Financial stability

Post n°188
Published on 11/20/2020

By Olivier Sirello

The coronavirus crisis and decline in economic activity have led to a steep rise in the need for financing. As a result, net issuance of public and private debt securities in the euro area has increased to unprecedented levels. The main buyers are central banks and banking institutions, and, to a lesser extent, non-euro area residents.

Chart 1: Public and private debt issuance has reached record levels in the euro area (Seasonally adjusted data, EUR billions)
Chart 1: Public and private debt issuance has reached record levels in the euro area (Seasonally adjusted data, EUR billions) Source: European Central Bank (author’ s calculations).
Post n°175
Published on 07/31/2020

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
Post n°173
Published on 07/24/2020

By Olivier de Bandt, Sandrine Lecarpentier and Cyril Pouvelle

Bank solvency and liquidity risks mutually interact. Using a model that simultaneously estimates the solvency and liquidity ratios of French banks, it is possible to incorporate them jointly into a stress scenario. It shows that the financial environment has a significant impact, but only in times of crisis, and that solvency has an impact on liquidity, not vice versa.

Chart 1: Solvency ratio and liquidity ratio of French banks since 1993
Chart 1: Solvency ratio and liquidity ratio of French banks since 1993 Sources: ACPR, authors’ calculations.
Post n°167
Published on 06/25/2020

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.
Post n°155
Published on 03/12/2020

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)
Post n°152
Published on 02/13/2020

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
Post n°149
Published on 01/22/2020

By Stéphanie Lange-Gaumand (French Embassy in Japan), Baptiste Meunier and Brieuc Monfort (Sophia University, Japan, and FFJ-EHESS)

Japan is a special case in that it is one of the first countries to face an ageing population. It is also unique in terms of the magnitude of this demographic: the proportion of people over 65 years old is the highest in the world and its population is expected to fall by 40% by 2100. Japan seems to have accepted this population decline and has focused on controlling welfare spending, which reflects national preferences.

Chart 1 – Contraction and ageing of the population
Chart 1 – Contraction and ageing of the population Source: UN forecasts (2019)
Post n°147
Published on 01/07/2020

By Cyril Couaillier, Dorian Henricot and Julien Idier

At the end of 2018, “at-risk” firms in France were estimated to have total gross debts of EUR 187 billion. A 100 basis-point rise in their cost of financing could push this amount up by 60%, potentially posing a risk to the financial system. This result supports the measures taken by the High Council for Financial Stability (HCSF) as of 2018 to strengthen the resilience of the banking system.

Chart 1: Debt at risk of French groups
Chart 1: Debt at risk of French groups Source: FIBEN group data and authors’ calculations. Note: ICR = Interest coverage ratio, or the ratio of earnings to interest payments. Net leverage is defined as the ratio of debt net of cash holdings to total equity.
Post n°142
Published on 11/12/2019

By Bruno Cabrillac and Baptiste Meunier

The net international investment positions (NIIP) of the G20 countries have diverged since 1990. While this divergence results partly from persistent imbalances in goods and services, NIIPs have their own dynamics: the portfolio generates income and capital gains or losses. These dynamics have had a stabilising effect at the cost of financial risks for some debtors, i.e. the United States, and an excessive accumulation of safe assets by some creditors.

Chart 1 – Financial effects and real factors
Chart 1 – Financial effects and real factors Sources: Lane and Milesi-Ferretti (2017), authors’ calculations
Post n°133
Published on 09/19/2019

By Irena Peresa and Edouard Vidon

Amid slowing growth and corporate deleveraging, State intervention in certain Chinese banks is again on the table. 20 years ago, asset management companies (AMCs) were set up to bolster the largest lenders, but their purpose has radically changed since. To address current bad loan issues, the priority should be to develop the secondary NPL market.

Figure 1: Four AMCs were originally set up to bolster the largest state-owned banks Source: Authors

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