Public pawnbroker is again the face of French banking

Crédit Municipal has lessons for banks in the recession.

From Napoleon III's mistress to cash-strapped modern-day bankers, Parisians have for centuries stored their jewels and secrets in a discreet building not far from the Seine.

Set up in the 17th century in response to usurious money lenders, the non-profit Crédit Municipal has a new task – helping Parisians weather the economic crisis with traditional loans and financial services.

In the ornate rooms where Auguste Rodin once pawned a hand from one of his sculptures to raise cash, immigrant mothers with toddlers queue to pledge their dowry gold or secure a low-cost loan.

Not all clients are poor. Aristocrats from the elegant 16th arrondissement regularly turn up with heirlooms. "We are a bit like the emergency room in a hospital," says the director, Bernard Candiard, in the medieval Marais district headquarters.

"Most of our clients are from a modest background, but there are also ladies in fur coats who are tightening the purse strings a bit," he says.

In 2008, client numbers rose by 30 per cent to more than 500 a day. This year, several bankers quietly pawned some paintings, using the loans to pay their taxes. Crédit Municipal also started accepting more unusual collateral last year, such as fine wine and photographic art. Clients can borrow between 50 and 70 per cent of the value.

In an age of internet banking and currency speculation, Crédit Municipal feels reassuringly old-fashioned. Its storage vaults are stuffed with close to a million objects, mainly jewellery, but also art works, books, stamps, fur coats, and an umbrella that has been there for about 50 years.

With €74m (£66.8m) in loans in 2008, up from €63m in 2007, and an average loan of €1,100, Crédit Municipal is much smaller than a commercial bank. At the same time, its basic principles, such as a strong relationship with clients and conservative lending practices, hold important lessons for the future of banking.

France has not experienced the kind of rocketing household debt seen in the US and Britain. However, GDP figures for the first quarter of the year, due next month, are expected to show that the economy has contracted by 1.2 per cent, according to a Reuters poll. Analysts say France could face a long downturn.

Jean-Pierre Rochette, the director of CMP-Banque, the part of Crédit Municipal that deals with debt restructuring, expects to see greater demand for his services. Staff at his unit meet applicants and give them budget advice before repackaging their debt at lower interest rates. In a separate new micro-credit section, retired Banque de France officials help arrange loans for the poorest clients.

In the 19th century, Napoleon III's mistreess, the Countess di Castiglione, would bring in her jewellery in the morning and borrow it back for parties in the evening. Poor Parisians would also come to pawn their mattresses in the morning, redeeming the loan before bedtime. Hard to believe? The evidence is there: a mattress-cleaning machine from the period is still displayed on the ground floor of the building. (Reuters)