France will end the additional capital requirement imposed over the past two years on French systemic banks' exposure to the country's highly indebted large corporations, the High Council for Financial Stability (HCSF) announced on Monday.
The HCSF had decided that, starting in August 2023, a "sectoral systemic risk buffer" would require major French banks--BNP Paribas, Société Générale, Crédit Agricole, and BPCE--to hold extra capital if their exposure to a non-financial group exceeded 5% of CET1 funds, or if the group's total debt-to-Ebitda ratio was strictly above 6 or negative.
The additional CET1 capital buffer was set at 3% of the risk exposure amount located in France.
This measure, introduced in 2023--a year marked by major debt restructurings in France such as Casino--was initially established for two years and could have been extended.
"The High Council notes that the specific risks which led to the introduction of this measure have significantly diminished, resulting in non-material prudential requirements under this buffer today. The HCSF therefore intends to lift the measure, in a spirit of simplifying the macroprudential framework, without jeopardizing financial stability," the authority explained in a statement.
The HCSF, chaired by Economy and Finance Minister Eric Lombard and including the Governor of the Banque de France, also stated it would keep the countercyclical capital buffer for banks at 1%, as it sees no evidence of credit supply restrictions.
(Written by Mathieu Rosemain, French version by Bertrand De Meyer, edited by Blandine Hénault)
