Activities relating to risk assessment, resilience and the digital transformation of the financial sector

Assessing financial stability

The Banque de France and Autorité de Contrôle Prudentiel et de Résolution (ACPR – Prudential Supervision and Resolution Authority) closely monitor vulnerabilities in the French financial system. They publish their findings twice a year in a report entitled Assessment of risks to the French financial system, which is piloted and coordinated by the Banque de France’s Financial Stability Directorate.

These analyses are used to inform debates at the national, European and international gatherings in which the Banque de France participates. They are also covered regularly in Banque de France publications such as research papers, bulletins and blog posts.

Strengthening financial sector resilience

The Paris financial centre resilience system fosters coordination and information-sharing to prevent major operational crises from causing lasting disruption to the financial system.

Role of the Paris Resilience Group

In 2005, as part of its financial stability mandate, the Banque de France set up the Paris Resilience Group, which is chaired by its Directorate General Financial Stability and Operations. The Group brings together the main Paris financial centre participants, with the aim of increasing the financial system’s ability to withstand external shocks.

Its day-to-day activities and secretariat functions are managed by a team in the Banque de France’s Financial Market Infrastructures Directorate. It meets informally at least twice a year to set priorities for and improve the financial centre’s crisis management system. The Paris Resilience Group is structured into two working groups, responsible for the crisis management system and for organising sector-wide simulation exercises to develop operational response capabilities.

Tasks of the Paris Resilience Group

The Group’s operational tasks can be broken down into three phases:

• the anticipation phase and preparation of the crisis response (notably via the simulation exercises)
• the crisis management phase, comprising an assessment of the situation and collective decision-making
• ongoing improvement of the system and awareness-raising initiatives

Steering and coordinating the crisis response

In the event of a crisis, the response will depend both on the source of the disruption (natural disaster, pandemic, major industrial action, failure of a critical service provider, cyberattack, etc.) and its operational impact on critical financial functions (human resources, premises, information system, etc.).

Members of the Paris Resilience Group meet within a dedicated structure, the Coordination Unit, to assess the situation, share information and take collective decisions. The unit is overseen by the Banque de France and supported by three financial centre crisis units – one for each of the main issues to be handled during a crisis: liquidity, cash and communication. These crisis units are comprised of professionals from both the private sector and the Banque de France.

Contributing to the digital transformation of the financial sector

The digital transformation of the financial sector is characterised by three main trends:

• new expectations from customers already accustomed to the digital universe: a need for user-friendly, multichannel digital tools that simplify access; a need for instant and more flexible services; a need for personalised services and greater autonomy
• the entry of new competitors (especially fintechs and big tech) which is forcing legacy players to adapt
• new technologies, especially those linked to artificial intelligence and big data, which are opening up new possibilities for sector participants

In response to these developments, the Banque de France is participating in the Eurosystem project to develop a digital euro, which will offer consumers an electronic means of payment to complement physical cash (banknotes and coins). The Banque de France is also conducting experiments on wholesale central bank digital currency (CBDC), which will provide a public sector payment solution for use in tokenised finance.

Find out more

• Proposal for a regulation of the European Parliament and of the Council on the establishment of the digital euro (June 2023)
• ECB digital euro portal
• Progress on the investigation phase of a digital euro – first report (September 2022)
• Progress on the investigation phase of a digital euro – second report (December 2022)
• Progress on the investigation phase of a digital euro – third report (April 2023)
• Progress on the investigation phase of a digital euro – fourth report (July 2023)
• Digital euro experimentation scope and key learnings (July 2021)
• Report on a Digital Euro (December 2020)
• Market Research Outcome Report (May 2023)
• Digital euro – Prototype summary and lessons learned (May 2023)

Publications on wholesale CBDC 

In March 2020, the Banque de France launched an experimentation programme on wholesale CBDC

In November 2021, it published a first report on ways of integrating a CBDC into innovative procedures for the exchange and settlement of financial assets, based on new technologies such as distributed ledger technology (DLT), and in a multi-currency and cross-border setting. The report covers nine experiments, selected from close to 40 proposals, which were conducted as of September 2020 in liaison with domestic and international private sector players, as well as other central banks and public authorities.

The Banque de France and Monetary Authority of Singapore successfully conducted a cross-border payment and settlement experiment using CBDC

Supported by J.P. Morgan’s Onyx, the experiment simulated cross-border payments on a multi-CBDC (mCBDC) network shared by France and Singapore. It was the first mCBDC experiment to incorporate automated liquidity management and market-making services.

The Banque de France, Bank for International Settlements (BIS), and Swiss National Bank (SNB) successfully concluded an experiment on the use of CBDC in cross-border payments

The experiment, entitled Project Jura, concluded that wholesale CBDC can be used effectively for international settlements between financial institutions. The project explored the settlement of foreign exchange transactions in euro and Swiss francs using wholesale CBDC, and the issuance, transfer and redemption of a tokenised, euro-denominated French commercial paper between French and Swiss financial institutions.

The Banque de France shares the key takeaways from its experiments with wholesale CBDC using distributed ledger technology (DLT)

Following on from its first report in 2021, the Banque de France published a new set of findings from the first and second phases of its wCBDC experimentation programme launched in March 2020. A total of 12 experiments have been conducted so far. The findings contribute to the Eurosystem’s exploratory work, announced in April 2023, which looks into how wholesale transactions recorded on (DLT) platforms could be settled in central bank money.

Thanks to its experiments, the Banque de France has demonstrated the operational feasibility and practical implementation of three models for issuing wCBDC directly on DLT:

• the interoperability model
• the distribution model
• the integration model

All three address key aspects of wCBDC implementation and each offers different capabilities and functionalities compared to conventional systems, so they can be complementary rather than exclusive.