![Sample our Humanities journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5939/TOC-Subject-Sample-2021-Humanities.jpg"})
Abstract
The advent of the Eurodollar market under the international monetary system of Bretton Woods (1944–1971) played a crucial role in the re-emergence of post-war international finance. By drawing on multiple historical archives, this article examines several aspects related to the establishment of the Eurodollar market in France between 1959 and 1964. The article argues that the Paris-based but Soviet owned Banque Commerciale pour l’Europe du Nord pioneered offshore banking in Paris and that some of the leading French banks sought Eurodollar regulations and reform in 1963. The Banque de France rejected regulation as it wished to promote Paris as a centre for offshore banking and because it deemed efforts to promote Eurodollar reform at the Bank of International Settlements unrealistic. The Banque de France was a member of the Eurodollar international governance regime that emerged in the 1960s.
Acknowledgments
I wish to thank Kazuhiko Yago, Jean-Baptiste Pons and the four anonymous reviewers for their constructive comments.
Disclosure statement
No potential conflict of interest was reported by the author.
Historical archives
Banque de France, Historical Archives of the Banque de France, Paris, France (BFA).
Crédit Lyonnais, Historical Archives of the Crédit Agricole, France (CLA)
Banca d’Italia, Archivi Storici della Banca d’Italia, Rome, Italy.
Central Intelligence Agency, https://www.cia.gov/readingroom/docs/CIA-RDP79T01098A000600110004-5.pdf.
Notes
1 Oscar L., Altman. ‘Foreign Markets for Dollars, Sterling, and Other Currencies’. Staff Papers 8, no. 3 (1961): 313–52.
2 Only an in-depth study of selected banks’ historical archives can perhaps reconstruct such lending in the early 1950s.
3 BFA, 1495200501-577, ‘Question des “Euro Dollars”’, 10 July 1962.
4 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
5 Ibid.
6 BFA, 1495200501-577, Julien Koszul, ‘Euro-dollar, Euro-devises’, speech given at the ‘Forex Club’, Association Cambiste Internationale, 24 April 1964.
7 BFA, 1495200501-576, handwritten note on the letter received by the Banque de France from the BCEN following the requests for clarifications on that bank’s exposure to Hugo Stinnes, 12 December 1964.
8 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
9 Ibid.
10 This hypothesis is confirmed by the United States spy agency, the Central Intelligence Agency, which noted the contribution of the BCEN and the Moscow Narodny Bank to the Eurodollar market in the 1950s by stating that the two banks could lend Soviet dollar deposits because of the: ‘unwillingness of their Communist correspondent banks (Gosbank, Vneshtorgbank, and the central banks and special foreign trade banks of the Communist countries) to hold more than working balances in US banks. This reluctance stemmed from their belief that if East-West relations deteriorated, their Western currency balances in European banks would be safer (that is, less likely to be blocked by government authorities) than balances held in the United States. The Communist countries, however, were unwilling to exchange their dollar balances for the then less convertibility currencies. As a result, Soviet and East European banks began to hold some of their dollar balances in [the Moscow Nardony Bank and the BCEN], which in turn loaned them out at profitable rates of interest in what became known as the Eurodollar market’, Central Intelligence Agency (CIA) Confidential, Soviet and European-Owned Bank in the West, December 1975.
11 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
12 BFA, 1331200301-121, ‘Position en devises des intermediarires agrees vis-à-vis de l’etranger- avoirs et engagements au 31 December 1963’ 31 January 1964; BFA, 1331200301-121, ‘Position en devises des intermediarires agrees vis-à-vis de l’etranger- avoirs et engagements au 31 December 1963’ 10 Feburary 1965.
13 BFA, 1295200501-577, Le Ministre Pénitentiaire chargé des fonctions de Conseiller Financier, PB4
($) 3, Confidentiel, ‘Londres et le marché de l’Euro-dollar’, Ambassade de France à Londres, June 1964.
14 BFA, 1495200501-577, Confidentiel ‘Réunion de représentants des banques centrales consacrée au marché de l’Euro-dollar’ B.R.I., 6-8 Octobre, 1962, Resume de Debats RESUME DES DEBATS.
15 Ibid.
16 Ibid.
17 BFA, 1295200501-577, Le Ministre Pénitentiaire chargé des fonctions de Conseiller Financier, PB4 ($) 3, Confidentiel, ‘Londres et le marché de l’Eurodollar’, Ambassade de France à Londres, Juin 1964, June 1964.
