Financial stability

Post n°249

System-wide stress tests: a deep dive into the financial system

Published on 01/07/2022

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By Gábor Fukker, Thibaud Piquard, Aurore Schilte and Matthias Sydow

The growth of non-bank financial intermediation calls for a more holistic risk assessment encompassing the entire financial system and the interactions between financial intermediaries. The incorporation of investment funds into a stress test for banks further increases the impact of a shock in terms of depletion of bank capital by 1%.

Chart 1: Representation of securities holdings networks for euro area banks and funds.
Chart 1: Representation of securities holdings networks for euro area banks and funds. Source: Sydow et al. (2021). Note: Each dot is an entity of all possible sectors. Each line shows that a bank (blue dot) or a fund (purple dot) holds a security issued by another entity.
Updated on 01/07/2022 15:06
Post n°246

A measure of the evolution of cyber risk

Published on 12/17/2021

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By Stéphane Lhuissier and Fabien Tripier

After the 2008 financial crisis, then the 2020 health crisis, will the next global economic crisis be a cyber crisis? Cyber risk is a real threat to the economy and public authorities are mobilised to deal with it. This post presents an indicator used to monitor this risk on a daily basis, based on exchanges on the social network Twitter.

Chart 1 – Evolution of cyber risk over the last decade
Chart 1 – Evolution of cyber risk over the last decade Source: Twitter and authors’ calculations.
Updated on 12/17/2021 18:08
Post n°245

Crypto-assets and financial stability: are there any contagion risks?

Published on 12/10/2021

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By Jean Barthélemy, Paul Gardin and Benoît Nguyen

The strong growth of stablecoins - the category of crypto-assets whose market value is supposed to remain stable by being pegged to a reference currency such as the dollar - is increasingly attracting the attention of regulators because of potential risks to financial stability. This post illustrates one of the mechanisms by which crypto-assets could impact financial stability: the growing use of stablecoins could prove destabilising to the short-term debt market in the United States.

Chart 1: Capitalisation of the main stablecoins
Chart 1: Capitalisation of the main stablecoins Source: Coinmarketcap.com, Messari, Bloomberg
Updated on 12/10/2021 15:51
Post n°235

Is there a bubble in “green” equities?

Published on 10/26/2021

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By Tristan Jourde and Arthur Stalla-Bourdillon

Given the recent outperformance of those sectors best-positioned to accompany the ecological transition, some commentators have voiced fears that a bubble might be emerging in “green” equities. A systematic analysis based on the environmental scores (the “E “in ESG) of over 2,500 stocks in the Datastream Global Equity Index suggests that these fears may be overdone.

Chart 1: Trajectory of prices for clean, neutral and polluting sectors
Chart 1: Trajectory of prices for clean, neutral and polluting sectors Source: Datastream. Scope: World. BdF calculations.
Updated on 10/26/2021 16:48
Post n°225

Health crisis: (very) heterogeneous cash flow shocks

Published on 07/30/2021

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By Benjamin Bureau, Anne Duquerroy, Julien Giorgi, Mathias Lé, Suzanne Scott and Frédéric Vinas

Without support measures, the cash flow shocks (on a constant funding basis) experienced by French companies in 2020 would have been generally negative but above all very heterogeneous, including within a single sector of activity. The support measures brought the share of negative (and positive) shocks back to the level of a normal year and reduced their dispersion, although major shocks at both distribution tails were less rare than usual.

Chart 1. Share of companies with a positive or negative cash flow shock in 2020
Chart 1. Share of companies with a positive or negative cash flow shock in 2020 Source: Bureau et al. (2021a).
Updated on 07/30/2021 17:44
Post n°224

Health crisis: what impact on SME debt?

Published on 07/23/2021

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By Franck Lemaire, Loriane Py, Jean-Pierre Villetelle and Frédéric Vinas

An analysis of a sample of nearly 180,000 SMEs exposed to the health crisis shows that the vast majority of companies that took on debt in 2020 kept some of this money in cash. In the context of the gradual phasing out of government support, we also assess the extent to which businesses will be able to meet their debt obligations depending on their level of activity.

Chart 1: SME cash flow statements for 2019 and 2020 (per EUR 100 turnover)
Chart 1: SME cash flow statements for 2019 and 2020 (per EUR 100 turnover) Source: Banque de France, FIBEN database 2019 and 2020, sample of SMEs exposed to the health crisis in 2020. Note: OWCR, Operating working capital requirement + NOWCR, non-operating working capital requirement.
Updated on 07/23/2021 18:19
Post n°221

How has risk appetite fared since the start of the COVID-19 pandemic?

Published on 06/25/2021

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By Hadrien Camatte, Théophile Legrand and Quoc-Trieu Le

Assessing investor risk appetite is essential for financial stability and market analysis. This post looks at a risk appetite indicator developed by Banque de France staff and gives insights into its contribution to understanding market impact since the start of the COVID-19 pandemic.

Chart 1: Risk appetite indicator since early 2020
Chart 1: Risk appetite indicator since early 2020 Sources: Bloomberg, authors’ calculations.
Updated on 06/25/2021 17:01
Post n°218

Euro area portfolio flows in 2020: the impact of the Covid-19 crisis

Published on 06/02/2021

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By Julia Schmidt and Olivier Sirello

Since the onset of the pandemic in 2020, euro area residents have sharply adjusted their international portfolio investments. Significant sales of foreign assets in March 2020 were followed by large purchases of foreign securities. At the same time, non-residents have purchased euro area debt securities, especially short-term debt.

Chart 1: The euro area has purchased US securities on a massive scale since the second quarter of 2020
Chart 1: The euro area has purchased US securities on a massive scale since the second quarter of 2020 Source: European Central Bank.
Updated on 06/02/2021 17:47
Post n°201

An identifier to characterize groups’ global expansion strategies

Published on 01/27/2021

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By Dominique Durant, Kevin Parra Ramirez, Geneviève Toubol

The descriptive data associated with large enterprise identifiers (LEIs) provide up-to-date information on groups’ ownership structure, as well as on the legal form and location of their operations, including those in off-shore financial centres (OFCs). Extending the obligation to have an LEI would thus help to make global financial transactions more transparent.

Chart 1: Distribution of locations of foreign subsidiaries, by parent company nationality
Chart 1: Distribution of locations of foreign subsidiaries, by parent company nationality
Updated on 01/27/2021 16:57
Post n°196

Bank stress-tests at the time of Covid-19- Episode 2

Published on 12/24/2020

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By Valère Fourel, Julien Idier, Valerio Scalone and Aurore Schilte

Unlike the fictitious scenarios used in standard prudential stress test exercises (see post "Bank stress tests: tools for prudential analysis – Episode 1"), the Covid-19 crisis represents an unprecedented adverse scenario. This is an opportunity to draw the first lessons from it: (i) on the resilience of the banking system, as observed for the time being, and (ii) on the improvement of stress-test tools in the light of this experience.

Chart 1: Loss of GDP in the stress tests and during recent crises (pp)
Chart 1: Loss of GDP in the stress tests and during recent crises (pp)
Updated on 12/24/2020 15:06

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