Enterprise Risk Management at BNP Paribas

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Case Details:

Case Code : ERMT-021
Case Length : 15 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : BNP Paribas
Industry : Banking
Countries : Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note Contd...

It was the #3 bank in France from the late 19th century through the 1950s. Banque National pour le Commerce et l'Industrie (BNCI) started in Alsace, a region that was part of Germany from the Franco-Prussian War until WWI. BNCI served as an economic bridge between Germany and France.

By the 1960s, BNCI had overtaken CNEP in size. French leader Charles de Gaulle believed banking would drive post-WWII reconstruction.

In 1945, CNEP and BNCI were nationalized. In 1966, France's finance minister merged them and they became BNP.

BNP started an association with Dresdner Bank of Germany, under which the two operated joint ventures, primarily in Eastern Europe.

In the early 1990s, the privatized BNP expanded outside France to get around government controls. Even before privatization, BNP had been involved in controversial deals such as the bailout of OPEC money repository Banque Arabe and the extension of credit to Algeria's state oil company Sonatrach.

These deals seemed to have been influenced by political considerations. In 1997, BNP won the right to operate in New Zealand, bought Laurentian Bank and Trust of the Bahamas, took control of its joint venture with Egypt's Banque du Caire, and opened a subsidiary in Brazil.

BNP bought failed Peregrine Investment's Chinese operations in 1998.

That year the bank also expanded in Peru, opened an office in Algeria, opened a representative office in Uzbekistan, set up an investment banking subsidiary in India, and bought Australian stock brokerage operations from Prudential.

As France's other two large banks (Société Générale and Paribas) made plans to merge, BNP decided it would absorb both banks as a means to get a bigger chunk of the to-be-privatized Crédit Lyonnais. But executives at Société Générale (SG), formed a cartel called "Action Against the BNP Raid." Meanwhile, BNP tried to boost controlling stakes its holdings in the two banks. (In Europe's cross-ownership tradition, the target banks also owned part of BNP.) France's central bank tried unsuccessfully to negotiate a deal (the government supported the triumvirate merger)...

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