FBF management report 2012 : Financing growth

The FBF management report sums up the 2012 banking year and mention updated main figures for the French banking sector.

Our country is currently facing the challenge of achieving sustainable growth and reducing unemployment.

To achieve this, the main priorities must be to shore up public finances and restore the competitiveness of Frenc businesses. Banks also have an essential role to play. In 2012 French banks showed their determination to finance the plans of their individual and business customers in a tough economic environment. Outstanding loans rose by a futher 1.7%, despite depressed economic growth.

If they are to continue to play this crucial role, banks must have the means to do so.

Yet they currently facing a multitude of far-reaching regulations – in particular the Basel III bank capital requirements – which will considerably alter the French economy’s current financing model and weigh on banks’ lending capacity. French banks have made sizeable efforts and are on track to comply with the new prudential standards, while the United States has indefinitely delayed the implementation of Basel III for fear of the impact the new rules will have on lending and growth.

The forthcoming european liquidity bank ratio will also affect lending.

Even though the Basel Committee has eased its requirements, French banks are in an atypical position since a significant portion of the savings deposits they collect does not stay on their balance sheets. in the current situation, raising the ceiling on the Livret A savings account is counterproductive because it reduces banks’ lending capacity, while the funds held centrally by CDC are sufficient to finance social housing projects.

Proposed legislation to ring-fence and regulate risky banking activities comes as an additional constraint, applicable only to French banks, in what is already a challenging environment. This legislation was not even urgent as French banks overall weathered the crisis well, and the Liikanen report acknowledges that there is no link between a bank’s failure and its organisational model. French banks will be the first to have to separate retail banking from investment activities, since the UK and US plans are far from being applied and it will take years for a European project to come into being.

In any case, banks need to have effective capital market activities so they can accompany businesses and the government on the markets. This is essential for our country, even more so since Basel III will force businesses to turn to the markets for financing more often. In this respect, regulations on how the markets operate need to be tightened.

If French banks are able to support their customers in a difficult environment, it is also thanks to the commitment of their 380,000 employees. Franc boasts a dense banking network and local banks – which continued to hire during the crisis – provide services tailored to all their customers, including the most vulnerable individuals, across the whole of France. The quality of these services and banks’ proximity to their customers must be preserved. France needs competitive banks that are strong in all their activites and able to lend to their customers. This is a matter of public interest.