Corporate debt remains "
at the forefront
" of the risks weighing on the French financial system, the Banque de France warned on Thursday.
This risk, already pointed out in previous reports, is particularly important in the event of a slow recovery in economic activity, which would complicate the repayment of debts contracted in the spring to cope with the cash flow shock associated with the first confinement.
Read also: Covid-19: corporate debt, a threat for banks
It would be "
likely to significantly deteriorate the financial situation of the most fragile companies,
" said the central bank in its half-yearly report on the risk assessment of the French financial system.
Such a scenario, with "
a significant increase in defaults by non-financial companies would be likely to weigh on the results of banks, via an increase in losses and provisions
", continued the Banque de France.
“Stable” risk of a financial crisis
Regarding households, "
in the event of a marked increase in unemployment, their solvency could deteriorate
", noted the institution, even if "
for the moment, thanks to measures to support employment (...) there is no "There has been no increase in insolvency,
" pointed out Sylvie Goulard, deputy governor of the institution, during a virtual press conference.
In addition, "
we have banks and insurance companies which have very robust levels of solvency
," added Jean Boissinot, adviser to the governors of the Banque de France.
In short, the picture drawn by the institution remains close to that of six months ago, with in addition an improvement concerning the market risk.
Read also: Corporate debt: a record to predict in 2020, according to a study
While the risk of a financial crisis was considered "
rather on the rise
" in June, it is now considered "
stable
", pointed out Jean Boissinot, when Sylvie Goulard reported that "
the shock of the first half has been contained
" .
The collapse observed in March has since been erased and several stock indexes have returned to record levels.
However, "
a marked deterioration in asset prices could materialize in the event of an adverse shock
," the report warns.
Low interest rate
Among other risks to watch out for, the Banque de France has also drawn attention to interest rates which are expected to remain low as well as to climate change and the digitization of the economy, which poses risks of cyber attacks.
For the latter, these are "
not worrying risks for the next three months
" but we must "
especially not lose sight of them,
" said Jean Boissinot.