18 Bank of England, UK external liabilities and claims in foreign currencies (QB 1964), pp. 104-108
19 Archivi Storici Banca d’Italia (henceforth ASBI), Carte Baffi, Monte Oppio, Pratt. 67, ‘Regulations and policies related to the Eurocurrency markets, Bank for International Settlements’, 7 April 1967.
20 Bank of Italy, Annual Report, 1969, 113.
21 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
22 CLA, 21AH9.12, ‘Réunion de la Banque de France du 12 Novembre 1963’ (présidée par M. Koszul), 12 Novembre 1963.
23 BFA, 1495200501-576, ‘Observations recueillies auprès de divers banques (C.L, S.G, B.N.C .I., C.N.E.P., B.F.C.E., C.I.C, B.U.P) suer le projet de circulaire relatif aux opérations de prêts et dépôts de devises a vue et à court terme avec les banques étrangers’. April 1963.
24 Ibid.
25 Ibid.
26 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
27 BFA, 1495200501-861, ‘Hot money” en France- Visite de M. Avon, Directeur de la Banque de l’Union Parisienne’ 20 April 1959.
28 CLA, 21AH9.12, ‘Reunion de la Banque de France du 2 Avril 1963’ (présidée par M. Koszul), 4 October 1963.
29 The 7 lending French banks were the Credit Commerciale de France, BCEN, Crédit Lyonnais, BUP, Union Européenne Industrielle et Financiere, Banque Jordaan and Banque Lazard. Among the Dutch banks’ lending to Hugo Stinnes, the most important were the Twentsche bank, Nederlandshe Handel Maatschappij, Hendring et Pierson, Rotterdamsche Bank and Nederlandsche Overzee Bank. The two American banks instead were Bank of America and Irving Trust.
30 CLA, 21AH9.12, ‘Reunion de la Banque de France du 2 Avril 1963’ (présidée par M. Koszul), 2 April 1963.
31 BFA, 1495200501-576, Auguste Avon, ‘26éme Session de l’Institute International d’Etudes Bancaires à KRONEBERG-TAUNUS- les 15 et 16 Novembre 1963’.
32 BFA), 1495200501-577, Confidential ‘The Continental Dollar Market: A report based on Visits to European Bank in June 1960’ written by Allan R. Holmes and Fred H. Klopstock, 26 August 1960.
33 BFA, 1495200501-576, Auguste Avon, ‘26éme Session de l’Institute International d’Etudes Bancaires à KRONEBERG-TAUNUS- les 15 et 16 Novembre 1963’.
34 BFA, 1495200501-577, Memorandum prepared for the American Bankers Association to be held in Vienna, Austria, May 19-22, 1964, ‘The Euro-Dollar: A New Segment of International Finance’, 2 April 1964.
35 Ibid.
36 BFA, 1495200501-576, ‘Résume de la Presse Étrangère – Marche de l’Euro-dollar: Préoccupations dans les milieux bancaires d’Europe, Observations de M. Abs (Times – 13 Novembre 1963)’.
37 Ibid.
38 CLA, 21AH9.12, ‘Reunion de la Banque de France du 2 Avril 1963’ (présidée par M. Koszul), 2 April 1963.
39 BFA, 1495200501-576, Auguste Avon, ‘26éme Session de l’Institute International d’Etudes Bancaires à KRONEBERG-TAUNUS- les 15 et 16 Novembre 1963’.
40 Ibid.
41 BFA, 1495200501-577, Memorandum prepared for the American Bankers Association to be held in Vienna, Austria, May 19-22, 1964, ‘The Euro-Dollar: A New Segment of International Finance’, 2 April 1964.
42 Ibid.
43 Ibid.
44 BFA, 1495200501-577, Julien Koszul, ‘Euro-dollar, Euro-devises’, speech given at the ‘Forex Club’, Association Cambiste Internationale, 24 April 1964.
45 BFA, 1495200501-576, Auguste Avon, ‘26éme Session de l’Institute International d’Etudes Bancaires à KRONEBERG-TAUNUS- les 15 et 16 Novembre 1963’.
46 Ibid.
47 Abs believed that such an entity would: ‘allow Eurodollar lenders to find out about the commitments already made by their potential borrowers. Such an institution would make it possible to detect which borrowers are trying, by entering into commitments abroad, to avoid the publicity of nationally organized risk centrals. It would probably not give a clear view of the channels of the Eurodollar market, but it would at least have the advantage of excluding from this market borrowers who appear to be already too committed’. BFA, 1495200501-576, ‘L’Allemagne et le marché de l’Eurodollar’, Ambassade de France à Bonn, 23 Decembre 1963.
