A banking giant is born

Monday sees the creation of what will be France's second biggest retail bank with the official merger of Banque Populaire and the Groupe Caisse d'Epargne to become BPCE.

Far from being a marriage "made in heaven" though, it is one born out of necessity and despite its size, the process of finally "becoming one" has not been without its difficulties.

Although the green light will be given for the new bank to operate throughout most of the country, there's a slight problem in Ile de France, the area surrounding and including the French capital.

The Paris court of appeal has blocked the merger for the moment because of what it insists a "failure to inform its personnel sufficiently on the merger plan between the two banking groups."

A decision as to when the Ile de France branches can be merged into the new BPCE will have to wait until the court's final ruling later this month.

In the meantime though the creation of BPCE is official throughout the rest of the country in a move which creates the second-biggest retail bank in France behind Credit Agricole.

When the credit crunch hit the world last year, Banque Populaire and Caisse d'Epargne seemed the best match in terms of the desire by French authorities to limit the effects here of the financial turmoil and consolidate the country's banking sector.

Both were major shareholders in the investment bank Natixis which was hard hit by the sub-prime mortgage crisis in the United States. Between them, the two held 70 per cent of Natixis' shares.

But the merger process has been far from an easy one.

In October last year, just as talks were underway between the two groups, Caisse d'Epargne had to come clean and reveal that it had lost around €600 million in unauthorised derivatives trading.

The chief executive at the time, Charles Milhaud, resigned taking full responsibility, but it was a loss which brought a sharp rebuke from the French president, Nicolas Sarkozy, who described it as "unacceptable" and an investigation was launched into how it had happened.

And at the end of February there was further controversy when François Pérol was nominated to become head of the two banks once merged.

He was a former top financial advisor to Sarkozy, and critics contested that his appointment represented a conflict of interests.

When fully operational the new group will reportedly have around 34 million customers at over 8,000 branches and employ around 110,000 people.