Financial System of France Essay Example | Topics and Well Written Essays - 2000 words

Financial System of France - Essay Example French banking system is composed of approximately 450 banking business entities, which operate close to 40,000 branches. With this magnitude banking institutions, approximately 60 million people are considered as the banked segment. One of the defining characteristics of French banking system is the proximity of financial and non-financial institutions to the customers, which provide adequate banking services and products. Nonetheless, all organizations providing banking services operate under authorized establishments. Authorization of establishments defines the scope of banking activities. The establishments authorized include general-purpose credit institutions, investment service providers, and specialized credit institutions. All the commercial banks and other financial institutions within France are regulated and controlled by Banque de France, the French Central Bank. Linked to the European Central Bank, Banque de France has been effective in administering monetary policies and ensuring compliance amongst financial organizations. Some of the core functions of Banque de France are formulation and implementation of monetary and credit policies, issuance of currency, ensuring financial stability, monitoring French’s financial markets, and controlling all the foreign reserves. Banque de France is usually administered by a General Council having the responsibility of developing and carrying out all activities that relate to monetary policies. French financial (stock) market has primary and secondary markets. Primary markets provide vistas for introduction of new securities while secondary markets are involved in the actual trading. Paris Stock Exchange market had four markets prior to 2005; first, second, new, and free markets. The trading on stock had to be done across these four markets. Paris, Bruzelles, and Amsterdam Stock Exchange markets merged into Euronext Stock Exchange Market, which led to free market being subsisted and replacement of other markets by the Eurolist market. Due to increasing volume of transactions, Euronext Stock Market expanded to cover Portugal and United Kingdom in 2003 though still under the control of Euronext Paris. Currently, Euronext, having a volume of approximately US$1.9 trillion (Yahoo Finance) by trading, has all the French and foreign companies that subscribe their shares to the public. Importantly, Euronext through merger with New York Stock Exchange in 2006 led to the establishmen t of the current NYSE Euronext. Within Euronext, the main stock indices relate to either market or activity with the main one being the CAC 40 belonging to SBF 120. Amazingly, CAC 40 makes up 75% of all the stock exchange transactions. On the other hand, blue chips of CAC 40 such as Air France KLM, Arcelormittal, and AXA amongst others are indicated in the appendices. French financial market is composed