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

    HKMA Sets Out Regulatory Treatment for Personal Loan Guarantee Scheme

    HKMA has published a circular that sets out the regulatory and reporting treatment for loans that participating authorized institutions may grant to eligible borrowers under the 100% Personal Loan Guarantee Scheme.

    April 20, 2021 WebPage Regulatory News
    News

    ECB Completes Targeted Review of Internal Models of Banks

    ECB published the results of the assessment of internal models that banks use to calculate risk-weighted assets for credit, market, and counterparty credit risks.

    April 19, 2021 WebPage Regulatory News
    News

    PRA on Regulatory Treatment of Loans Under Mortgage Guarantee Scheme

    PRA published a statement on the regulatory treatment of retail residential mortgage loans under the Mortgage Guarantee Scheme, or MGS.

    April 19, 2021 WebPage Regulatory News
    News

    FCA Consults on Rules and Reporting Forms for Investment Firms Regime

    FCA is consulting, via CP21/7, on the second phase of proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR).

    April 19, 2021 WebPage Regulatory News
    News

    HMT and BoE Decide to Explore Central Bank Digital Currency in UK

    HM Treasury and BoE announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential central bank digital currency in UK.

    April 19, 2021 WebPage Regulatory News
    News

    EIOPA Sets Out Expectations on Use of Climate Risk Scenarios in ORSA

    EIOPA published an opinion to set out its expectations on the supervision of the integration of climate change risk scenarios by insurers in their Own Risk and Solvency Assessment (ORSA).

    April 19, 2021 WebPage Regulatory News
    News

    EC Sets Out Standards for MREL Reporting by Competent Authorities

    EC published the Implementing Regulation 2021/622 that lays down implementing technical standards for reporting of the minimum requirement for own funds and eligible liabilities (MREL).

    April 16, 2021 WebPage Regulatory News
    News

    BCBS to Advance Work on Suptech, Climate Risk, and Basel Monitoring

    BCBS has set out the strategic work priorities, as part of its the work program for 2021-22.

    April 16, 2021 WebPage Regulatory News
    News

    Bundesbank Updates AnaCredit Reporting Requirements

    Bundesbank published two circulars on AnaCredit reporting requirements. Circular 27/2021 covers changes to the reporting of branches, additional attributes to be reported for investment funds from August 01, 2021, and updates to the list of international organizations.

    April 16, 2021 WebPage Regulatory News
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6874