Crédit Lyonnais

Bank's Dutch subsidiary makes disastrous $1 billion MGM loan to Giancarlo Parretti. As one of France's three largest banks with assets of EUR 200 billion, Crédit Lyonnais provides a full range of commercial banking and financial services domestically and worldwide. Active in 60 countries, Crédit Lyonnais was once the world's largest bank. It has earned a reputation for innovation since the 19th century and was a pioneer in automated teller machines (ATMs). Ambitious expansion in the 1980s, however, spawned the world's largest financial disaster, estimated to have cost the French government $25 billion. Nevertheless, Crédit Lyonnais's 1999 flotation has made it something of a privatization success story, however sullied by scandal. Crédit Lyonnais was created to fulfill a need in France for a bank that would accept small deposits during the expansion of the Second Empire, when the country needed an infusion of capital. The city of Lyons, with its rich and long-established banking tradition and the residents' desire to become independent of Parisian tutelage, was favorably suited to the formation of such a bank. The legal pathways were made clear by a May 23, 1863 law permitting the establishment of businesses without governmental authorization. The active personality of 39-year-old Henri Germain was also an important element in the bank's foundation. The son of a prosperous Lyons family, Germain had been a lawyer, stockbroker, silk merchant, and mine manager before launching Crédit Lyonnais and becoming its first president. Of the bank's 20 million francs of capital (40,000 shares at 500 francs each), he became the biggest shareholder with 2,150 shares. On July 6, 1863, 200 businessmen met in the presence of a notary in Lyons to finalize a charter for Crédit Lyonnais, and on July 26, the bank opened for business at the Palais du Commerce in Lyons. In its first years, Crédit Lyonnais operated as a deposit bank and served the needs of local business. Sudden losses in a dye factory in Lyons, however, deterred further direct participation in businesses. Germain's edict that the amount of all deposits and current accounts be equaled by liquid capital for immediate reimbursement became not only the rule at Crédit Lyonnais, but at all deposit banks. Such policy became influential in the bank's increasing reputation for reliability and security, as it expanded both in France and abroad. By 1865, Germain had married into a Paris family and assumed a seat in the French parliament. A newly established branch of Crédit Lyonnais in Paris became increasingly more important, and Germain traveled regularly between Lyons and Paris. With the beginning of the Franco-Prussian War in 1870, Germain moved some of the bank's assets to London, creating Crédit Lyonnais's first foreign branch. During the Commune of 1871, a provisory office was installed at Versailles. Germain's active participation in negotiations over the financial clauses of the Frankfort treaty, which ended the Franco-Prussian War, reflected his growing influence in the financial community and helped to assure that his business went on as usual after the war. As a parliamentarian, Germain was much in the public eye and was suggested as a candidate for Finance Minister, but his attentions remained fixed on Crédit Lyonnais. During the 1870s, Germain acquired some capital for expansion in Paris, southeastern France, and abroad. The construction in 1878 of a new, ornate building on Boulevard des Italiens to house the central Paris branch, which became known as a 'temple of finance,' signaled the ultimate dominance of Paris over Lyons in the bank's future. (It was built by Gustave Eiffel.) Branches also were established in Aix-en-Provence, Nice, and Montpellier, among other cities in the southeast of France. The international network of branches, which would become fundamental in the history of the bank, began as offices added in Constantinople and Alexandria in 1875, Geneva and Madr