Category: Finance

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Economical policy Finance

The French vicious circle of tax increases

Raising taxes is not the solution, only a structural reform policy, efficient management of our public finances, and investments for the future will allow us to preserve our standard of living and social protection, writes Olivier Klein.

The compulsory contribution rate has been on an upward trend in France for a long time reaching more than 43% of GDP in 2023, the highest in the European Union (around 6 points higher than the euro zone average).The marginal tax rate on household income stands at 55.2%, compared to 47.5% in Germany. It is higher than in Italy, Spain, the Netherlands and Belgium.

The capital tax rate still remains higher than the European average despite recent reductions which are very helpful to the French economy, which has been well documented. As for businesses, despite the efforts of recent years, they are subject to production taxes that are more than 2 points of GDP higher than the euro zone average and almost 4 points higher than Germany.

Due to the lack of control over public spending (notably operating costs), the public deficit has often remained high, including in 2023, when it was one of the highest in the euro zone. For example the civil service workforce was indeed approaching 6 million people at the end of 2023, constantly increasing (33% more than in 1990), with a very high total share in total employment (more than 21 %). However, there is no long-term positive correlation between the increase in public spending and economic growth.

One of the highest levels of redistribution in the OECD

Nor can the increase in household taxes be aimed at combating income inequality. After redistribution, in France the latter is one of the lowest in Europe. The Gini index of post-redistribution inequality stands at 0.298, while Germany is at 0.303; Spain, Italy and the United Kingdom have levels between 0.320 and 0.354. In addition, the level of inequality in France has remained considerably stable since 1990. France actually has one of the highest levels of redistribution in the OECD. Let us also add that the share of national income after redistribution held by the richest 1% in France is also one of the lowest after redistribution at 7.17%, compared to 8.72% in Sweden, 10.32% in Italy or 14.35% in the United States. Likewise, the poverty rate is lower than the European average.

Thus, increasing compulsory contributions, as well as the level of redistribution, would be counterproductive, leading to effects contrary to those desired regarding both employment and growth. The endless race between spending and public contributions that are significantly higher here than elsewhere has continued to cause an increase in debt, which has now reached worrying levels. Remember that between 2000 and 2022, French public debt grew twice as quickly as that of the euro zone. The result is an increasing weakening of the French economy, without gains in terms of relative growth.

Reform policy

Even more taxes, beyond an already high threshold, would lead to a weakening of our competitiveness and our attractiveness, and therefore our employment rate, which is already low compared to that of the countries of northern Europe. Which would in turn lead to more inequalities before redistribution, employment being decisive in this matter. Thus leading to raising the redistribution rate again, and therefore causing more taxes again. The vicious circle is complete.

Only a policy of structural reforms, efficient management of our public finances (notably operating expenses) and investments for the future made possible by a reallocation of our public expenses, will allow us to preserve our standard of living and social protection. Not understanding this would very quickly lead to discouraging work and talent, damaging already insufficient competitiveness, therefore aggravating inequalities of opportunity and creating huge scale poverty.
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Economical policy Finance Global economy

The European model will be unsustainable without reforms

The mid to long term results of Europe’s economic performance require critical reflection. And anticipating future difficulties require us to think about the reforms to be rapidly implemented to protect the European standard of living and social protection, an invaluable shared asset but unsustainable without in-depth change.

Some data. Over the last 20 years (2002-2023), the cumulative economic growth rate of the United States has reached 60%. The euro zone is at 30%. American household consumption increased by 60%, that of Europeans by 20%. The rate of American private and public research and development over GDP has exceeded the European one by about one point by year for the last 20 years, etc. Thus, over the same period productivity gains have increased by more than 45% in the United States compared to 10% in the euro zone. From 2019 to 2023, they increased by 1.7% per year in the United States and by 0.3% in the euro zone (-0.8% in France). However, the working age population is growing by around 0.2% per year in the United States while it is falling by around 0.5% per year in the euro zone. It will fall by 0.8% around 2030, with the percentage of the population over 65 continuing to increase (22% today, 26% in 2030).

