Missions

The High Council for Financial Stability (HCSF) is the French macroprudential authority responsible for “overseeing the financial system as a whole, with the aim of preserving its stability and ability to make a sustainable contribution to economic growth” (article L.631-2-1 of the French Monetary and Financial Code).

Its mandate

The HCSF's mission is to prevent systemic risk, i.e. a dysfunction in the financial system as a whole (or in a large part of it) leading to a deterioration in its ability to perform its fundamental function of financing the economy. To ensure this stability, the HCSF has adopted five intermediate objectives which guide its action in a more operational way :

• mitigate and prevent excessive credit expansion and leverage;
• limit excessive reliance on short-term financing or too high a degree of risk transformation, and maintain liquidity in financial markets;
• limit the concentration of direct and indirect exposures (whether interconnections between players or exposure of a number of players to a common risk factor);
• limit the systemic impact of inappropriate incentives in order to reduce moral hazard (including by aiming to strengthen the resilience of systemically important institutions, which can be coupled, where relevant, with the introduction of orderly liquidation and resolution mechanisms aimed at reducing the systemicity of these institutions);
• strengthen the resilience of financial infrastructures.

The HCSF is also responsible for facilitating cooperation and the exchange of information between the institutions its members represent. These exchanges are an essential element of the overall effectiveness of the supervisory and regulatory framework, as they help to limit the blind spots in supervision and to take better account of the risks associated with interconnections between different players or sectors and interactions between regulations.

The HCSF meets at least four times a year and draws up an annual report which is submitted to Parliament.

The institutional framework in France and Europe

Since the late 1990s, France has developed an institutional framework to facilitate coordination between supervisory authorities: the Collège des College of Financial Sector Supervisory Authorities (CACES), created in 1999, was intended to “facilitate the exchange of information between supervisory authorities”. With the widespread awareness of the need for more cross-functional financial supervision, this body was replaced in 2010 by the Conseil de la Régulation Financière et du Risque Systémique (Corefris), whose missions have been expanded, notably to “examine analyses of the situation of the financial sector and markets, and assess the systemic risks they entail”.

The French Banking Separation and Regulation Act of July 26, 2013 strengthened macroprudential oversight by transforming Corefris into the High Council for Financial Stability (HCSF) and, in particular, endowing it with binding powers of intervention.

The HCSF operates within the European institutional framework. Its decisions are taken in collaboration with the European Commission, the European Central Bank (ECB), the European Systemic Risk Board (ESRB), the European Banking Authority (EBA) and the macroprudential authorities of other European Union member states.

The institutional framework for systemic risk supervision at European level was set up in line with the recommendations of the high-level group of experts chaired by Jacques de Larosière. The ESRB was created in 2010 to ensure macro-prudential oversight at European Union level, and to coordinate the actions of national and European supervisory authorities where necessary.

At the same time, the establishment of the Single Supervisory Mechanism (SSM), under the aegis of the ECB, has also strengthened the European institutional framework: while national macroprudential authorities retain primary responsibility for intervention, the ECB has the possibility of tightening macroprudential measures taken in states that have joined the SSM.

Composition of the HCSF

The HCSF is made up of eight members: five ex-officio members and three qualified personalities. The ex-officio members include :

• the Minister of the Economy, Finance and Economic Recovery, who chairs the Board ;
• the Governor of the Banque de France, Chairman of the Autorité de contrôle prudentiel et de résolution (ACPR) ;
• The Chairman of the Financial Markets Authority (ACPR) ;
• the Chairman of the French Accounting Standards Authority (ANC).

The three qualified individuals are economists chosen for their work and expertise in the economic, monetary and financial fields. They are appointed for a five-year term by the President of the National Assembly, the President of the Senate and the Minister of the Economy, Finance and Economic Recovery.