48 BFA, 1495200501-576, Auguste Avon, ‘26éme Session de l’Institute International d’Etudes Bancaires à KRONEBERG-TAUNUS- les 15 et 16 Novembre 1963’.
49 BFA, 1495200501-577, Robert Abboud, ‘The Significance of Eurodollars in today’s world markets’, Bankers’ Monthly, February 1964.
50 ASBI, Carte Estero, Elaborati del Capo del Servizio Rapporti con l’Estero, Emilio Ranalli, predisposti per il Governatore, ‘Appunto per il signor Governatore’ (nota mensile-agosto 1963).
51 The Crédit Lyonnais’s attempt to establish a European banking club is discussed by Bussiére. Bussiére, however, does not mention the Eurocurrency cartel the Crédit Lyonnais aimed to establish through the club or does he mention the Eurocurrency market behind the attempt of the Crédit Lyonnais to establish the club (Bussière, 2002).
52 ASBI, Carte Estero, Elaborati del Capo del Servizio Rapporti con l’Estero, Emilio Ranalli, predisposti per il Governatore, ‘Appunto per il signor Governatore’ (nota mensile-agosto 1963).
53 Ibid.
54 Ibid.
55 Ibid.
56 BFA, 145200501-576, Julien Koszul, ‘Engagements des Intermédiaires Agréés en devises étrangers vis-à-vis de non-residents’ 5 December 1963.
57 BFA, 1289200402-56, Copie ‘Extraits de la lettre de M. Waitzenegger addressee a M. Theron 30/12/1957’.
58 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
59 As Calvet explained: ‘A country’s reserves must be made up either of gold or of claims on foreign countries, and not of assets that are definitely denominated in foreign currency, but which represent a claim on national banks. We cannot control the use that French banks make of our deposits. There is an element of risk that we are not allowed to assume. Last but not least, we increase their liquidity at times when such a result can be considered as quite unpleasant, even if the effect is indirect. I propose, therefore, not an abrupt withdrawal [i.e. from the Eurodollar market] of course, but a policy of gradual reduction until total elimination of deposits’. BFA, 1495200501-374, ‘Extrait d’une note de M. Calvet au Gouverneur en date du 14 Décembre 1962’, 4 December 1962.
60 BFA, 1495200501-577, ‘Les Banques Françaises et le marché de l’Euro-dollar’, September 1962.
61 Oscar L. Altman, ‘Recent Developments in Foreign Markets for Dollars and Other Currencies’, Staff Papers (International Monetary Fund) 10, no. 1 (1963), pp. 48-96.
62 CLA, 21AH9.12, ‘Réunion de la Banque de France du 12 Novembre 1963’ (présidée par M. Koszul), 12 Novembre 1963.
63 Ibid.
64 BFA, 145200501-576, Julien Koszul, ‘Engagements des Intermédiaires Agréés en devises étrangers vis-à-vis de non-residents’ 5 December 1963.
65 BFA, 1495200501-576, Letter from govenor Jaques Brunet to French banks, 6 December 1963; BFA, 1495200501-577.
66 BFA, 145200501-576, Julien Koszul, ‘Engagements des Intermédiaires Agréés en devises étrangers vis-à-vis de non-residents’ 5 December 1963.
67 BFA, 149520050-188. ‘Marche des Euro-Devises’ Rapport B.R.I de la réunion des experts tenus à Bale, Bale, 12 January 1964.
68 BFA, 145200501-576, Julien Koszul, ‘Engagements des Intermédiaires Agréés en devises étrangers vis-à-vis de non-residents’ 5 December 1963.
69 Ibid.
70 The BUP, Maurice Theron wrote in early December: ‘Passed a rather harsh judgement on the Dresdner Bank. Indeed, for two years this institution required guarantees on all the advances made to the Hugo Stinnes, so it did not suffer any loss when the suspension of payments occurred. But while it was careful to deal only on a “covered basis” with Hugo Stinnes, the Dresdner Bank continued to provide good information to its French colleagues on the Hugo Stinnes Bank business’. BFA, 1495200501-576, Maurice Théron, ‘Defaillance de la Banque Hugo Stinnes’, 19 December 1963.
71 BFA, 1495200501-576, Résume des Débats, Confidentiel, ‘Réunion d’experts des banques centrales a Bale sur les problèmes posés par le marché des Euro-divises’ Project de déclaration française, Annex 3, 2 October 1962.
