DP16698 The Great Expansion. The Exceptional Spread of Bank Branches in Interwar France

Author(s): Emilie Bonhoure, Hadrien Clausse, Eric Monnet, Angelo Riva
Publication Date: November 2021
Keyword(s): Bank Branching, Banking, French financial history, Great Depression
JEL(s): G21, G34, N14, N24
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16698

France during the 1920s was characterized by exceptional expansion of bank branches, with access to banks developing rapidly in rural areas due especially to establishment of temporary branches. However, it did not translate into increased bank assets and deposits as a share of national income. The banking crisis of the Great Depression ended the network expansion and reversed part of it, but the number of bank branches remained four times greater than before the war (though the French population was similar in 1910 and 1930). The distinction between indicators of credit or deposits on GDP and indicators of the density of the banking network challenges the thesis of the Great Reversal and improves understanding of the evolution of the banking system during the interwar period. We argue that inflation and increased competition explain the disconnect between the evolution of branches and the real volume of banking activity.