France: Financial Sector Assessment Program-Technical Note-Risk Analysis of Banking and Insurance Sector

October 29, 2019

Preview Citation

Format: Chicago

France: Financial Sector Assessment Program-Technical Note-Risk Analysis of Banking and Insurance Sector, (USA: International Monetary Fund, 2019) accessed December 22, 2024

Summary

This technical note presents risk analysis of banking and insurance sector in France. The assessment is based on stress tests, which simulate the health of banks, insurers under severe yet plausible (counterfactual) adverse scenarios. The stress tests reveal that banks and insurers would be resilient against simulated shocks, although some challenges remain. French banks have improved their capitalization and asset quality; however, profitability remains challenged. The report also highlights that profitability is pressured on both the income and expense sides. Banks’ ability to generate higher interest income is constrained by persistently low interest rates, and market businesses including trading activities have contracted in recent years. Growth-at-risk (GaR) analysis shows that the biggest contributing factors to the risk of growth are cost of funding and stock market prices. Financial conditions continue to tighten gradually since mid-2017; though the overall conditions remain accommodative. Risks stemming from loans to households seem to be contained over the short- to medium-term horizon, given relatively strong households’ balance sheets, no evidence of significant misalignment in house prices, social safety nets, and fixed interest rates.

Subject: Asset and liability management, Banking, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Insurance, Insurance companies, Liquidity, Liquidity requirements, Liquidity risk, Stress testing

Keywords: Balance sheet, BNP Paribas, Cash flow, Central bank, CR, Crédit Agricole, Global, Insurance, Insurance companies, Interest rate, ISCR, Liquidity, Liquidity risk, Risk tolerance, Stress testing

Publication Details

Pages:

90
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2019/322
Stock No:

1FRAEA2019005
ISBN:

9781513517773
ISSN:

1934-7685

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