Financial markets

Post n°189

What are the factors behind current high stock market valuations?

Published on 11/26/2020

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By Nicolas Chatelais and Arthur Stalla-Bourdillon

Despite the corrections at the end of 2018 and the Covid-19 shock, price-earnings ratios remain at high levels, particularly in the United States. However, based on indices adjusted for expected growth and the level of interest rates, this trend does not appear to be the result of irrational exuberance like in previous speculative episodes.

Chart 1: Cyclically adjusted P/Es and interest rates in the United States
Chart 1: Cyclically adjusted P/Es and interest rates in the United States Sources: S&P 500, Datastream, Fed Saint Louis & Philadelphia. Author’s calculations. Most recent value: October 2020
Updated on 11/26/2020 14:49
Post n°175

Credit mediation for businesses during the Covid crisis

Published on 07/31/2020

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By Raymond de Pastor

The health crisis has left a significant number of businesses in urgent need of cash. In response, public authorities have put in place various support mechanisms, including a scheme to provide State-Guaranteed Loans (SGLs). The credit mediation system is currently helping businesses that have received an initial refusal from a bank in response to their SGL request.

Number of requests for credit mediation from businesses (monthly average)
Chart 1: Number of requests for credit mediation from businesses (monthly average) Source: Banque de France, Credit Mediation Scheme for Businesses
Updated on 07/31/2020 08:54
Post n°167

Banks’ climate commitment and lending to brown industries

Published on 06/25/2020

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By Jean-Stéphane Mésonnier

We assess the link between banks' commitments to take climate issues seriously, measured by a climate performance rating based on their declarations, and the changes in their lending in France to greenhouse gas emitting industries between 2010 and 2017. A higher score appears to be associated with lower growth in lending to large enterprises in the five most carbon-intensive industries. However, lending to SMEs is not affected.

Chart 1: Banks’ pro-climate commitments and share of loans to firms in the most carbon-intensive industries in France.
Chart 1: Banks’ pro-climate commitments and share of loans to firms in the most carbon-intensive industries in France. Source: Banque de France, authors’ calculations.
Updated on 06/25/2020 14:32
Post n°163

International cooperation in times of Covid 19: less disappointing than it appears

Published on 05/27/2020

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By Bruno Cabrillac

A pandemic is the type of challenges that can only be overcome by global action. Despite a pre-crisis context fraught with geopolitical and trade tensions, this necessary international coordination has been achieved in the economic field. However, the post-crisis phase will exacerbate conflicts of interest and constitute a "stress test" for multilateralism.

Chart 1. Measures taken by governments in response to the Covid 19 crisis (as a % of G20+ countries)
Chart 1. Measures taken by governments in response to the Covid 19 crisis (as a % of G20+ countries) Source: IMF, April 2020.
Updated on 05/27/2020 16:17
Post n°155

What if large firms were to go bust?

Published on 03/12/2020

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By Sarah Mouabbi

What would the economic cost of a systemic firm going bust be? This post addresses this question by assessing the recessionary effect of a systemic default. Within two years, such an event is expected to be followed by a 3% decrease in aggregate consumption and by three more systemic defaults.

Source: Gourieroux, Monfort, Mouabbi and Renne (2019)
Figure 1: Euro area probability of consumption dropping by more than 10% or 20% (horizon= 12 months) Source: Gourieroux, Monfort, Mouabbi and Renne (2019)
Updated on 03/12/2020 16:49
Post n°152

Responsible investment labels in France: taking stock

Published on 02/13/2020

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By Emilie Candus and Jean-Luc Le Goff

2019 saw very significant growth in labelled funds. With subscription rates higher than the industry average and broadly comparable levels of performance, the label is proving to be a factor of attractiveness for investors. However, the success of the labels is uneven and their penetration in the landscape of French collective investment management remains limited. Further educational and promotional efforts are still needed to step up the distribution of these products among savers.

Chart 1. Labelled funds accounted for only 7% of the French collective investment management market in 2019
Chart 1. Labelled funds accounted for only 7% of the French collective investment management market in 2019 Sources: Association française de la gestion financière (AFG – the French Asset Management Association), Banque de France and the French Ministries for the Economy and for Ecological Transition. Note: Estimate of the responsible investment collective man
Updated on 02/13/2020 14:55
Post n°140

The China rebalancing of benchmark indices: what implications?

Published on 10/29/2019

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By Florian Lalanne and Irena Peresa

Responding to China’s greater capital account openness, major investment indices have started incorporating renminbi-denominated securities. This is expected to support portfolio inflows into China and increase the correlation between domestic asset prices and external factors. The consequences for other emerging markets are uncertain.

Composition of the MSCI Emerging markets index (%).
Chart 1: Composition of the MSCI Emerging markets index (%). Source: MSCI. Note: The index is composed of equity securities. China A-shares are renminbi-denominated equities traded in Shanghai and Shenzhen, while China offshore shares are mainly traded in Hong Kong.
Updated on 02/14/2020 11:53
Post n°117

Senior customers’ vulnerability and financial institutions’ business practices

Published on 06/04/2019

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By Jade Al Yahya (Banque de France)

Since 2018, the ACPR and the AMF have studied how financial institutions adjust their business practices to demographic ageing. Senior consumers are particularly likely to experience vulnerability. Yet, according to preliminary results, a commercial offer based solely on an age criterion, the most commonly used today, is far from satisfactory.

Chart 1. Population projection for the European Union by age category.
Chart 1. Population projection for the European Union by age category. Source: Eurostat.
Updated on 02/17/2020 11:54
Post n°116

What are the financial risks to euro area growth?

Published on 05/27/2019

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By Naomi Cohen, Laurent Ferrara, Matteo Mogliani and Jean-Guillaume Sahuc

Monetary policy decisions require a prior assessment of different economic scenarios, including the most extreme ones. Assessed on the basis of the Banque de France's Financial Conditions Index, financial risks that are likely to weigh on the distribution of future euro-area GDP growth appear limited.

Expected distribution of euro area quarterly GDP growth between 2001 and 2018
Chart 1: Expected distribution of euro area quarterly GDP growth between 2001 and 2018 Sources: Eurostat, Banque de France, authors' calculations.
Updated on 02/17/2020 11:37
Post n°108

Company ratings: useful information for banking relationships

Published on 03/14/2019

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By Christophe Cahn, Mattia Girotti, Federica Salvadè

The banking sector assesses the credit risks associated with borrowers. What are the consequences to be expected from the production of information by a third party? Exploiting a change in the rating methodology of the Banque de France, this post shows how the disclosure of more detailed information on companies can increase the supply of credit for their benefit.

Chart: Companies with a fine-tuned rating obtain more credit
Chart: Companies with a fine-tuned rating obtain more credit
Updated on 02/14/2020 10:15

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