Assessment of vulnerabilities in the French financial system 

As part of its financial stability mandate, the Banque de France is responsible for assessing risks and vulnerabilities in the French financial system. It has created a robust analytical framework to increase its crisis-prevention capabilities, and developed effective tools for managing crises when they occur.

Its role is to evaluate cyclical vulnerabilities in financial and non-financial agents, as well as structural vulnerabilities that are common to all actors, such as exposure to climate change and cyberattacks. 

The Banque de France’s macroprudential role within the HCSF

Macroprudential policy is designed to prevent systemic risk, which is the risk of an impairment of the overall financial system, adversely affecting its capacity to perform its key function of financing the economy.

Unlike microprudential policy, which aims to ensure the stability of individual financial institutions, macroprudential policy is concerned with the financial system as a whole. It analyses interlinkages between actors in the system (banks, insurers, non-bank financial players, etc.) and the channels of contagion.

What macroprudential tools are used to mitigate risk and preserve financial stability ?

The measures used include:

Information on other measures can be found on the HCSF website

The HCSF regularly publishes diagnostic assessments to alert market participants to risks (in the real estate sector, for example). It also publishes an annual report which it submits to the French parliament.

Measurement of climate risk

As part of their financial stability mandate, the Banque de France and the ACPR analyse banks’ and insurers’ exposure to climate risk and their ability to withstand these threats.

Climate change : a source of financial risk

The physical and transition risks linked to climate change have serious implications for finance. The Banque de France and ACPR therefore have a duty to monitor and analyse these threats as part of their financial stability mandate – although primary responsibility for climate policy lies with governments.

Central banks and supervisors can play a role in fostering sustainable finance by encouraging responsible investment. While all of us need to take steps to combat climate change, the financial sector has a decisive role to play in financing the transition to a low-carbon economy.

Climate stress tests

One of the principal challenges for supervisory authorities is to accurately measure how banks and insurers are exposed to climate risk using forward-looking stress tests. The ACPR has conducted a first major stress-testing exercise on the sector – the climate pilot exercise – the results of which were published in May 2021.

The Banque de France and ACPR are now working to make climate stress tests a standard tool in bank and insurance supervision. They are helping to finalise the analytical framework for climate risk, at both the French and European levels and, once this has been completed will look at how stress test results should affect institutions’ capital requirements.

Science and research

The Banque de France uses a multi-disciplinary approach to climate risk assessment, working closely with the academic community to identify the specific risks to finance from climate change. The scope of risks to the financial sector is gradually being expanded to include nature-related risks and risks posed by the loss of biodiversity.