international activities, and the bank was forced to sell many entities in the following years.
On May 5, 1996 a major fire destroyed much of Crédit Lyonnais' Paris headquarters
Crédit Lyonnais headquarters
The Crédit Lyonnais headquarters is installed in a haussmannian style building in the 2nd arrondissement of Paris...
. The fire began in the main trading room of the bank and was one of the worst fires to damage a Paris building in 25 years. It burned for over 12 hours, destroying two-thirds of the building, along with crucial bank archives and computer data.
In 1998, Crédit Lyonnais sold Crédit Lyonnais (Austria) to the Anglo Irish Bank
Anglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
.
Crédit Lyonnais was fully privatized in 1999. In 2003 BNP Paribas
BNP Paribas
BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...
built a position in the capital of the bank but finally another French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
, (Crédit Agricole
Crédit Agricole
Crédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index....
) acquired it and reorganised its operations:
- The investment banking business merged with Crédit Agricole Indosuez; the new entity took the name CalyonCalyonCrédit Agricole Corporate and Investment Bank is Crédit Agricole's corporate and investment banking entity. With a staff of 13,000 employees in 58 countries, Crédit Agricole CIB is active in a broad range of capital markets, investment banking and financing activities...
. - The French retail banking network remained separate. In 2005 it was renamed LCL in order to avoid negative references to its troubled recent history. It is owned by, but competes with, the existing French retail network of Crédit AgricoleCrédit AgricoleCrédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index....
.
Recent controversy
In 2001, Denis RobertDenis Robert
Denis Robert is a French freelance journalist and a writer. Robert formerly worked for Libération newspaper for 12 years....
and Ernest Backes book, Revelation, showed that Crédit Lyonnais was one of the many banks to hold unpublished accounts in Clearstream
Clearstream
Clearstream Banking S.A. is the clearing and settlement division of Deutsche Börse, based in Luxembourg and Frankfurt. Clearstream was created in January 2000 through the merger of Cedel International and Deutsche Börse Clearing...
, a Luxembourg
Luxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
-based transaction clearing company, which has been accused by the authors of being a huge international money-laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
machine.
In 2005 the CDR had to pay back €135 million to the creditors of Bernard Tapie
Bernard Tapie
Bernard Tapie is a French businessman, politician and occasional actor, singer, and TV host. He was Ministre de la Ville in the government of Pierre Bérégovoy, a businessman specializing in recovery for bankrupted companies, among which Adidas is the most famous ; and owner of sports teams...
, the controversial billionaire, after a scandal concerning the sale of Adidas
Adidas
Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, TaylorMade-Adidas golf company , and Rockport...
.
Sponsorship
Crédit Lyonnais may be most remembered for its sponsorship of the Tour de FranceTour de France
The Tour de France is an annual bicycle race held in France and nearby countries. First staged in 1903, the race covers more than and lasts three weeks. As the best known and most prestigious of cycling's three "Grand Tours", the Tour de France attracts riders and teams from around the world. The...
as many will remember the corporate brand on the sides of the maillot jaune (yellow jersey).