Featured Product

    ESRB Issues Opinion on Extension of Macro-Prudential Measure in France

    July 14, 2020

    ESRB published an opinion on the notification of the French High Council for Financial Stability (HCSF) to extend application period of the macro-prudential measure regarding requirements for large exposures. The measure aims to limit concentration risk with regard to highly indebted large French non-financial corporations or NFCs. HCSF proposed to extend the period of application of the existing measure for one additional year, until June 30, 2021. ESRB opines that the extension of the proposed measure serves as a helpful backstop to ensure risk diversification and safeguard the resilience of the banking system in France.

    The measure consists of a tightening of limits for large exposures of French systemically important credit institutions to highly indebted large NFCs that have their registered office in France. The tightened limit requires systemically important French credit institutions to ensure that exposures to highly indebted large NFCs are no greater than 5% of eligible capital. An NFC is to be classified as highly indebted if its ultimate parent company has both a net leverage ratio greater than 100% and its interest coverage ratio is below 3. A credit institution applies the measure to the exposures—where it has an original exposure to the highly indebted NFC or to the group of connected clients to which the highly indebted NFC belongs—equal to or larger than EUR 300 million. This measure had been in force since July 01, 2018, in line with Article 458 of the Capital Requirements Regulation or CRR, and expired at the end of June 2020.

    ESRB opines that the proposed extension of the measure does not contradict the overall aim of guaranteeing lending to the real economy throughout the COVID-19 crisis. The extension of the measure does not per se set a limit to the overall borrowing of highly indebted large NFCs, but ensures that individual systemic credit institutions cannot have too large a concentration of their exposures toward any one individual NFC. ESRB, therefore, supports the intention of HCSF to extend the period of application of its stricter national measure. ESRB reiterates that the issues raised in its assessment of the original measure require continued follow-up, as described below, by the French authorities to ensure the effectiveness of the measure and avoid unwarranted consequences:

    • ESRB states that close monitoring of the impact of the measure and the evolution of the risk must continue, particularly if the 5% threshold for large exposures were to be frequently breached as a consequence of the COVID-19 pandemic. 
    • ESRB continues to encourage French authorities to explore alternative options for addressing financial stability concerns, in particular if risks continue to develop unfavorably. These options include, but are not limited to, borrower-based measures and the systemic risk buffer after its sectoral use is permitted.

     

    Related Links

    Keywords: Europe, EU, France, Banking, CRR, Large Exposures, Opinion, Systemic Risk, Basel, HCSF, Macro-Prudential Policy, ESRB

    Featured Experts
    Related Articles
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    News

    FSB Sets Out Effective Practices for Cyber Incident Recovery

    FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.

    October 19, 2020 WebPage Regulatory News
    News

    ECB Publishes Eleventh Issue of the Macroprudential Bulletin

    ECB published eleventh issue of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy.

    October 19, 2020 WebPage Regulatory News
    News

    HM Treasury Seeks Views on Review of Solvency II Regime for Insurers

    HM Treasury issued a call for evidence seeking views to reform the prudential regulatory regime—also known as Solvency II—of the insurance sector in UK.

    October 19, 2020 WebPage Regulatory News
    News

    ESRB Responds to EC Consultation on Review of Solvency II

    ESRB responded to the EC consultation on review of Solvency II regime.

    October 19, 2020 WebPage Regulatory News
    News

    HM Treasury Consults on Phase II of Future Regulatory Framework Review

    HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021.

    October 19, 2020 WebPage Regulatory News
    News

    EC Publishes Work Program for 2021

    EC adopted the work program for 2021.

    October 19, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5991