3-minute guide to financial stability

What is financial stability?

Ensuring financial stability means maintaining a robust financial system where payments, banks and insurers function efficiently in all circumstances, including in periods of crisis. To this end, the financial system is subject to regulation and oversight by public authorities, which has been reinforced since the 2008 crisis. 

Monitoring financial stability is one of the founding tasks of a central bank, and hence of the Banque de France. Since 2013 and the introduction of the Law on the Separation and Regulation of Banking Activities, the Bank has been assisted in this task by the Haut Conseil de Stabilité Financière (HCSF – High Council for Financial Stability).

Financial stability: a global imperative involving a number of international institutions

Because financial stability is now a global issue, several institutions, in addition to the International Monetary Fund (IMF), are working together to safeguard it:

• The Bank for International Settlements (BIS) brings together the governors of 63 national central banks in Basel to analyse the global economic and financial situation and issue prudential guidelines.
• The Financial Stability Board (FSB) at the G20 level identifies vulnerabilities in the global financial system and issues principles to address them.
• The European Systemic Risk Board (ESRB) is tasked with oversight of the European Union's financial system and preventing and mitigating systemic risks.
• In France, the HCSF is the macroprudential authority tasked with supervising the financial system as a whole. It issues recommendations and has binding powers for preventing systemic risk.
• The Banque de France participates in various European and international institutions relating to financial stability and is Co-secretary of the HCSF.
• The Autorité de Contrôle Prudentiel et de Résolution (ACPR – Prudential Supervision and Resolution Authority), which is attached to the Banque de France, supervises banks and insurance companies and protects customers.

The Banque de France’s financial stability mandate

Ensuring the smooth operation and security of payments and financial market infrastructures

The Banque de France is also responsible for overseeing French payment systems and financial market infrastructures. This oversight involves:

• ensuring the security of cashless means of payment and the relevance of the standards applicable in this area
• ensuring the smooth operation and security of payment systems
• ensuring the security of financial instrument clearing and settlement systems

Guaranteeing a sound financial sector

The ACPR, which is an administrative authority attached to the Banque de France, is tasked with prudential oversight of banks and insurers and protecting customer interests.

The Banque de France and the ACPR provide support for the structural changes taking place in the financial system, especially the digitalisation of finance and the global challenge of climate change.

Anticipating and mitigating risks

The Banque de France is responsible for analysing the workings of the financial sector in order to assess vulnerabilities and identify factors likely to trigger destabilising events. It has teams of experts and economists tasked with performing analyses and studies on the various aspects of how financial markets work and the emergence or crystallisation of risks likely to affect them.

It also participates in numerous international groups and helps draft international financial standards as part of the work of the Financial Stability Board at G20 level, and of dedicated committees such as the Basel Committee on Banking Regulation and the Committee on Payments and Market Infrastructures (CPMI).