In 2018, the High Council for Financial Stability took a decision based on the ‘large exposures’ of systemically important banks (decision no. D-HCSF-2018-2 of 11 May 2018). This decision limited their exposure to the most heavily indebted large French non-financial companies. Its aim was thus to preserve the resilience of banks to the risk of default by these companies and to raise awareness of the need to properly assess the risks arising from excessive dynamics in the indebtedness of these companies. The decision expired on 30 June 2023 and was replaced by a sectoral systemic risk buffer (sSyRB, decision no. D-HCSF-2023-3 of 28 July 2023), which came into force on 1 August 2023.
The measure in force
The measure introduces a category 1 capital buffer, the amount of which is calculated by multiplying by 3% the amount of risk exposure arising from exposures to entities attached to a non-financial group and located in France. This buffer applies to systemically important French credit institutions if the total amount of final exposure to the group of related customers represents, after risk mitigation, more than 5% of category 1 capital and if the non-financial group concerned is highly leveraged.
Highly leveraged non-financial companies are those whose ratio, assessed at the highest level of consolidation, between total financial debt, including undrawn credit lines, and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation, defined as income before interest, tax, depreciation and amortisation) is greater than 6 or negative. The notice accompanying the decision provides detailed information on the measure.
The adoption of this decision falls within the powers of the HCSF under Article 133 of Directive (EU) No 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU (CRD V). In accordance with the provisions of the article, this measure was subject to a pre-publication notification procedure initiated by the High Council following its June 2023 meeting with the European Central Bank and the European Systemic Risk Board (ESRB).
In view of the low materiality threshold of the exposures of banks established in another European country, the High Council did not ask the ESRB to issue a reciprocal recommendation to the other countries of the European Economic Area.
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Decision no. D-HCSF-2023-3 on the sectoral systemic risk buffer (PDF)