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

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Publishes Waiver by Consent of Continuity of Access Rules

    PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook (DPP).

    September 13, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Revises Branch Return and Updates Guidance for Regulatory Reports

    PRA published the policy statement PS17/19, which contains the final policy related to changes in the format and content of the Branch Return Form and reporting guidance.

    September 12, 2019 WebPage Regulatory News
    News

    ISDA Guide on Collateral Management Under Smart Derivatives Contracts

    ISDA published the third in a series of legal guidelines for smart derivatives contracts.

    September 12, 2019 WebPage Regulatory News
    News

    ESA Report Highlights Risks of No-Deal Brexit in EU Financial System

    ESAs published a Joint Committee report on risks and vulnerabilities in the EU financial system.

    September 12, 2019 WebPage Regulatory News
    News

    ECB Modifies New Targeted Longer-Term Refinancing Operations

    The Governing Council of ECB decided to modify some of the key parameters of the third series of targeted longer-term refinancing operations (TLTRO III) to preserve favorable bank lending conditions (Decision (EU) 2019/1558).

    September 12, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3820