Banking governance and financial crisis: The case of the French market

The systematic crises faced by the banking system these last years were very only seldom analyzed under the Corporate Governance perspective.  Corporate Governance takes into account various mechanisms aiming at making so that the decisions taken by the leaders correspond to the Shareholders interests (Anglo-Saxon vision) or, more largely, to the Stakeholders interests  (European vision).  Whereas the Corporate Governance considers basically a spectrum of mechanisms, it is very often reduced to the manner with which the Boards of Directors function, by considering criteria based on the concept of independence of the administrators, on the size of the control committees, the possible presence of associated committees, or on the scission of the functions of CEO and Chairman.

If, under the effect of the American economic circles, there was a promulgation of the codes of governance in the years 2000 in Europe, those were largely influenced by the diktat of the banking and financial environment because the problems of governance were then confined in the field of the companies of Technology Media Telecom sector.

Through this paper, there is the assumption that the regulations made for the companies had only little applicability for the banking environment (representatives are being principal instigators of codes). They led to deficiencies of control and decision making which negatively impact different kind of stakeholders.

We focus on the French market and the quoted banks as this one is characterized by a significant number of banking institutions (BNP/Paribas, General society, AXA, Crédit Agricole,…) whose bankruptcy could cause systemic effects on the real economy.

More precisely, using Who is Who database for the French Market, we show that the professional and extra-professionals links between the directors of these institutions cause the non-observance of criteria of independence of judgment and involves a managerial freedom and consequences potentially disastrous for the whole of the economy.

Beyond this description, we support our reasoning by considering the links between the banking representatives and the political circles, which reinforces the idea of impunity of the banking actors, centred fundamentally on the assumption of Too Big to Fail.

In other words, we show that the financial representatives, because of strong links with the public sphere, based on the implication of the political world to limit problems involved in the perpetuation of banking activities.