Are French banks in danger?

The financial crisis generated by toxic products has already affected a substancial amount of financial groups. The crisis might have reached its peak last week, with the collapse of Lehman Brothers. Who could have guessed that a couple of monthes ago? Even Morgan Stanley is currently about to disappear. What a big mess!

Due to this increasingly unsecure environment, consummers are more and more scared. How can they trust their bank after all these issues and dramas?

In France people are starting to raise some interrogations; they are wondering whether their money is really in a safe place. So here is the point: how healthy is the French banking system? What is the difference between French and US system?

The major difference between those two systems is based on an organisationnal criterion. On the one hand the French system is based on a universal bank, meaning that all the different activities are made by the same bank. On the other hand the US system consists in diffenciating different types of activities. Thus investment banks, such as Lehman Brothers and Morgan Stanley, cannot benefit from cash deposits. They have got to find their funds on specific markets. Therefore a credit crunch can affect a US investment bank much more sharply than a Universal bank.

Finally French banks appear to be better builted to face the current financial crisis. However French consummers should'nt be oversatisfied neither! Although their bank should not collapse, they will still suffer a bit from the crisis: credit crunch, decreases in shares value...

Greedy people in a world of fraud

“le monde se divise en 2 categories: ceux qui ont le pistolet charge et ceux qui creusent”

Journalists are more and more blaming Wall Street for manufacturing and selling the subprime poison. American bankers are the bad guys, whereas French and German bankers are the serious ones. Let’s think about it…
On the one hand, it’s true that Americans are those who sell the poison. But who purchase it?
In reality, on the other hand there are foolish European bankers who are stupid enough to purchase subprime via CDOs. They do it because they do not have a full knowledge and understanding of the new and evolving exotic products.
Who is to be blamed? The ignorant or the greedy…I let make your own choice.

Is it related to the subprime?

As many banks are suffering from subprime issues, journalists have rapidly guessed that SocGen difficulties were due to it as well. Although subprimes seem to have an indirect impact on this situation, the biggest issue in this case is the terrible lack of efficiency within the risk management department. What a disaster for these teams.

Rogue trader: one man against five control teams

How is it possible that one man, who does not belong to the top management, can use more than $100 billions without being caught by its hierarchy? …a five control teams hierarchy…
How did he conceal all his massive trading positions by creating fictitious transactions?
What were the auditors doing over the past few months?

Is it the first time?

The most amazing part of the story is that…it is the first time that a greedy trader creates (what a destructive creation!) such a big waste of money.
Just remind Nick Leeson and the Barings in the 1990s. This bastard (sorry for my impulsive language, but I couldn’t resist) utterly destroyed his bank by leading it to bankruptcy. Afterwards he visited jail only a couple of years…and he is now CEO of a football club in Ireland. What’s going on in this world????

Fraud, fraud…an fraud

The subprime scandal is a story without hero. Or maybe I missed something. Where are the good guys?
Greedy idiots, the bankers, sell debts to people who cannot repay it. Thus they can earn more money thanks to impressive commissions.
Their bosses are delighted, because they also take bonuses.
Clients are happy because they can borrow money (whereas they are definitely not solvent).
Center banks are happy as well, because it enables them to claim it will enhance growth.
Credit Rating forget the reason of their existence…and decide rather to benefit from this greedy world.
And so on…

The reputation of France goes down

SocGen used to be renowned broadly thanks to its expertise in shares futures. It was even considered as one of the leading groups in this business. This quality also offered to France the opportunity to create a solid reputation among the financial community.The sudden appearance of SocGen scandal changed the framework of finance sector. Due to this fraud, French reputation has collapsed. SocGen is definitely not the only group to suffer from this story.

Future of Societe Generale

SocGen situation is really uncertain at the moment.
In the past all the frauds lead to the end of the company’s existence. Thus various scenarios are possible.
There might be a merger or an acquisition; the most probing bidder are Hsbc, who is already settled in France, and BNP Paribas, who is the strongest French group. The second possibility is the most obvious, as French Government intends to defend its economy ( by the way this is really funny because France always claim Europe, whereas it always act as a nationalist country).

Future of Banking sector

The severity of the scandal damages is still unknown at the moment. What is it extent? Should we create a new institution? Should we rather finish the capitalism era?
Noyer, the governor of Bank of France, claims that there is no need to change the system. However he is preparing new controls. Merkel and Brown would like to avoid too much regulation on the other hand.