The birth of Credit Agricole
Credit in farming at the end of the 19th century
In the late 19th century in France, agriculture was struggling to find suitable credit, i.e. long-term, flexible and cheap.
There were several failed attempts to set up agriculture banks, including one in 1861 supported by Credit Foncier. The 1884 Act concerning professional freedom of association allowed the formation of farm unions, and together with the example of mutual banks in Germany and Italy, this created an environment conducive to the emergence of suitable banks.
The Third Republic’s desire to attract farmers’ votes by supporting small family farms, together with the efforts of Agriculture Minister Jules Meline, resulted in the Act of 5 November 1894, which created Credit Agricole. The Act authorized the creation of Credit Agricole’s Local Banks by members of farm unions. The banks would be owned by their members, according to the principle of mutuality.
Government support and the creation of Credit Agricole’s Regional Banks
The 1894 Act did not confer any financial advantages, and Local Banks quickly faced financial problems, such as a lack of capital and insufficient collateral from small farmers.
The government took partial measures, including the Act of 1898 concerning farm warrants, which helped to solve the collateral problem, along with more general measures. In 1897, the government required the Banque de France to accept discounted notes from farm unions and to provide resources to Credit Agricole in the form of an injection of 40 million francs and an annual payment of 2 million francs.
To distribute these advances, the Act of 31 March 1899 set up an Agriculture Ministry committee and instituted Credit Agricole’s Regional Banks, of which there were nine in the first year. These co-operative banks represented the second level in Credit Agricole’s institutional pyramid. They brought together the Local Banks in each region and encouraged the formation of new Local Banks.
The rise of the Local and Regional Banks
Through determined effort, Local and Regional Banks became more numerous. By the time of the First World War, each French department had at least one Regional Bank.
However, despite being authorized to grant long-term loans by the Acts of 29 December 1906 (loans to farm co-operatives) and 19 March 1910 (individual long-term loans), these banks mostly lent short-term. In addition, despite rising savings inflows, the government continued to provide three quarters of source funds.
The First World War emphasized these shortcomings, along with the benefits of the Credit Agricole system. The isolation of certain regions showed the need for a central bank to regulate business. Credit Agricole was also called upon to finance the development of land left fallow during the war, and then to restore farms located in battle areas. Credit Agricole also gradually became a tool for supporting small rural farms.
The creation of Office National de Credit Agricole
To give greater autonomy to what was at the time merely a credit department of the Ministry of Agriculture, and to create a central clearing organization for the Regional Banks, the Act of 5 August 1920 created the Office National de Credit Agricole. This public-sector entity was renamed Caisse Nationale de Crйdit Agricole (CNCA) in 1926, putting greater emphasis of its role as a bank.
Bank development in the XX century
Development during 1920-1945
In the 1920s, Credit Agricole increased its geographical coverage in France. It was authorised to grant loans to small rural tradesmen in 1920, and then financed the rural electrification programme from 1923 onwards. It granted the first low-interest loans for farmers in 1928. The Local and Regional Banks did not emerge from the 1930 crisis unharmed. Those most exposed were helped by CNCA, which stepped up its control duties. A joint deposit guarantee fund was then set up in 1935.
However, Credit Agricole also played a major role in helping the agricultural sector overcome the crisis, financing wheat stocks through discounting when ONIC was set up 1936. The payment methods used led to wider usage of cheques and bank accounts in the countryside.
Although the Vichy regime led to increased state supervision during the Second World War, this was only a temporary institutional change. However, the war had a significant financial impact. Weak activity during the war led to an abundance of savings, and Credit Agricole took advantage by issuing 5-year notes, a simple, safe savings product that was highly successful and set Credit Agricole on the way to being self-funding.
Major savings inflows
To enable it to finance the post-war reconstruction effort and the mechanization of agriculture, Credit Agricole stepped up efforts to attract savings, in order to complement government resources. The Regional Banks opened large numbers of new offices (1,000 in 1947, 2,259 in 1967), and salespeople sold 5-year certificates and long-term bonds created in 1950. Increased savings inflows made Credit Agricole self-financing from 1963 onwards.
In 1945, the Federation Nationale du Credit Agricole (FNCA) was set up as an association representing the Regional Banks with respect to the public authorities and CNCA. CNCA was revamped in 1947, playing a growing role in training staff and increasing Credit Agricole’s expertise, in order to offer depositors the loans and services they required in return for their deposits. 1959 was an important date in this respect, since Credit Agricole was authorized by the government to finance customers’ primary residence in rural areas, whatever their status.
Adoption of the all-purpose banking model
In 1966, as part of major financial reforms carried out by the government to boost savings and remove Credit Agricole from its budget, the government gave Caisse Nationale de Credit Agricole financial autonomy. Savings inflows no longer passed through the Treasury, and CNCA was now responsible for balancing the surpluses and deficits of the Regional Banks.
