France and the International Financial Crisis: The Legacy of State-Led Finance



Despite the far-reaching liberalization of the French banking system over the past quarter century, French banks suffered far less in the international financial crisis (2007–2009) than banks in the United Kingdom and Germany. However, the French system also suffered far more—at least in the first stages of the crisis—than the banking systems of Southern Europe. By several measures, French banks were world leaders in financial innovation, and the French banking system was highly exposed to international market movements. The limited impact of the crisis, however, owed to the specificities of French “market-based banking.” Deliberate state action over the two decades prior to the crisis created a specific kind of banking system and encouraged forms of financial innovation, the unintentional consequence of which was the limited exposure to the securitization that caused the damage wrought during the financial crisis.