To deal with this negative demographic effect and protect European standards of living, growth will be essential, and therefore more productivity gains. Innovation, research and development and robotisation should be widely encouraged. Especially since Europe is not prominent in the strategic industries of the future: wind turbines, voltaic panels, electric batteries, electric cars, industries of the fourth technological revolution…

We must therefore change the paradigm by facilitating Schumpeterian growth much more, through creative destruction. By rethinking the weight of regulations which, in Europe, are always higher than those in the rest of the world. By increasing the mobility of labour and capital. By combating the decline in the quality and effectiveness of teaching. By controlling and better allocating public spending… Indeed, European potential growth of around 0.5 to 1%, resulting from productivity gains close to zero, declining demographics and a slowing rise in the employment rate will in no way ensure the persistence of European economic prosperity.

Qualified immigration would also make it possible to resolve this difficult equation; in the United States, immigrants having, in total and on average, a level of education higher than that of the resident population. Finally, an increase in the quantity of work (number of hours worked in life as well as the number of people working as a percentage of the population), with less cultural disaffection for work, will be essential.

The Europeans preference, like their institutions, for precaution instead of risk, as well as the permanent extension of rights without their accompanying duties, is unsustainable, otherwise they risk an inexorable decline. A certain strategic naivety must give way to ethical pragmatism. Ethics without efficiency cannot survive for long. Europe cannot continue much longer without the danger of Péguy’s criticism of Kantianism: having pure hands, but having no hands at all. To preserve the very essence of what made post-war Europe, we urgently need to change our software. It remains for us to think carefully about institutional reforms, those through which Europe regulates itself, to facilitate this jumpstart and allow it to maintain its place in the world.

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Economical policy Finance Global economy

French Public Debt and Deficit- how to avoid the precipice

5.5% of GDP in 2023: the French public deficit rate is posted at an unexpected level and one of the highest in the European Union. Why is this a serious problem? What are the possibilities for getting out of the trap that France has been stuck in for a long time?

A deficit may be desirable when fiscal policy plays its countercyclical role during recessions, for example. However, if French and European growth proved weak in 2023, the recession feared due to the historic rise in interest rates did not occur. After years of very high public deficits (6.6% in 2021 and 4.8% in 2022), it was hoped that last year’s deficit would be at a much lower level and that its decline would be premeditated and credible for the following years. France has continuously run public deficits since 1974, though, empirically, there is no long-term positive correlation between public deficits and the growth rate.

If the public debt rate were low, or even average, a few years of public deficits at high levels would not be dangerous. But our public debt (social protection system included) exceeds 110%. Our primary deficit (before payment of debt interest) is close to 4% of gross domestic product (GDP). Our potential growth is low and the real long-term interest rate has become slightly positive. We have come out of the period of low rates for good. With free money having disappeared, the cost of public debt rose from 34 billion euros in 2020 to more than 50 billion in 2023 and will reach more than 70 billion in 2027. There is no more magic money. This very unfavourable combination could thus lead us to experience a snowball effect of public debt, which consists of borrowing even more to pay the interest on the debt itself, in an endless and very destabilising growth of public debt. The French public debt rate stood at 20% of GDP in 1980, 60% in 2000 (same in Germany) and 110.6% in 2023 (compared to around 65% in Germany). Finally, if the public debt rate has increased by approximately 25 points of GDP for the entire euro zone since 2000, it has increased by 50 points for France, or twice as much as the euro zone.

There are possible ways to break the deadlock, of course being protected by the euro which has protected us since 2000, but which could sooner or later no longer be enough.

No room for manoeuvre

The cancellation of the debt held by the central bank is not only highly perilous, but also useless because the interest lost by the monetary authority would be equally lost by the State which receives revenue through the results of the issuing institution.

Raising taxes would be a solution if France did not already have a total tax rate (43.5% of GDP in 2023) among the highest in the world. But today, this would lead to slower growth and sooner or later further deterioration of the deficit and debt. And further lower the employment rate. And fall back into France’s vicious circle. This recipe can only work when there is room to manoeuvre. This is no longer the case in France.

