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

    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

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    BoE Publishes Reporting Schedule for Statistical Returns

    In a recent statistical notice, BoE announced publication of the reporting schedule for statistical returns for 2021.

    October 15, 2020 WebPage Regulatory News
    News

    EC Welcomes Declaration by Member States on EU Cloud Federation

    EC welcomed the joint declaration by 25 EU member states on building the next generation of cloud in Europe.

    October 15, 2020 WebPage Regulatory News
    News

    PRA Updates Supervisory Statement on Counterparty Credit Risk

    PRA published the final policy statement PS22/20, which contains the updated supervisory statement SS12/13 on counterparty credit risk.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Update on Work to Address Market Fragmentation

    FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies.

    October 14, 2020 WebPage Regulatory News
    News

    EBA Proposes to Revise Guidelines on Incident Reporting Under PSD2

    EBA proposed revisions to the guidelines on major incident reporting under the second Payment Service Directive (PSD2).

    October 14, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5967