Crédit Lyonnais
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- See also: LCL (Le Crédit Lyonnais)
Crédit Lyonnais is a historic French bank. In the early 1990s it was the largest French bank, majority state-owned at that point. Crédit Lyonnais was the subject of poor management during that period which almost led to its bankruptcy in 1993. It was acquired by another French bank (Crédit Agricole) in 2003 and is now known as LCL (Le Crédit Lyonnais).
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[edit] History
Founded in 1863 in Lyon by Henri Germain, Crédit Lyonnais was the biggest bank in the world by 1900. It was nationalised in 1945, as was most of the banking sector in France after the war.
Following a new leadership and a frantic expansion starting in 1988, the bank was the subject of numerous financial scandals, contributing to a huge debt of around 150 billion French francs (nearly €23 billion). This was caused by directors exaggerating investments and by problems with the bank's subsidiary companies.
Crédit Lyonnais became the leading lender to Hollywood studios in the 1980s. It also financed Giancarlo Parretti's takeover of MGM in 1990 for $1.25 billion. However, Paretti started looting the company, fired most of the accounting staff and appointed his 21-year-old daughter to a senior financial post and used company money to buy presents for several girlfriends. In June 1991, CL finally had enough, and decided to assume ownership of MGM, fired Paretti and began a lawsuit against him. Credit Lyonnais's sudden emergence as the de facto owner of the world's most famous movie studio broke like an intense summer storm in the French press. The bank came under increasing pressure from the French Ministry of Finance and various deputies in the National Assembly to provide details. Overall, CL lost $5 billion from its Hollywood deals.
The bank's finances were saved from disaster by moving its debts and liabilities into a new state-owned company, Consortium de Réalisation (CDR). The CDR was a highly controversial creation, as many did not believe that the French government should have bailed out the bank. The CDR notably agreed to pay $525 million US to California's Department of Insurance in order head off a lawsuit concerning the Executive Life insurance scandal.
To allow the bailout, the European commission imposed severe limitations, principally on the international activities, and the bank was forced to sell many entities in the following years.
On May 5, 1996 much of Crédit Lyonnais' Paris headquarters was destroyed in a major fire. The fire began in the main trading room of the bank and was one of the worst fires to damage a Paris building in 25 years. The fire burned for over 12 hours and two-thirds of the building was destroyed, along with crucial bank archives and computer data.
Crédit Lyonnais was fully privatized in 1999. In 2003 BNP Paribas built a position in the capital of the bank but it was finally acquired by another French bank (Crédit Agricole). The operations of Crédit Lyonnais were then reorganized:
- the investment banking business was merged with the one of Crédit Agricole, Crédit Agricole Indosuez, and the new entity became Calyon.
- the French retail banking network remained run as a separate entity. In 2005 it was renamed LCL in order to remove references to its troubled recent history. It is owned by, but competes with the existing French retail network of Crédit Agricole.
[edit] Recent controversy
In 2001, Denis Robert and Ernest Backes book, Revelation, showed that Crédit Lyonnais was one of the many banks to detain unpublished accounts in Clearstream, a Luxembourg-based transaction clearing company, which has been accused by the authors of being a huge international money-laundering machine.
In 2005 the CDR had to pay back €135 million to Bernard Tapie (or rather to his creditors), the controversial billionaire, after a scandal concerning the sale of Adidas.
[edit] Sponsorship
Crédit Lyonnais may be most remembered for its sponsorship of the Tour de France as many will remember the corporate brand on the sides of the maillot jaune (yellow jersey) that Lance Armstrong, Joop Zoetemelk and many other phenomenal cyclists have earned over the years.
