Featured Product

    IMF Publishes Reports Assessing Financial System Stability in France

    July 24, 2019

    IMF published a report on results of the Financial System Stability Assessment (FSSA) on France. Also published were the staff report and the selected issues report under the 2018 Article IV consultation with France. The FSSA report highlights that important institutional and policy changes have taken place since the 2012 Financial Sector Assessment Program (FSAP). At the national level, the authorities have strengthened the macro-prudential framework, enhanced monitoring of financial stability risks, prepared to manage the Brexit fall-out, and taken various financial reform measures and initiatives on digital finance, crypto-assets, and green finance. At the European level, significant changes relate to Banking Union, Capital Requirements Regulation/Capital Requirements Directive (CRR/CRD), Solvency II, and efforts toward Capital Markets Union.

    The FSSA report notes that the financial system is more resilient than it was in 2012, with an improvement in capital positions and asset quality. Banking and insurance business lines, and the corporate sector, carry important financial vulnerabilities that need close attention. Banks have adequate capital and liquidity buffers to withstand a sizable shock. Banks could face liquidity challenges from large outflows of wholesale funding, including in U.S. dollars, and from any acceleration of fragmentation of international liquidity. Insurers are broadly resilient against market shocks, but vulnerabilities stem from the concentrated exposures, mostly to their parent banks. Solvency ratios of insurers have been stable and bolstered by the effective implementation of Solvency II.

    The FSAP identified the following key policy priorities:

    • Continue pre-emptive management of systemic risks. To address a buildup of systemic risk including private non-financial sector debt, the authorities have proactively used macro-prudential measures. The authorities should engage with ECB and other EU agencies on the possible use of bank-specific Pillar 2 measures to address bank-specific residual risks from the concentration of exposures to large indebted corporates. In addition, the authorities should consider the use of a sectoral systemic risk buffer (SRB) and the expansion of the macro-prudential toolkit for corporates and non-banks.
    • Ensure adequate liquidity management and buffers. While aggregate bank liquidity buffers appear adequate, the supervisory authorities are encouraged to consider imposing additional liquidity buffers in all major currencies to minimize risks related to potential disruptions in wholesale funding in case of severe shocks.
    • Further integrate conglomerate-level monitoring and oversight. Common guidance, reporting, integrated liquidity risk management requirements, and stress testing at the conglomerate level can help ensure that risks are promptly identified and addressed. Several of these gaps are universal in nature and would benefit from a broader international effort.
    • Enhance governance, financial-sector policies, and financial integrity. In line with international best practices and critical for achieving their technical mandates in an accountable manner, governance and operational independence reforms are required to ensure that the oversight authorities are properly positioned and resourced to deliver their mandates effectively.
    • Reinforce crisis management, safety nets, and resolution arrangements. Continued implementation of crisis management instruments created under the EU Bank Recovery and Resolution Directive is essential. Recovery and resolution planning for non-banks needs attention. 

    The staff report highlighted that IMF Directors commended the authorities’ progress in bolstering the financial system’s resilience, as reflected in the FSAP review, including by taking a proactive macro-prudential response to the buildup of systemic risk from corporate leverage. Directors emphasized the need to continue to monitor systemic risks closely and stand ready to deploy additional macro- and micro-prudential policies as needed. Given the global significance and complexity of financial system in France, Directors emphasized further integrating monitoring and oversight at the conglomerate level, strengthening liquidity-risk management in conglomerates, and ensuring adequate liquidity buffers.

     

    Related Links

    Keywords: Europe, France, Banking, Insurance, FSSA, FSAP, Article IV, Systemic Risk, Macro-Prudential Framework, Solvency II, CRR/CRD, BRRD, Governance, Capital Buffers, Stress Testing, IMF

    Featured Experts
    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417