on the bank's main entrance façade on rue de la Vrillière
Background The
Kingdom of France's first experiment with a central bank was the
Banque Générale (Banque Générale Privée or "General Private Bank"), set up by
John Law at the behest of the
Duke of Orléans after the death of
Louis XIV. Law received the bank's 20-year
charter in May 1716 and its
stock consisted of 1,200
shares valued at 5,000
livres apiece. It was meant to stimulate France's stagnant economy and pay down its staggering
national debt acquired from Louis XIV's wars, including the
War of the Spanish Succession. It was
nationalized in December 1718 at Law's request and formally renamed the
Banque Royale a month later. It saw great initial success, increasing industry 60% in two years, but Law's mercantilist policies saw him seek to establish large monopolies, leading to the
Mississippi bubble. The bubble ultimately burst in a
financial crisis in 1720, and on 27 November of that year, the
Banque Royale officially closed. The collapse of the Mississippi Company and the Banque Royale tarnished the word
banque ("bank") so much that France abandoned central banking for almost a century, possibly precipitating
Louis XVI's economic crisis and the
French Revolution. Successors such as the
Caisse d'Escompte (from 1776 to 1793) and ''Caisse d'escompte du commerce
(from 1797 to 1803) used the word "caisse
" instead, until Napoleon retook the term with la Banque de France'' ("Bank of France") in 1800.
Creation In 1803, financial power in France was in the hands of fifteen members of the
Haute Banque, when the shareholders' meeting ratified the appointment of a “Council of Regency” composed of
Jean-Frédéric Perregaux, ,
Jean-Barthélemy Le Couteulx de Canteleu, ,
Jacques-Rose Récamier, , , , , , , ,
Claude Perier, , , and
Jean-Conrad Hottinguer. These powerful bankers, representative of the financial elite that would become referred to in France as the
Haute banque, were deeply involved in the agitations leading up to the
French Revolution. When the revolutionary violence got out of hand, they orchestrated the rise of
Napoleon Bonaparte, whom they regarded as the restorer of order. As a reward for their support, Napoleon, in 1800, gave the bankers a monopoly over French finance by giving them control of the new Bank of France (Banque de France). Banker
Claude Perier drafted the first statutes and
Emmanuel Crétet was the first
governor of the Bank. On 24
Germinal, year XI (14 April 1803), the new Bank received its first official charter granting it the exclusive right to issue paper money in Paris for fifteen years.
Development On 22 April 1806, a new law replaced the Central Committee with a Governor and two Deputy Governors. All three were appointed by the Emperor. The Bank was also instrumental in the creation of the
Latin Monetary Union (LMU) in 1865. The countries of France,
Belgium,
Italy, and the
Swiss Confederation established the LMU franc as a common bimetallic currency. In World War I, the Bank sold short-term
Treasury bonds abroad to help pay for wartime expenditures. France abandoned the gold standard shortly after the outbreak of war. Debts amounted to approximately 42 billion francs by 1919. Following the war, the Bank sought to re-establish the
gold standard and acquired capital from a number of American and British banking syndicates to defend the franc from exchange-rate fluctuations. The Bank also began to hoard gold reserves and, at its peak, held 28.3 percent of the world's gold stock (only behind the United States at 30.4 percent). Some scholars have asserted that this gold accumulation was a contributing factor to the
Great Depression. Under
Émile Moreau,
Governor from 1926 to 1930, the Bank consolidated gold reserves created a stabilization insurance fund (
fonds de stabilisation), and tested new monetary policies in the wake of a global depression. In World War II, the Bank oversaw the transfer of gold reserves overseas, which mainly included
Canada, the
United States, and the
French overseas territories. In 1945, the Bank was nationalized by
Charles de Gaulle and became a state-owned institution. Existing shareholders received bonds to replace their shares in the company. The Bank's statute was reformed in 1973. In 1993, the Bank of France was again reformed when it obtained independence from the state. It sought to establish credibility by promising to adhere to the single mandate of
price stability.
Jean-Claude Trichet,
Governor from 1993 to 2003, was the final Governor of the Bank until the establishment of the
European Central Bank (ECB) in June 1998. Today, the ECB sets
monetary policy and oversees
price stability for all countries in the
Eurozone, including France. of the Bank of France in
Paris On 1 June 1998, a new institution was created, the
European Central Bank (ECB), charged with steering the single monetary policy for the
euro. The body formed by the ECB, and the national central banks (NCB) of all the member states of the
European Union, constitute the European System of Central Banks (ESCB). According to the
Maastrict Treaty, the Bank would oversee the functioning of the payment system and conduct independent research on the French economy, while the newly established
European Central Bank conducted monetary policy for the entire
Eurozone. The
French franc was replaced by the
Euro as a virtual currency on 1 January 1999, being replaced entirely with coins and banknotes on 1 March 2002. Following the
Great Recession, the Bank of France implemented
quantitative easing for the account of the ECB. In 2010, the French government's
Autorité de la concurrence (the department in charge of regulating competition) fined eleven banks, including Bank of France, the sum of €384,900,000 for
colluding to charge unjustified fees on check processing, especially for extra fees charged during the transition from paper check transfer to "
Exchanges Check-Image" electronic transfer. The Bank recently established a "Lab", located on the
Rue Réaumur in Paris, where start-ups and small businesses work on
blockchain,
artificial intelligence, and
virtual reality. The Bank is the first to set up a blockchain system. With the onset of the
COVID-19 pandemic and the ensuing economic crisis, the
Eurosystem resolved to inject €3 trillion of liquidity into banks, allowing them in turn to support households and businesses, particularly with regard to urgent cash flow needs. In addition to membership in the Eurosystem, the Banque de France is in charge of credit mediation. This service, which has been in very high demand during the crisis, provides assistance to companies facing difficulties in their relations with financial institutions. The Banque de France manages procedures to resolve overindebtedness, and while its premises are no longer open to the public, requests continue to be processed. ==Activities==