The income tax rate for more than half of households is zero in France and the rates are lower than in the rest of the euro zone for the first levels of the scale. But the marginal rate on household income stands at 55.2% in France compared to 47.5% in Germany; it is also higher in France than in Italy, Spain, the Netherlands and Belgium…It therefore hardly seems feasible to cause even more imbalances by increasing the rate scales of the wealthiest households. The capital tax rate, for its part, still remains higher than the European average. In addition, the level of income inequality in France is one of the lowest in Europe.

Companies, for their part, despite the efforts of recent years, are still experiencing levies well above their European competitors: taxes on production, for example, are still 2.4 points of GDP higher in 2022 compared to the euro zone average and 3.7 points compared to Germany.

In 2022, the total tax rate was 6.1 GDP points higher than the euro zone average rate. It is the highest in the European Union. The budgetary weapon can be very useful, but only if one is able to reload it regularly.

Significantly lowering the level of public spending in relation to GDP is therefore desirable when reaching these peaks. In the case of France, it would be necessary to carry out a re-engineering of the territorial organisation and the management of public services. Which can only take time and cause discontent. However, the need for it is great and the superficial shaving method is very limited in its effectiveness.

However, it is unreasonable, with very low growth, to carry out a rapid and indiscriminate reduction in public spending because it could lead to a recession in the short term which would have negative effects on the deficits themselves. Stabilising their volume level and redirecting them is, however, particularly desirable and greatly improves their efficiency. By involving public service employees (including those within social security in the broad sense of the term) to show them the benefits that they themselves could gain from it. By working from administration to administration and transversally on each topic, calmly but without prevaricating or procrastinating. With the support of digital tools, among others, it is possible without human impact. Saying it and doing it in a credible way is essential. Credibility is, in fact, key to financial stabilisation.

At least three levers

Could this be enough? No. Two additional levers are necessary, to be used in conjunction with the previous one, and to be announced publicly, displaying unfailing determination and clear programming. The credibility of public authorities is essential to convince all stakeholders.

Pursue structural reforms that increase growth, i.e. increase the quantity of people available for work and increase productivity gains. The excess growth generated would make it possible to relieve the deficit rate and public debt by increasing the denominator.

But faced with the French and European delay in terms of technological innovations and industries of the future, these actions alone would again probably not be enough.

The development of programs like the American IRA, backed by a well-thought-out industrial policy, would be unavoidable, but illusory with current debt. It is also probably illusory to think that the European Union would agree to launch a second common loan similar to the one launched during the pandemic.

Only the concomitance of these three lines of action can avoid a predictable catastrophe. It is necessary to combine investments in growth and competitiveness, the financing of which would be pledged on a recurring reduction in operating expenditure in relation to GDP, the greater efficiency of public services (in health, as in education for example, French public sector expenditure by GDP is among the highest in Europe, yet it is both felt and measured to have deteriorated significantly) and the improvement in potential growth generated through structural reforms.

Public debt, when it is no longer sustainable, leads to the worst economic and social consequences. Monetary and financial disorder due to excessive and unsustainable debt for too long can suddenly lead to breakdowns in the confidence of citizens, as well as in the international financial markets (foreign investors finance more than 50% of French public debt). And in the absence of a sudden rupture, uncontrolled debt can lead to an inexorable decline, the economic and social consequences of which are, ultimately, just as bad, if not brutal. Only the commitment to a clear and planned pursuit of the three action plans described here, in short, only the presentation of a legible and credible trajectory, because it is solidly documented and substantiated seems to be able to avoid such a risk.

Categories
Bank Finance Teaching

Olivier Klein, the art of transition

Managing Director of Lazard and CEO of Lazard French Bank after having personified BRED for more than ten years, Olivier Klein continues his teaching and his work as an author. A few months ago, he published “Crises and Changes: Small Banking Lessons”. A read which is easy to follow and to be relished.

