Financial stability

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
Post n°195

Bank stress tests: tools for prudential analysis – Episode 1

Published on 12/22/2020

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

In order to protect banks from macroeconomic and financial shocks, prudential authorities use a range of risk analysis tools, among them stress tests. What are they? What purpose do they serve? This blog post answers these questions and is accompanied by a second post on the “real-life” stress placed on banks by the Covid-19 crisis.

Chart 1: Steps in a bottom-up bank stress-test exercise.
Chart 1: Steps in a bottom-up bank stress-test exercise.
Updated on 12/22/2020 16:24
Post n°193

Fed’s financial stability concerns and monetary policy

Published on 12/15/2020

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By Klodiana Istrefi, Florens Odendahl and Giulia Sestieri

Even though the Fed does not have an explicit financial stability objective extending beyond its supervisory responsibilities, the public speeches of Fed officials reveal that there is a relationship between the higher proportion of speaking time on financial stability topics and more accommodative monetary policy. Financial stability became a topic of concern in Fed speeches especially around the global financial crisis.

Chart 1. Main topics covered in Fed speeches
Chart 1. Main topics covered in Fed speeches Source: Istrefi, Odendahl, Sestieri (2020). The chart shows the proportion of six topics extracted from the Fed speeches for the period 1997 to 2018. The topic proportions displayed are annual averages.
Updated on 12/15/2020 18:46
Post n°188

Who has purchased euro area debt since the start of the health crisis?

Published on 11/20/2020

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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).
Updated on 11/20/2020 15:36
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°173

Bank solvency, liquidity and financial crisis: what relationship?

Published on 07/24/2020

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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.
Updated on 07/24/2020 14:47

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