The Ministry of the Economy and the Bank of France, brought together within the High Financial Stability Council (HCSF), reported on Thursday a “good resilience of different financial and non-financial actors” to recent developments in monetary policy. “The return to target inflation and the gradual reduction in key rates contribute positively to the stability of the French financial system”underlines the institution in a press release published the day after its last meeting.
Noting that the “French credit institutions and insurance and reinsurance organizations present a robust liquidity and solvency situation”the HCSF has decided to maintain the “credit protection reserve rate (countercyclical capital buffer) at 1%”. This system is an additional reserve of capital to be set aside preventively by banks in the event of a downturn in the financial situation. It comes in addition to the capital already required by international banking regulations.
“A recovery trend”
The HCSF, responsible for monitoring the financial system as a whole, “will continue to pay attention to adjustments in the commercial real estate market”also specifies the press release. The High Council also noted that the production of housing credit in France was part of “in a recovery trend”. The institution has control over the rules governing the granting of real estate loans. These safeguards, such as limiting the debt ratio or the maximum loan duration, aim to protect borrowers by limiting their risks of default.
Banks have room to deviate from this, which they do not use to the full, underlined the HCSF. The real estate loan market, which flourished when rates were low, fell to a low point at the start of the year and has since recovered with difficulty. This is the first physical meeting of the HCSF in over a year. The last three meetings, due quarterly, were only the subject of a “written procedure”.
Created in 2013 on the ashes of the 2008-2011 financial crisis, the HCSF brings together the Governor of the Bank of France and the Minister of the Economy. It was the target at the start of the year of a bill to reform it, supported by Bercy and ultimately abandoned.
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