Olivier Klein, recently appointed CEO of the Lazard Frères Bank, teaches financial macroeconomics and monetary policy at HEC, writes numerous articles on banking strategy, monetary policy, monetary economics and structural reforms, and participates in numerous conferences where he loves to rub shoulders with the greatest economists and leaders of financial institutions. Finally, a few months ago he published a major essay with Eyrolles and RB Édition, “Crises and Changes: Small Banking Lessons”.This book is a must read! Olivier Klein has a way with words and a penchant for well-chosen quotes. Above all, this professor-banker, based on his very well-documented field experience, offers analyses that shine a new light on strategic thinking. For example, how do you change things without breaking them? Followers of the “stakeholder” approach as well as those who support the notion of respecting the identity of companies will find convincing arguments here.

Beyond the abundant ideas that give structure to this book, it is the author’s ability to take action, to express an idea, and to teach that holds our attention. Olivier Klein is, without doubt, a “ferryman” and these days our society is missing this type of profile. We have excellent researchers, who publish in the best scientific journals, we have very high-level business leaders, but the problem of the “transfer” between theory and practice like that between research and pedagogy remains subtle and complex.

Olivier Klein’s career, like his works, is, in many respects, an example of a successful “transfer” and can enlighten us on the importance of this idea.

First, because his career and his approach in his macroeconomics articles show us how practice is enriched by scientific processes and models produced by research. When reading his book, we see clearly that there is no action that is not carried out without reference to clear knowledge. Chris Argyris, a Harvard professor and one of the theorists of organisational learning, spoke of “a theory of use”. Thus, practice, if it cannot resolve to “fit” into a single paradigm, necessarily relies on models, on theories.

From science to practice

We still need to be able to transfer these models into practice at least cost. “At least cost” here means “minimising the risk of misinterpretation of the available scientific results”. This is where Olivier Klein succeeds brilliantly as well. This is no easy task, if only because a single scientific discourse cannot simultaneously resolve all the problems put before the practitioner. This difficulty often results in frustration which leads some to throw the baby out with the bath water, that is to say, to reject all the contributions of theory and science, under the pretext that they cannot solve all the problems at hand. This is where the “ferryman”’s contribution lies. He must help with the transition between science and practice. He must choose the most effective
aspects of the theory, propose a rigorous interpretation of the facts and finally, participate in the nuances of the categories of thought. He must, in some way, offer what we will call a “lesson.” That is to say, his approach must be analogous to that of “good essays”. We know that “good essays” are those which, rigorously, choose certain parts of theories to challenge them without complacency with a particular situation, located in time and space. The “good essay” must also propose to rigorously erase certain boundaries between the different sciences. If these are in fact structured in terms of paradigms, the “ferryman” must be able to propose a “negotiated” synthesis, that is to say created through diverse influences, combining multiple scales of analysis and that is prescription-oriented.It is therefore not a popularisation of science because the “ferryman” must demonstrate great intellectual vigilance when articulating in a global vision several theoretical referents, several insights and several habits of interpretation specific to each practice.This is what Olivier Klein also achieves, especially in his book, and this demonstrates great discipline of thought. The Capitol is in fact close to the Tarpeian Rock: the difficult task of “translation” risks being transformed into a hasty collection of the latest fashions and cursive interpretations of poorly assimilated theories. The “ferryman” can, if he is not careful, become a “soup seller”. This is what Olivier Klein avoids, page after page, demonstration after demonstration.

To conclude on Olivier Klein’s role as a “ferryman”, I believe it is important to emphasise that his works certainly enlighten us, but above all, and this is a major point, that they encourage us to face the future. In our time we are afraid of modernity which excludes, which replaces man, which explores the boundaries, which builds a threatening order against, apparently, “the good old days”. There is a significant temptation to be reactionary and to condemn. In Olivier Klein’s ideas, he invites us to live in the future, optimism (or pessimism) is never the fundamental question. We must “simply” understand our world, and then commit ourselves to exercising our freedom to invent the new tools that are needed! Olivier Klein is undoubtedly a “ferryman” who mobilises.

References

  • Argyris Ch., with contributions from Moingeon B. & Ramanantsoa B. (1995), Knowledge for action. Overcoming Obstacles to Organizational Learning, trans. by Loudière G.), lnterEditions.

  • Boutinet J.-P. (ed.) (1985), From discourse to action. The social sciences question themselves, Social Logics, L’Harmattan.

