Written on 15 October 2012.
On Thursday, September 27, the EDHEC Nice campus had the honour of receiving a visit from Pierre Palmieri, Head of Global Finance, Société Générale CIB, for a talk on financing the economy after the financial crisis. This talk took place on the second anniversary of the partnership between SGCIB and the MSc in Corporate Finance. Mr. Palmieri spoke of the difficulties companies have been having obtaining financing from banks since the 2008 crisis with the securitisation of certain types of loans and since the 2011 crisis with channels for bank financing.
The central role of corporate and investment banks (CIBs) in the economy is sometimes not well known. Their business, quite simply, involves effecting a link between the capital markets and businesses for financing or hedging transactions. A significant percentage of the financing for projects or transactions thus takes place through CIBs, whereas in the media stress is often put on trading, which is only one facet of a CIB’s business. Pierre Palmieri mentioned the example of the long-term relationship (since 2003) between SGCIB and Glencore and its accompanying the growth of the company.
According to Palmieri, new regulatory constraints (Basel III), which mean that banks must now have greater stores of core capital on hand, will have consequences when it comes to the channels for financing the economy. As CIBs will be lending little, companies will have to turn more and more to the financial markets and private investors for their financing needs. Investment banks will those have to act more as go-betweens in bringing together those seeking financing (companies) and investors (pension funds, retirement funds, and so on). This new model, known as “originate to distribute,” is a logical follow up to the preceding “originate-and-hold model”; the point is to contribute as well as possible to the financing of growth.
These new activities are exceptional international opportunities for EDHEC finance students. SGCIB, part of the Société Générale Group, is active in 33 countries and has 12,000 employees; it offers all investment banking, financing, and capital markets services.
Reporting by Etienne Vaccaro-Grange and Simon Bigot, first-year students in the FE master’s programme and members of TRANSAC.