16 november 2016
After a successful launch, Bpifrance needs to stabilise its
development and its financial prospects have to be
Resulting from the reorganisation of Oséo, CDC Entreprises, Fonds Stratégique d’Investissement
(FSI) and FSI Régions, Banque publique d’investissement (Bpifrance) was launched in 2012 to
develop and broaden government support for corporate financing and to mitigate the risk of a
Its successful launch resulted in the creation of a group with prolific capacity for action, whose
lending and equity investment operations in 2015 together amounted to EUR 18.8 billion which
benefitted almost 71,200 companies.
It is now desirable for Bpifrance to stabilise its activity and to take strict control of its running
costs. Lastly, shareholders' discussions on the development of the group's economic and
financial model should involve a clarification of the government's strategy for financing
A successful launch
Bpifrance has established a foothold in the corporate financing ecosystem, and has won plaudits from
companies for its numerous support initiatives. The existence of a one-stop-shop where companies can
access virtually the entire range of financial instruments available, from loans through to equity capital, is
now a reality. The senior management of Bpifrance has managed to rapidly coordinate the various
entities that make up the new publicly-owned bank. Initial governance hurdles resulting from the equal
shares held in the capital by the government and the Caisse des Dépôts et Consignations, or relating to
the regions' partnership arrangements, have been overcome.
However, the launch of Bpifrance was marred by compensation issues that could have been better
managed, in particular with regard to pay rises awarded to certain senior executives that were not always
justified. Moreover, the existence of Bpifrance the public institution, with the government as its
shareholder, has no real justification as this entity is primarily used to circumvent the rules governing the
allocation of public funds and is detrimental to the notification of France's Parliament.
Genuinely dynamic, but its strategic positioning is in need of clarification
The creation of the Bpifrance group has served to boost the breadth and extent of Oséo's corporate
lending activities. Now that the corporate lending situation has generally improved, the objective must be
to stabilise the bank's activity in this area.
Its involvement in providing equity capital to SMEs is a continuation of CDC Enterprises' activity, with a
renewed strategy and greater breadth. However, Bpifrance's increasing involvement in this area,
especially in the innovation capital segment, raises the issue of the risk of an over-abundance of public
funds, effectively squeezing out private funding. Moreover, Bpifrance's growing involvement in the form of
direct investments in recent years is not without risk. Indirect investment through funds of funds would be
a better option.
Lastly, Bpifrance inherited its substantial portfolio of medium and large cap holdings mostly from the FSI,
which focused on rescuing companies that were strategic in terms of jobs or manufacturing. The bank has
diverted the focus of its strategy to mid-sized growth companies (
entreprises de taille intermédiaire
Bpifrance is entitled to adapt its operations to reflect developments in the economy and in the financial
world, but at times it has strayed from its original operating doctrine by investing in mid-sized growth
companies that are of no particular strategic interest or whose requirements could have been financed by
the private sector, and the proportion of holdings in mid and large caps remain high.
A fragile economic and financial model that requires closely-managed development
So far, Bpifrance's financial results have been positive and the group's solvency ratios currently exceed
the regulatory requirements by a clear margin. But these positive results are associated with higher
running costs. Moreover, they are largely attributable to the contribution of substantial public funding,
especially by the government.
Bpifrance's economic and financial model has hitherto been based on the rapid growth of its financing
and guarantee activity, which required an increase in available public resources, and on selling a portfolio
of legacy holdings that were running significant unrealised profits. This raises concerns as to how long
this stock of unrealised gains will last, and therefore the nature of new investments made, which must be
sufficiently profitable and liquid.
The government's capacity to carry on contributing indefinitely to the funding of Bpifrance's activity and to
determine the amount of public resources available between now and 2019 is also in question. On this
matter the government will have to prioritise its various public funding tools, namely budget appropriations
and the future investment programme.
The Cour des Comptes has issued ten recommendations, which aim in particular to put in place a risk
management system that is fully compliant with regulatory requirements, to stabilise executive pay, to
control the growth of the business in the medium term and to close down Bpifrance the public institution,
the government's holding vehicle.
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