  • Geertz C. (1986), Local Knowledge, Global Knowledge. Places knowledge, Phew.
  • Cain T., Wieser C. & Livingston K. (2016), “Mobilizing Research Knowledge for Teaching and Teacher Education”, European Journal of Teacher Education, flight. 39, no. 5, p. 529-533.
  • Gaussel M. & Rey O. (2016), “The Conditions for the Successful Use of Research Results by Teachers: Reflections on some Innovations in France”, European Journal of Teacher Education, vol. 39, no. 5, p. 577-587.

  • Gaussel M., Gibert A-F., Joubaire Cl., & Rey O. (2017), “What definitions of the passer in education? “, French review of pedagogy, 201-2017, 35-39.

  • Munerol L., Cambon L. & Alla F. (2013), “Knowledge brokering, definition and implementation: a review of the literature”, Public Health, vol. 25, no. 5, pp. 587-597.
  • Ward V. L., House A. O. & Hamer S. (2009), “Knowledge Brokering: Exploring the Process of Transferring Knowledge into Action”, BMC Health Services Research, vol. 9.
Categories
Economical policy Finance Finance

Text of my speech at the EURO 50 conference in June 2023

Can the risk of financial instability come from Non-Bank Financial Institutions?  (NBFIs)

Market finance and NBFIs (pension funds, insurers, investment funds, hedge funds) have seen a sharp increase in their share worldwide since the Great Financial Crisis. It now accounts for around 50% of global financing and 30% in the corporate sector. Obviously, because banks alone cannot guarantee the full amount to be financed, it is very useful that the NBFIs, as major players on the financial markets, take part in financing. As the NBFIs sector accounts a lot in global financial assets, the correct functioning of the non-bank sector is crucial  for financial stability. However, NBFIs potential fragility has been increasing for the last 15 years or so. All in all, there is a high level of financial vulnerabilities in the financial system. Recent stresses at some banks remind us of the elevated financial vulnerabilities built over years of too low for too long interest rates and ample liquidity. The recent manifestations of these strains – Silicon Valley Bank being a good example – appeared to be more idiosyncratic. This bank was in fact very badly managed and severely undersupervised. But, this bank was not the only bank to face this situation and the fast contagion we witnessed, shows in my opinion, that we are facing a potential systemic issue, rather than a simple idiosyncratic problem. As a matter of fact, as I said, too low for too long interest rates, with very abundant liquidity have led to a high level of vulnerabilities in many balance sheets. On the liability side, numerous firms and states, and even sometimes individuals, in both Advanced and Emerging Countries, have been able to run up debts painlessly, until over-indebtedness is proven when interest rates normalize. On the asset side, because of zero, or even negatives rates, final investors or their asset managers were incited to take more and more risk to get a little return. By lengthening the maturities, by increasing the mismatch between the asset and liability duration, by choosing higher and higher leverage, including by using more and more derivatives, etc. The rapid rise in rates has of course brutally interrupted this too long period of too low rates, during which the accumulation of vulnerabilities took place. As far as banks are concerned, since the Great Financial Crisis, the bank regulation has increased significantly, notably through the increase in the required capital adequacy ratios and the setting of restrictive ratios limiting liquidity risks. So, on average, banks are much more solid than before the Great Financial Crisis. But, there is no such regulation for non-bank financial institutions,  and specifically for funds. So, the former financial environment led the NBFIs, on behalf of savers, to seek returns, but increasingly taking on risks. Let me be more explicative: 1st. In terms of credit risks – including higher and higher leverage ratios, with squashed risk premiums. 2nd. In terms of liquidity, by further extending the securities of bonds or credit, and by lowering the expected level of their liquidity. And doing so, endangering their liquidity risk, with bigger and bigger liquidity mismatching. 3rd.The funds’ use of derivatives (futures, repo, etc.) amplified tremendously their own leverage. For example, between 2015 and 2022, the financial leverage (measured by derivatives over total assets) of macro-hedge funds came from 15% to more than 30%. And for relative value funds: from 15% to 25%. On top of that, Margin calls as well as collateral calls may be fatal.