72 Ibid.
73 BFA, 145200501-576, Julien Koszul, ‘Engagements des Intermédiaires Agréés en devises étrangers vis-à-sis de non-residents’ 5 December 1963.
74 BFA, 1495200501-577, Confidentiel ‘Réunion de représentants des banques centrales consacrée au marché de l’Euro-dollar’ B.R.I., 6-8 Octobre, 1962, Resume de Débats RESUME DES DEBATS.
75 BFA, 1495200501-576, Résume des Débats, Confidentiel, ‘Réunion d’experts des banques centrales à Bale sur les problèmes posés par la marche des Euro-divises’ Project de déclaration française, Annex 3, 2 October 1962.
76 Ibid.
77 BFA, 1495200501-577, ‘Réunion de représentants des banques centrales consacrée su marché de l’Euro-dollar’, B.R.I., 6-8 Octobre 1962. RESUME DES DEBATS
78 Ibid.
79 BFA, 1495200501-578, BFA, ‘Deuxième réunion sur l’Euro-Dollar à Bale 9-11 Novembre’, 14 Novembre 1963.
80 Ibid.
81 On the history of the Eurobond market see Burk (Citation1992), Richard (Citation2001), and O’Malley (Citation2014).
82 BFA, 1495200501-577, Confidentiel ‘Réunion de représentants des banques centrales consacrée au marché de l’Euro-dollar’ B.R.I., 6-8 Octobre, 1962, Resume de Débats RESUME DES DEBATS.
83 BFA, 1495200501-577, Julien Koszul, ‘Euro-dollar, Euro-devises’, speech given at the ‘Forex Club’, Association Cambiste Internationale, 24 April 1964.
84 BFA, 1495200501-577, Confidentiel ‘Réunion de représentants des banques centrales consacrée au marché de l’Euro-dollar’ B.R.I., 6-8 Octobre, 1962, Resume de Débats RESUME DES DEBATS.
85 BFA, 1495200501-578, letter from governor of the Bank of England to the President of the Bank of International Settlements (BIS), 31 March 1964.
86 BFA, 1495200501-576, ‘L’Allemagne et le marché de l’Eurodollar’, Ambassade de France à Bonn, 23 Decembre 1963.
87 The Bank of England, however, recognized that his proposal had limitations ‘since monies lent by banks in those countries whose Central Banks make returns to the BIS to recipients in other countries which are not members would figure in the BIS return as loans to the last recipient within the BIS cercle’. BFA, 1495200501-578, letter from governor of the Bank of England to the President of the Bank of International Settlements (BIS), 31 March 1964.
88 BFA, 1495200501-578, ‘Reunion sur l’Eurodollars a Bale les 6 et 7 Juillet 1964’.
89 Ibid.
91 As governor Cromer noted at the BIS in January 1964 ‘there is little communication between the Euro currency market and the UK domestic market due to the limits placed by the UK authorities on the spot and forward exchange positions taken by UK banks’, BFA, 149520050-188. ‘Marche des Euro-Devises’ Rapport B.R.I de la réunion des experts tenus à Bale, Bale, 12 January 1964.
92 BFA, 1495200501-576, Résume des Débats, Confidentiel, ‘Réunion d’experts des banques centrales à Bale sur les problèmes posés par la marche des Euro-divises’ Project de déclaration française, Annex 3, 2 October 1962.
93 BFA, 1489200402-56, ‘Le marché des Euro-dollars et la politique monetaire interne’, 16 March 1971.
94 BFA, 1495200501-576, Résume des Débats, Confidentiel, ‘Réunion d’experts des banques centrales à Bale sur les problèmes posés par la marche des Euro-divises’ Project de déclaration française, Annex 3, 2 October 1962.
95 Ibid.
96 BFA, 1495200501-577, Memorandum prepared for the American Bankers Association to be held in Vienna, Austria, May 19-22, 1964, ‘The Euro-Dollar: A New Segment of International Finance’, 2 April 1964.
97 Crédit Lyonnais Archives (CLA), 30AH5354, Comité de Directions Générale, 27 November 1970.
98 BFA, 1495200501-577, Julien Koszul, ‘Euro-dollar, Euro-devises’, speech given at the “Forex Club,” Association Cambiste Internationale, 24 April 1964.
Additional information
Funding
Notes on contributors
Ioan Achim Balaban
I am an economic historian with an interest in post-war international monetary, banking and financial history. I hold a PhD in economic history from the European University Institute, Fiesole, Italy. E-mail: [email protected]. Currently, I am a research assistant at the Lucian Blaga University of Sibiu, Romania.