Jean Laurent
1944–

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Chief executive officer, Crédit Agricole

Nationality: French.

Born: 1944, in France.

Education: École Nationale Supérieure de l'Aéronautique; Wichita State University, MS.

Career: Toulouse Regional Bank, 1970–1981, head of information systems and organization department, then deputy director of credit; Loiret Regional Bank, 1981–1984, director of rural development; Île de France Regional Bank, 1984–1993, department chief executive in charge of operations; Caisses Nationale de Crédit Agricole, 1993–1994, head of development and markets division; 1994–1999, department CEO; 1999–2001, CEO; Crédit Agricole, 2001–, CEO.

Address: Crédit Agricole, 91-93 Boulevard Pasteur, 75710, Paris, France; http://www.credit-agricole.fr.

■ As chief executive officer of Crédit Agricole in 2003 Jean Laurent oversaw the acquisition of the rival French banker Crédit Lyonnais. The merger masterminded by Laurent made the combined firm one of the largest banks in Europe. Prior to the merger Crédit Agricole had been the world's 15th-largest bank; after the two firms combined, they accounted for nearly a quarter of all French lending business and posed a formidable challenge to France's largest bank, BNP Paribas. In Banker Leslie de Quillacq declared, "One out of three Frenchmen has an account at Crédit Agricole" (January 1995).

In order to achieve the merger Laurent had been obligated to deal with the challenges posed by Crédit Agricole's complicated history. The organization as a whole had previously been officially called Caisses Nationale de Crédit Agricole; the briefer title Crédit Agricole was officially adopted in 2001. The company began and remained a mutual: rather than paying out dividends, it reinvested its profits in the business. Owned and operated jointly by all members, the business worked to provide services rather than profits to its sponsoring organizations.

RISE THROUGH A LABYRINTHINE STRUCTURE

Chartered, and until the onset of the 20th century funded by the French government, Crédit Agricole historically responded more to changes in French politics than to changes in national financial markets. Even after the French National Assembly authorized the privatization of Crédit Agricole, challenges to management remained. Most of the central organization's assets were distributed to its regional member banks in a complicated ownership structure spread over nearly three thousand local agricultural cooperatives. The company's structure made decision making an agonizingly long process but also made Crédit Agricole virtually unstoppable once a decision was made. Quillacq noted, "Its productivity ratio is the best of the major French banks" (January 1995).

Laurent began his career in the regional banks, starting out in 1970 as a manager in a branch in Toulouse. During the 1980s he became the head of two different area banks, in Loiret and then in the Île de France. In 1993 he moved to the central coordinating office of Crédit Agricole, the Caisses Nationale de Crédit Agricole, where he first served as head of marketing and development. By the end of the decade Laurent had been named chief executive officer of the entire firm.

RURAL ASSISTANCE THROUGH MANY AGENCIES

The challenges Laurent faced during his tenure resulted in large part from Crédit Agricole's history as a lending organization directed to help small farmers and from its complicated relationship with the French government. Crédit Agricole was chartered by the French National Assembly in 1894. It was intended to be a cooperative association between a collection of farmers' loan companies, which in 1899 were recharted into regional banks. As recently as the 1950s the majority of France's population remained rural, living either in the countryside or in small towns or villages away from large metropolitan areas.

Until the creation of Crédit Agricole farmers had had few ways to get the kind of credit and terms they needed to buy equipment and to protect themselves and their families against crop failures and other disasters. In order to kickstart the lending process the National Assembly voted to award the regional banks 40 million francs and to supply them with a further annual subsidy of 2 million francs. The government's 1899 restructuring of Crédit Agricole created a new agency, the Caisses Régionales de Crédit Agricole. The new institution brought existing regional banks together under a single agency and provided for the creation of new regional banks.

In the early 20th century Crédit Agricole developed a need for another central agency to oversee all of its constituent parts, monitoring and coordinating financial activities. That institution was founded in 1920 as the Office Nationale du Crédit Agricole, which became the Caisse Nationale de Crédit Agricole (CNCA) in 1926. Through the 1920s Crédit Agricole expanded its loan base, offering credit to rural tradesmen and small artisan businesses in addition to farmers. In 1923 the bank also began financing local government programs to bring electricity to rural areas.

By the time France fell to the Nazis in 1940, Crédit Agricole had become a vital part of France's rural economy. In 1942 farmers who were unable to invest their surpluses from crop sales in normal ways because of World War II began using the five-year note, a perpetual savings plan developed by CNCA. At the close of the war Crédit Agricole, in need of a body to represent its interests to the national government that had chartered and funded it, authorized the formation of Fédération Nationale du Crédit Agricole.