All this has been highlighted by numerous organisations in charge of supervising financial stability around the world. So, all in all, financial risk could have been partly pushed out of the banking system onto NBFIs, without control.

A piece of evidence: The violent financial crisis of March 2020, triggered by the expected impact of the pandemic, was fortunately brought swiftly under control by the Central Banks. They acted very strongly and very quickly. The violence of this flash crisis was much more due to the vulnerability of many funds, than to banks which demonstrated, by the way, their resilience. Central Banks had to buy very large amounts of securities, including high yield bonds, from funds in difficulty. Central Banks had to prevent a catastrophic chain of events, due in particular to sudden withdrawal from final investors, that these funds could not absorb without incurring excessive losses or without a major liquidity crisis.

Of course, additionally, high levels of interconnectedness among NFBIs and with banks can also be a crucial channel of financial stress.

And, obviously, possible repeated Central Banks’ interventions to provide them with liquidity support during systemic stress events could bring a very dangerous moral hazard effect !

So, some ideas arising from these facts and analyses, converging with the IMF proposals: 1st.Robust surveillance, regulation (capital and liquidity requirements) and supervision are needed. 2nd.Public data disclosures are required to post the liquidity mismatch chosen, the level of leverage (including derivatives), etc. 3rd.Only under these conditions, access to Central Banks facilities liquidity at a high interest rate and/or fully collateralized should be envisaged. Otherwise, there would be a free option!

As NBFIs became more and more important in the financial intermediation, and because of their systemic risk and potential vulnerabilities, an appropriate international regulation of the NBFIs seems to me a priority.

Finally, I’d like to say that prudential and macro-prudential regulation cannot do everything. But it is essential to mitigate the intrinsic procyclicality of finance and to prevent -better then to cure-financial instability, as much as possible.
So, in my opinion, prudential and macro-prudential regulation must now be extended and adapted notably to investment and hedge funds.

> Agenda of the last EURO 50 session on the 19th of June 2023 in Luxembourg at the European Investment Bank

Categories
Bank Finance

A Banker’s Life

The Economics Professor who transformed BRED, which he ran for over ten years.

He arrives slightly out of breath, apologising for being late, with a big smile. Elegant in his dark suit and sky blue silk tie, Olivier Klein the Managing Director of BRED invites me into his contemporary office high above the Seine populated with his collection of African statues. But the real passion of this fan of primitive art is banks, and in particular his own that he has managed skilfully for over ten years and successfully since the net banking income has increased by 70% in a decade. This boss is also a professor at HEC and the author of numerous publications. A busy life, “an achievement,” he says, of which he is proud. He can thus spend hours discussing world markets adding humorous remarks, using pedagogy to decipher a complex world, inaccessible to laymen.

However, at 65 after an exemplary history of leading large establishments he was obliged to leave BRED at the end of May. When he brings up his imminent departure on this day in April, the eyes of this man with his joyful personality become misty. “It’s not easy to say goodbye,” he frankly admits. Having reached his age limit he regretfully left his position. A brief moment of abandonment quickly forgotten when he begins to recount his banking saga, which started at the beginning of the 1980s.

