A merchant bank with European roots, Banque de Paris et des Pays-Bas (later Paribas) very early on developed an international network to serve businesses.
A merchant bank with European roots
Founded in 1872 by French and German bankers, Banque de Paris et des Pays-Bas was steeped in the tradition of European high finance, which was conducted through alliances between European family-run banking houses. No sooner had the Banque de Paris et des Pays-Bas been set up than it made its mark during the highly successful second issuance of ‘Liberation Bonds’ designed to raise funds to pay France’s war indemnity to Prussia in the wake of the Franco-Prussian war of 1870; the success of the issue was in large part due to the bank’s excellent European network.
During this period, the bank developed two major areas of activity: securities issuance on the French market and corporate finance. It took part inter alia in the construction of the Peking-Hankow railway (1899-1905). At the same time the bank was building up an impressive portfolio of company shareholdings both in France and abroad, especially in industrial concerns such as the Norwegian conglomerate Norsk Hydro and public utilities such as railways, trams and power companies. The bank also set up or took stakes in a number of credit institutions in Europe, including Banco Español de Credito and Banca Commerciale Italiana, and – further afield – Crédit Foncier Franco-Canadien, Banco Nacional de Mexico, Banque Française et Italienne pour l’Amérique du Sud-Sudaméris, the Ottoman Bank and the Banque d’Etat du Maroc.
The Banque de Paris et des Pays-Bas also established close correspondent banking relations with major international financial institutions such as Barings and Deutsche Bank, which enabled it to extend its influence overseas without having to create its own bricks-and-mortar banking network.
A prudent strategy
During the period of political and financial instability that marked the inter-war years, the Banque de Paris et des Pays-Bas saw its overseas business curtailed and fell back on the French market. Horace Finaly, Managing Director between 1919 and 1937, steered a prudent course, building industrial stakes in the chemicals and electricity sectors; in the oil business in the Compagnie Française des Pétroles, Esso, Standard Oil and the Romanian oil group Steaua Romania; in steelmaking; and also in publishing and communications with Havas, Hachette and the Compagnie Générale de TSF.
Under the law of 2 December 1945 which re-structured France’s banking system, the Banque de Paris et des Pays-Bas opted for merchant bank status, which enabled it to escape the wave of nationalisations and return to one of its great traditions, supporting industrial development. At that time French industry was in urgent need of restructuring and development in order to take advantage of the newly-emerging European economic space.
Under the leadership of Jean Reyre, who was Managing Director from 1948 to 1966, the bank developed worldwide export finance for capital goods and equipment, using new medium-term export credit mechanisms. The bank thus helped to supply equipment to the steel industry in Latin America, including the Paz del Rio works in Colombia and Cosipa in Brazil; to the power sector, with the Cabora Bassa project in Mozambique; and the petrochemicals industry in Scandinavia. This strategy, pursued right through until the 1970s and 1980s, saw the bank general known as Paribas helping to finance large-scale projects such as the construction of the Caracas underground rail system in the Venezuelan capital and the development of the European aeronautics champion Airbus. At the same time its return to the international banking scene took shape as it established a number of banks, subsidiaries and offices abroad – including in New York in 1960 and London in 1964.
Although the name Paribas had been used as the bank’s telegraphic address since the beginning of the 20th century, it was only when the banks were nationalised in 1982 that this abbreviation was made official. When it was re-privatised in 1987, the Compagnie Financière de Paribas attracted 3.8 million individual shareholders.
In 1999, the Banque Nationale de Paris (BNP) launched a takeover bid for Paribas, and this led to a merger between the two banks on 23 May 2000, which formed the BNP Paribas Group.
To go further :
Eric Bussière, Paribas, l’Europe et le monde (1872-1992), Anvers, Fonds Mercator, 1992