CLIENTELE BROADENED

Crédit Agricole took a major step away from its farming roots in 1959 when a decree allowed the institution to award mortgages to residents in towns with populations of two thousand or fewer. This capability was extended into the 1960s; in 1966 CNCA became financially independent from the federal government when for the first time in its 82-year history deposits covered the loans it had already made. The following year CNCA's first subsidiary, the Union d'Études et d'Investissements, was formed to help fund agribusinesses that were not part of existing cooperatives. Throughout the 1970s the corporation continued to expand its customer base as the concept of "rurality"—applied to communites that met the criteria to become Crédit Agricole's clientele—grew to include all metropolitan areas with populations under 12,000; the financial company originally created to meet the needs of farmers had received authorization to work with over half the French population.

During the 1980s the French government's policy of privatization allowed Crédit Agricole to expand its customer base even more and to diversify outside its traditional banking focus. By 1981 the company had lost its monopoly on loans to the agricultural sector; its loss of control over that market, however, had been more than compensated for by the authorization to make loans to individuals throughout France, whether or not they were living in rural areas or were associated with farming or other rural industries. In 1986 the corporation created Predica, which grew over the next decade to become the second-largest life-insurance company in France. Finally in 1988 CNCA itself was privatized, its capital distributed to the individual banks that made up Crédit Agricole in proportion to their assets.

GROWTH SPURTS

The 1990s saw Crédit Agricole continue the privatization trend that had begun in the previous decade. In the early 1990s the company consisted of about 85 regional banks with around 8,400 local branches—it was already one of France's biggest banking institutions. The corporation continued its growth through further diversification (Pacifica, a casualty-insurance subsidiary, opened in 1990) and acquisitions (in 1996 Crédit Agricole bought Banque Indosuez, entering the international-banking market for the first time). In 1996 the stockbrokerage subsidiary Crédit Agricole Indosuez Cheuvreux opened its doors.

In 1999 Crédit Agricole acquired Sofinco, which specialized in consumer credit, and acquired a 10 percent interest in one of its competitors, Crédit Lyonnais. By that time Crédit Agricole had also obtained controlling interests in other major banks worldwide, including Ambroveneto and Gruppo Intesa BCI in Italy; Banco Espíritu Santo in Portugal; and Banco Bisel in Argentina. The company that had been chartered to assist small French farmers had over the course of a hundred years become a major player in the world's financial markets.

PROLONGED POLITICKING

Yet at the beginning of its second century of existence Crédit Agricole continued to suffer from a reputation derived from its rural origins. The Euroweek contributor Ian Kerr explained that "the bank's farming traditions are not far below the surface" (January 9, 2004). To be taken seriously as a major player in the European banking industry, Laurent and his colleagues needed to overcome that purported liability. Laurent saw an opportunity when Crédit Lyonnais—an important French bank in which Crédit Agricole by then owned almost one-fifth of the stock—was put up for sale. Crédit Lyonnais had been publicly funded through the French government; weakened by decades of exclusively governmental support and by a poor 1991 investment in a California firm—Executive Life Insurance Company—Crédit Lyonnais was privatized in 1999. Soon afterward, thanks to an influx of private cash, the former "state-owned basket case," as put by Carol Matlack and David Fairlamb (June 24, 2002), was thriving. Although the government retained 10 percent of Crédit Lyonnais's stock, another third of the company was put on the market. Purchasers included the German company Allianz as well as Crédit Agricole. As part of the agreement in which the French allowed private companies to buy Crédit Lyonnais's assets, however, the government prohibited any of the owners from making a takeover bid for the remaining Crédit Lyonnais stock until after July 2003.

In spite of the eight months that remained before the possible sale date, in December 2002 Laurent announced that Crédit Agricole would be willing to pay $16 billion in cash and stock for the 82 percent of Crédit Lyonnais that it did not already own. He raised the necessary funds by putting about 30 percent of Caisse Nationale de Crédit Agricole's shares up for sale on the French stock exchange. The most immediate problem faced by Laurent would not be the amount of money involved or the complications related to integrating Crédit Lyonnais into the Crédit Agricole system; rather he would be confounded by rapid shifts in French politics. In order to win government backing for Crédit Agricole's upcoming bid for Crédit Lyonnais, Laurent worked quietly behind the scenes to win the support of the Finance Minister Laurent Fabius. Fabius reportedly favored Crédit Agricole's proposed acquisition of its sister bank in part to discourage potential takeovers by foreign investors like Allianz.

But the Socialist government that Fabius represented fell from power in April 2002. Elections later that spring brought in a new right-of-center government whose finance minister, Francis Mer, had to be wooed and placated in his turn. Laurent faced resistance from Crédit Lyonnais stockholders who opposed the merger, wanting to keep their bank independent, as well as from some of his own corporation's stockholders, who feared that bringing Lyonnais's assets into Crédit Agricole would reduce their influence in the organization. Indeed the acquisition of Crédit Lyonnais would reduce the regional banks' power in the combined corporation from 70 percent to about 50 percent.

