Did France experience inefficient banking panics? an exploration of the 1930's crisis

Economists and historians acknowledge several episodes of local banks runs in France during the early 1930's. They consider generally that the consequences of this phenomenon were not as important as in other countries, and that bank closures rather improved safeness and soundness in the banking industry. It is argued here that reassessing recent historical studies (by H. Bonin, M. Lescure, and others) suggests, on the contrary, that three genuine, large-scale and contagious bank panics occurred. More than 40% of total banks were closed. Although only one of the largest banks failed, BNC, a number of well capitalized and solvent banks closed: panics proved therefore to be inefficient. The Treasury initiated bailouts, in association with a rather timid action of Banque de France (hindered by numerous conflicts of interests), but its forbearance policy addressed banks too important to fail, which eventually failed because they were insolvent. On the contrary, access to lifeboats was denied to several hundreds of smaller banks, which however played a major role in providing for liquidity in the credit market and refinanced banks through the securities lending operations in the Stock Exchange. Their liquidation was severely harmful to financial intermediation for decades.