Expert in Acquisitions and Mergers

Economics and nothing but economics. When Olivier Klein graduated from the National School of Statistics and Administration (ENSAE), finished his postgraduate studies at HEC, and received his diploma from Panthéon Paris- Sorbonne, he hesitated. Should he become a distinguished economist, diving deeply into study and forecasts? Tempting, but this young man finally prefers banking which is at the “crossroads of the economy”. He recalls “I needed to act, to make concrete things happen.” And so in 1985 he joins the French Bank of Foreign Trade (BFCE) and becomes head of the risk management consulting department in charge of change and interest rate risk and puts together complex offers for large groups. He then sets up the business banking at BFCE where he takes the helm. He finds this work very satisfying. But it’s not enough for him to be fulfilled. So to continue moving towards macroeconomics and to satisfy his great curiosity he becomes an affiliate professor at HEC: “I don’t play golf, I have no hobbies, but I need to reflect and to transmit; this helps me become a better banker,” he pleads, affirming that he was able to predict the 2008 financial crisis thanks to his constant watchfulness, an overall understanding of the system and an ever critical eye. “Constantly on the lookout for any signs of weakness in the markets, he’s a visionary; he knows how to anticipate and develop his strategy,” points out Françoise Epifanie head of development at BRED. A double life which makes him a rare breed in the world of banking, “He’s on the one hand an intellectual, an economics professor and on the other he’s very hands-on : a very rare balance!” confides Eric Lombard, Managing Director of Caisse des Dépôts. Determined, a hard worker -“he has an extraordinary capacity to work,” according to an executive manager- he has never given up on his teaching. Even when he joined Caisse D’Epargne in 1998 where he was initially appointed as president of the board of directors for the western Paris region before being sent to Lyon. For this fourth generation Parisian it’s his first job in France outside of the capital. But this food lover and fan of good wines loves the area. And he,“then values the crucial role of the regions in the equilibrium of France,” he affirms. Olivier Klein realises that it is the dedicated involvement of the directors of the established regional banks that are behind the success of a decentralised retail banking group. An expert in acquisitions and mergers, he is given the task of fusing Caisse D’Epargne from the Alps region with the Rhone-Alps Lyon Caisse D’Epargne. A prelude to future mergers, such as the merger between Banques Populaires and Caisse D’Epargne in 2008 (later to become BPCE) in which he was actively involved.

Managing Director of commercial banking and insurance at the head of the newly formed group, Olivier Klein quickly covets BRED bank- which he made into, “a little jewel” points out admiringly his old teacher and former Minister of Economy, Edmond Alphandéry. Taking advantage of the retirement of his predecessor, he takes over in 2012. It’s an entrepreneurial bank,”the most complete in the group” he rejoices. He develops the bank with steady progress going against the tide of the rest of the banking sector rushing to bring in the digital to replace the bricks and mortar banking. He, on the other hand, keeps the branches open, opens more and increases employee recruitment. Convinced of his strategy he launches the, “bank without distance” in opposition to the pure players focused on remote banking, increasing the training budget by 40% so that his employees can best accompany their customers in their life projects. “He understood that the success of a company rests on the quality of its teams,” points out someone close to him. He wants to make BRED 100% dedicated to giving advice, much to the dismay of his team, which finds him a little audacious and in a rush.

Perfectionist

And yet the Covid-19 crisis proved him to be right and speeds up the transformation. Being ambitious he also decides to conquer new markets and quickly moves into Cambodia and the Fidji Islands: “He set up shop in places which bankers generally avoid, and he was right to do so,” notes Edmond Alphandéry. Without any false modesty, Olivier Klein is delighted with his results which he sends to all those that are close to him. His fondness for grand strategy doesn’t prevent him from following closely the day- to-day business. He frequently travels around visiting regional branches and banks outside of France and always begins each visit with exchanges with the local teams. A man of communication- and speeches- he enjoys these trips during which he reassures and rallies his employees. On the other hand he will not accept anything that is slapdash. “He doesn’t let anything go by, he’s always on the frontline no matter what the activity,” acknowledges Françoise Epifanie and jokes, “He always encourages people to go beyond themselves”. And he knows how to delegate when he believes in the person, this indulgent boss keeps an eye on everything at all times. Even when he is on holiday he has difficulty in letting go.

As his departure approaches this sixty-something feels he is in great shape. As much as he loves his collection of African statues as wells those from Papua New Guinea which sit in state in a dedicated room, Olivier Klein is ready to head towards new horizons.

L’Hémicycle – Corinne Scemama
Article published on 19 June 2023.

Key Dates

  • 15 June 1957: Birth in Paris.
  • 1985: Head of the risk management consulting department in charge of change and interest rate risk for key accounts at the French Bank of Foreign Trade (BFCE). He then sets up Business banking at the heart of the group.
  • 1985: Affiliate Professor at HEC.
  • 1998: President of the board of directors at Caisse D’Epargne for the western Paris region, followed by the Rhône-Alpes Lyon Caisse D’Epargne.
  • 2010: Managing Director of the BPCE Group, in charge of commercial banking and insurance.
  • 2012: Managing director of BRED.