The 1971 "Rurality Act" extended Credit Agricole’s potential financing sources to rural zones and to new types of customers, such as tradesmen and food producers.
Further reforms extended Credit Agricole’s range of activity, through a broader definition of rural zones and an authorization to grant loans to SMEs, as well as reducing its tax advantages. To meet specific needs and to work around the rigidity of the Rural Code, CNCA set up subsidiaries: Union d’etudes et d’investissements (UI) was created in 1967 to make equity investments, Segespar in 1968 to carry out asset management and Unicredit in 1971 to grant loans to food producers.
Outside France, Credit Agricole opened its first branch in Chicago in 1979.
Major changes in the group’s institutions
A major phase in Credit Agricole’s history began when the government passed an act to privatize CNCA on 18 January 1988. CNCA was transformed into a public limited company, with a 90% stake sold to the Regional Banks and 10% to staff. Credit Agricole became fully independent of the government.
CNCA was listed on the stock market in 2001 under the name Credit Agricole S.A. This gave its majority owner, the Regional Banks, a listed vehicle through which to carry out major acquisitions.
Recent history
Credit Agricole’s business diversification started in the late 1980s. In insurance, the Predica life insurance subsidiary was set up in 1986 and became France’s number one in 1994, while property & casualty unit Pacifica was created in 1990.
Outside France, the Group acquired stakes in Banco Ambrosiano Veneto (Italy) in 1989 and Banco Espirito Santo (Portugal) in 1991. However, the acquisition of Banque Indosuez in 1996 took Credit Agricole into a new league in terms of corporate and investment banking and international exposure.
In 1999, diversification continued as the Group took a stake in the newly privatized Credit Lyonnais, and acquired leading consumer finance company Sofinco (followed by the acquisition of Finaref in 2003).
The Group took a huge step forward in June 2003, when it acquired Credit Lyonnais in the face of competition from many other banks. The transaction was triggered by the government auctioning its remaining stake in Credit Lyonnais in December 2002. The combination between the two banks took place in 2003 and 2004, resulting in the various business lines being grouped into subsidiaries. This resulted in the creation of Calyon in 2004, from the combination of Credit Lyonnais and Credit Agricole Indosuez’s corporate and investment banking activities. Credit Lyonnais focused on retail banking and rebranded as LCL in August 2005.
Credit Agricole S.A. embarked on an ambitious development plan in 2005, aimed at increasing the Group’s international reach. In 2004, the Regional Banks adopted a strategy of focusing on sustainable relationships and bolstering their leading positions in France by gaining a greater presence in major cities. The 2006-2008 development plan was implemented with record speed, with retail banking acquisitions in Egypt, Ukraine, Greece and Italy, and expansion in banc assurance in Portugal.
In late 2007, the Group was named “Global Bank of the Year” by The Banker magazine for its socially and environmentally responsible policies.
In early 2008, Credit Agricole S.A. gave a further practical demonstration of its commitment to responsible banking by signing the Diversity Charter, along with eight subsidiaries - following the lead of its Sofinco and Finaref units - and making a commitment to fighting poverty alongside Professor Yunus by setting up the Grameen Credit Agricole foundation.
In October 2009 Credit Agricole S.A. launched BforBank a 100% online private bank, specializing in saving products. Also that year Credit Agricole S.A. and Societe Generale announced about the formation of Amundi by combining their asset management activities.
In 2010 Calyon became Credit Agricole Corporate and investment Bank. New brand architecture rolled out to boost recognition of the Credit Agricole global brand in France and abroad. This year also saw Formation of Credit Agricole Consumer Finance, a tie-up between Sofinco and Finaref, to become the new leader in consumer credit in France and Europe. Credit Agricole Leasing and Eurofactor joined forces to become Credit Agricole Leasing & Factoring, Credit Agricole Group’s specialized financing arm. To the end of 2010 year Credit Agricole S.A. relocated to Evergreen, its new campus in the Paris suburb of Montrouge.
In 2011 the group continued it’s expansion strategy in Italy, with the acquisition of 172 branches from Intesa Sanpaolo S.p.A.
Since 2011, the Group has reduced its risk profile, deleveraged its balance sheet and refocused on its strengths
In 2012 Credit Agricole signed the agreements on the sale of Emporiki to Alpha Bank and sale of the CLSA and Cheuvreux brokers.
In March 2014 Credit Agricole presented it’s medium term plan – “Credit Agricole-2016”. In 2016 year Credit Agricole Group will be universal and client centric bank, which continuous develop and delivers strong results. Also this will be the group which serves their clients with pride. All business lines will contribute to common result.
