From the Hybridisation of the French Banking Model to the Rise of Global Leaders: The French State's Key Role in Developing Asset Management

Since seminal studies by Gurley and Shaw (1960) and Hicks (1974), financial markets and banks have been depicted as institutions representing two distinctive modes of funding that serve to categorise national economies. Since then, many other studies have looked at the determinants of this dualism, applying a variety of competing approaches and theoretical foundations (Hall and Soskice, 2001; La Porta et al., 1998). This corpus has diverged in many regards (alleged superiority of a given financial system, causes and origins of the financial system’s dualism) but converges around the idea that the French financial system remains highly bank-based, with banks serving as the prime providers of funding in this economy.

At the same time, calling the French financial system bank-based understates the transformations it experienced. It is clear that French banking activities have gone well beyond lending alone. They have helped develop the country’s financial markets through their issuance activities, own account securities investments and, more broadly, a whole spectrum of activities. To the best of our knowledge, studies looking at the broadening of banking activities have rarely focused on the determinants thereof.

The questions raised have tended to involve the institutions - defined as sets of practices and rules - assumed to be at the origin of a hybridisation process. More generally, hybridisation can be construed as the ‘largely unintentional process by means of which attempts to imitate or establish an institution which has proved its effectiveness in other spaces leads to the birth of an original configuration’ (Boyer, 2003). The view here has been that transformations in the French financial system are tied to the advent of institutions intensifying the interconnection between banks and financial markets. From our perspective, the hybridisation of the French banking model comes from its importing of Anglo-American practices since the 1940s. Whereas American asset management has been scrutinised in a number of studies, countries characterised by bank-based funding systems remain relatively under-studied. This is particularly surprising given how easy it is to depict asset management’s arrival in France as a success, with subsidiaries of the country’s banks turning into global leaders capable of collecting and allocating funds in markets worldwide.

The present paper suggests analysing the French financial system’s hybridisation by a historical study of asset management. Starting with the bank intermediation phases identified in Plihon (1995) and Plihon et al. (2006), it analyses the conditions of emergence and the institutional determinants that have helped French banks become global leaders in asset management. More specifically, we show how the governance of these funds has been organised around a universal banking model, and how such practices have served the interests of the French State and the country’s banks. Towards that end, it particularly analyses the role played by the French State through the regulations and industrial policies it has carried out in order to build up the financial sector. According to Schmidt (2003), the French capitalist model remains characterised by the State’s active role, something that can be described as ‘State-enhanced capitalism’.