Several types of systemic risks and vulnerabilities may justify action by the HCSF: contagion effects between financial institutions, amplification of the effects of a shock due to the joint exposure of several players in the financial system, or financial imbalances (such as the existence of bubbles or excessive credit growth) that may abruptly unwind.
The mobilization of the HCSF's powers potentially concerns all players in the financial sector, from banks, insurance companies and investment funds to shadow banking, market infrastructures and payment systems.
Macroprudential instruments
To fulfill its mandate and prevent systemic risks, the HCSF has three types of instruments at its disposal
- instruments of influence (communication, publication of opinions, etc.), which can be used to signal a risk, coordinate behavior, etc. ;
- intermediate instruments (publication of recommendations) which call for a response or formal action by third parties ;
- binding instruments corresponding to the mobilization of legally binding powers.
Among the binding provisions, the HCSF may, on the proposal of the Governor of the Banque de France :
Impose bank capital buffers. These may include :
- buffers for sectoral or global systemic risk. The purpose of this is to improve the resilience of the banking system in the event of a crisis, enabling financial institutions to meet their commitments. It is applied with or without distinction of exposure sectors if a risk is detected.
- counter-cyclical buffer. The purpose of this buffer is to limit the procyclicality of bank capital and thus improve banks' resilience: it is increased in a positive situation of the financial cycle, to be released in the event of a crisis and thus support credit production.
Mobilize the powers provided for in Article 458 of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of June 26, 2013: if changes in the intensity of macroprudential or systemic risk are identified, more stringent national measures may be decided on pillar 1, large exposures, publication, the conservation buffer, liquidity and the supervisor's specific powers with regard to real estate risk.
Set credit-granting conditions to prevent excessive asset price rises or excessive indebtedness on the part of economic agents.
Take precautionary measures with regard to companies in the insurance sector, or modulate their rules for setting up and reversing profit-sharing provisions.
Decide to recognize measures taken by other national authorities, in order to have them applied by establishments under its own authority (so-called reciprocity powers).
Mobilizing powers
The HCSF bases its decisions on the principle of “guided discretion”, i.e., it relies on a set of indicators, analyses and in-depth studies of the French financial situation, but decisions will ultimately rest with the HCSF's discretionary judgment.
To this end, the HCSF :
- identifies and monitors systemic risks and vulnerabilities, as well as mechanisms for transmitting and amplifying shocks ;
- analyzes the range of courses of action proportionate to the risks and vulnerabilities identified ;
- implements macroprudential actions decided by the HCSF (warnings, recommendations, macroprudential instruments) in order to prevent risks and/or correct identified imbalances ;
- monitors and, where necessary, sanctions, via member institutions, compliance with its opinions, recommendations or measures by the financial system players concerned ;
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assesses the effect of its action on financial stability and, if necessary, adopts adjusted or complementary measures.
Download
Macroprudential strategy of the High Council for Financial Stability (pdf - 305 Ko ) - December 2014
Further information
- Financial stability, on the European Central Bank (ECB) website
- Monetary and Financial Code - HCSF, legislative articles
- Monetary and Financial Code - HCSF, regulatory articles