Crisis and the Second World War

The fall

The appointment of André Vincent as Chairman of BNC in 1927 was the culmination of a long partnership. He also headed the Comptoir Lyon-Alemand, a long-standing client. A dynamic and entrepreneurial partner, André Vincent was not only a client and director of BNC: through successive purchases of shares in the bank, he also became its largest shareholder.

Under Vincent, BNC expanded its merchant banking business while continuing its role as a commercial bank. It set up audacious financial arrangements, and supported struggling and new industries (such as talking pictures and aviation).

The Vincent group comprised about 50 companies, including the Comptoir Lyon-Alemand, Forges et Aciéries de Firminy, Carel et Fouché, Minerais et Métaux. These companies had significant financing needs and BNC funded their growing investments. However, confusion gradually arose between the accounts of the Comptoir Lyon-Alemand and those of the BNC. This latter institution, which had become a captive of its own clients, gradually found itself obliged to fund its merchant banking activities by using its commercial banking business.

By 1930, the BNC had begun to prosper. It had 751 branches (of which 388 permanent) and had absorbed its original founding company, the Comptoir d'Escompte de Mulhouse. But when the economic and stock market crises hit, the loss-making companies in the Vincent group weighed heavily against BNC's receivables, as did companies new to the group that relied upon the national economic growth for their own.

Rumors began to circulate concerning BNC's difficulties, giving rise to a crisis in confidence that was heightened by the crash of the diamond industry in 1930. BNC began to see its deposits melt away. In an attempt to rectify the bank's image, it launched an advertising campaign and effected changes in the board of directors. Five well-known industrialists joined the board and mobilized their counterparts to support the BNC's share price. At the same time, the bank was able to cover its clients' withdrawals by calling on rediscounting by the Central Bank and refinancing receivables through the Caisse des Dépôts et Consignations. The situation grew worse in 1931, however, with the collapse of central European stock markets, and the BNC share took another sharp plunge, this time for good. With a face value of 500, it dropped from 1,200 francs in April to 400 in September (in October of 1930 it had stood at 1,479 francs).

Faced with the possibility that the BNC's situation could trigger a stock market crash, with the ensuing risks for the country's economy, emergency measures were taken. André Vincent resigned, a new managing director was appointed, and the Banque de France accepted a rediscounting of the bills of exchange from the BNC. These measures were not enough to reassure depositors. The case was referred to the Minister of Finance, and the Banque de France, along with the government and a pool of banks, took over the task of saving BNC. Despite the French Treasury's guarantee of depositors' savings, massive withdrawals continued. By December 1931 the bank had lost three-fourths of its deposits and its share had plummeted to 50 francs. In the public's eyes, the bank was doomed.

In the end, the decision was made to save the bank and re-establish it in another form, with the new entity taking over the BNC's assets and deposits.

The liquidation of the BNC was approved in April of 1932 by a special meeting of shareholders and a new bank created, the Banque Nationale pour le Commerce et l'Industrie (BNCI).