The proposed acquisition of Crédit Lyonnais also reignited a prior debate among Crédit Agricole's owner banks. Many asked whether Crédit Agricole should continue to move away from its roots as an agricultural mutual or become a publicly traded bank on a par with other major French banks such as BNP Paribas and Société Général. Laurent would need to convince the conservatively minded owners of Crédit Agricole of the necessity to expand through the purchase of Crédit Lyonnais, which proved to be a long, drawn-out process—taking almost two and a half years. Earning approval for the initial public offering as well took Laurent and the chairman Marc Bue two years. The cumbersome management structure—which was left over from the company's days as a federally funded mutual—remained a drag on Laurent's ability to respond quickly to changes in the fast-moving world of modern financial markets. In recognition of his leadership abilities, Laurent was made chairman of Crédit Lyonnais after the merger was finally completed.

EXPENSIVE CHALLENGES ABROAD

Following the Crédit Lyonnais merger Laurent's talents were further tested in international venues. One of the biggest of these challenges was the fallout from Crédit Lyonnais's convoluted involvement in U.S. financial markets. In the early 1990s Crédit Lyonnais made a number of loans to the California-based Executive Life Insurance Company. Executive Life had traded in junk bonds and collapsed in 1991; Crédit Lyonnais approached the state with a plan to rescue the insurer from bankruptcy. When Executive Life's portfolio unexpectedly recovered, Crédit Lyonnais reaped a profit of some $872 million. Yet U.S. law did not allow insurers to be owned by banks; the violation resulted in fines totaling about $770 million—which was believed to be the largest settlement of a criminal case in U.S. history.

In December 2003 the U.S. Federal Reserve levied an additional fine of $100 million on Crédit Lyonnais for its role in the Executive Life affair. As the owner of Crédit Lyonnais, Crédit Agricole was responsible for paying the fine. Furthermore the Federal Reserve and the New York State Banking Department accused Crédit Agricole of failing to comply with a November 2000 agreement in which the French company had agreed to tighten the management oversight of its New York subsidiary, Crédit Agricole Indosuez New York. U.S. oversight agencies felt that Crédit Agricole had failed to comply with the terms of the agreement and levied further fines totaling $13 million on the bank—$5 million from the Reserve, $5 million from the New York State Banking Department, and $3 million for the corporation's failure to resolve issues surrounding its violations of the U.S. Bank Holding Company Act.

The agencies required Crédit Agricole to submit future reorganization plans for review—including those for incorporating Crédit Lyonnais into its business—and to make changes to internal auditing and other controls. Laurent complied with the fines, and in fact Crédit Agricole's 2003 gross operating income was so great that in spite of the fines the company's business grew by nearly 30 percent for the year. Laurent's success in managing one of Europe's largest banking institutions made him a major player in worldwide financial markets.

See also entry on Crédit Agricole in International Directory of Company Histories .

sources for further information

"Beast of the Field," Economist , June 21, 1997, p. 72.

Boyce, Caroline, "Consolidation Poses Questions," Trade Finance , April 2003, p. 1.

"Business Brief—Crédit Agricole: Regulators Are Seen Seeking Only Minor Changes in Deal," Wall Street Journal , March 13, 2003.

"CA Continues French Trend of Management Reshuffles," Euroweek , June 13, 2003, p. 1.

"Farmers' Folly: French Banking," Economist , December 21, 2002.

"The History of Crédit Agricole," Crédit Agricole http://www.credit-agricole.fr/legroupe/uk/history.shtml .

Humphreys, Gary, "Crédit Agricole: A Break with the Past," Euromoney , September 1992, p. 271.

"Jean Laurent, Chief Executive Officer, Crédit Agricole S. A.," Crédit Agricole http://www.credit-agricole.fr/legroupe/uk/credit-agricole-sa.shtml .

Kerr, Ian, "Stuck in the Merde ," Euroweek , January 9, 2004, p. 1.

Matlack, Carol, "The Humbling of a Tycoon: The Executive Life Scandal Casts a Pall on François Pinault's Fortune," BusinessWeek , December 8, 2003, p. 22.

Matlack, Carol, and David Fairlamb, "Europe's Most Frustrated Banker: Will Crédit Agricole's Laurent Fulfill His Big Ambitions?" BusinessWeek , June 24, 2002, p. 52.

"Moves in Brief," Euroweek , October 10, 2003, p. 1.

"People," Project Finance , October 2003, p. 1.

de Quillacq, Leslie, "Bigger Than a Backyard," Banker , January 1995, p. 21.

"The Slumbering Giant Is Up—and Hungry," BusinessWeek , July 23, 2001, p. 26.

Tagliabue, John, "Two Big Banks in France Join Forces," New York Times , December 17, 2002.

"U.S. Fed Fines Crédit Agricole $13M for Failings in Riskv Controls as Bank Reports Strong Results," Euroweek , March 12, 2004, p. 1.

—Kenneth R. Shepherd



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