François Villeroy de Galhau: New Year wishes to the Paris financial
centre
New Year wishes to the Paris financial centre by Mr François Villeroy de Galhau, Governor of the
Bank of France, Paris, 18 January 2018.
* * *
I would like to thank all of you for coming, like each year, to our Golden Gallery. I am pleased to
welcome you, together with Denis Beau, Deputy Governor since July and first Deputy Governor
since yesterday. I also commend Anne Le Lorier, who unfortunately left us on 5 January but who
has contributed so much to the Banque de France over the past six years: this evening is an
occasion to thank her. And I am delighted to announce the appointment of Sylvie Goulard, who
will be taking over from her. As of next Monday, she will bring to the Banque de France all
her competence and independence.
I would like to start by extending to you our warmest wishes for 2018, for you and your loved
ones, as well as for all of your staff, hoping that 2018 will be an excellent year; an excellent year,
not only for each of you, but also for Europe and our country. But before presenting my collective
wishes for this new year, I would like to return to 2017 and three positive elements that marked it.
1. 2017, a turnaround year
At this same time last year, I made the paradoxical wish that the euro area, despite all its
electoral uncertainties would be "an area of relative stability". 2017 was supposed to be a year full
of dangers in Europe; and yet, our continent, and France above all, has proven to be a beacon of
hope and strong growth, whereas the United States has abdicated from its leadership role. Two
figures illustrate this: that of GDP which greatly exceeded forecasts in 2017 - it is
growth,
expected to reach 1.9% in France according to our latest forecasts, with notably 280,000 net job
creations, and 2.4% in the euro area, which is the highest rate since 2010; the other key factor
is reflected notably by the confidence in the euro, 74% of euro area citizens - the
confidence,
highest figure since the outset -, 71% of French citizens, and as many as 81% of German
citizens claim that they are attached to our single currency.
The second positive element in 2017: the acceleration of reforms in France. This acceleration
of reforms has changed the image of France in the eyes of Europe and the world, which is
extremely positive.
Lastly, in 2017 Bankers - largely represented this evening - had
Basel III was finalised.
expressed, alongside others, serious concerns. The agreement of 7 December 2017 is the best
possible agreement for our country and for Europe, thanks to the particularly active commitment
of French negotiators. We maintain, against all temptation of nilateralism or deregulation, our
commitment to the multilateral rules of the game in place since 2009. And we are stabilising
these rules once and for all: there will not be a Basel IV.
In sum, 2017 positively marked a turning point for both the United States and France. The
beginning of 2018 has thus been characterised by a welcome optimism, but one which must not
act as a disincentive: confidence yes, complacency no. We must not lie back and enjoy the
return of blue skies; we must take steps to ensure that this improvement is transformed into
stronger and sustainable growth. To this end, I wish to make four collective wishes for the
coming year.
2. Four wishes for 2018
My first wish concerns Europe. This does not so much concern our monetary policy, which has
entered a gradual normalisation phase, and which is a success; I will not discuss it further this
evening during the "silent period". 2018 must above all be the year of Economic Union, which still
largely remains to be built. We must now or never take advantage of the recovery to tackle the
shortcomings of the euro area. Because France and Germany's electoral calendars are aligned
for the first time in 15 years, and since last Friday, there is a prospect of a pro-European coalition
in Germany. And because now is the time to strengthen our economic instruments in order to
deal with a future European recession, the day it comes. Otherwise monetary policy may be
overburdened.
My second wish concerns our country. The French economy is in much better shape, but there
are still major drags on growth. At around 1.9%, we are above our potential growth rate, which
means that we are coming up against more structural limiters. There are at least two indications
of this: a persistent negative growth differential vis-à-vis the euro area of around half a
percentage point, and a current account deficit and hence a lack of competitiveness. In order to
increase the speed of the French economy, we need to boost the power of the engine: reforms,
including those underway, are therefore necessary. And, beyond bureaucratic barriers or
corporate interests, the greatest priority is to reform vocational training and apprenticeships:
we cannot remain in a situation where we have almost 3 million unemployed, of whom 600,000
are young people, and companies cannot recruit the skills they need. I hear this everywhere from
the entrepreneurs who participate in the advisory boards of the Banque de France, from
Besançon to Châteauroux last week. According to INSEE, hiring difficulties have been the main
obstacle to corporate activity.
My third wish is for Often, the Governor of the Banque de France encourages banks
financing.
to lend more; this is not the case at present! Bank lending in France is very buoyant. Bank
lending to households and firms is growing at almost 6% per year. This is good news, but we
must avoid excesses. There are thus several efforts to be made in 2018 to ensure the smooth
financing of our economy:
first and foremost. At last December's
Remain vigilant to ensure financial stability,
meeting of the Haut Conseil de Stabilité Financière (HCSF - High Council for Financial
Stability), we decided to take a macroprudential measure to limit the sharp rise in the debt of
certain large companies, including bond debt. It will apply as of 1 July after approval by the
European authorities. If credit cycle risks persist - i.e. growth that is significantly higher than
that justified by economic fundamentals - we stand ready to act further at any time in 2018,
including if necessary by implementing a countercyclical capital buffer.
Promoting the attractiveness of the Paris financial centre in the context of Brexit,
second: irrespective of the possible transition, the City will most likely lose its EU
passporting rights. The Paris financial centre must continue to develop, notably in the area of
the clearing of financial instruments, and promote its numerous qualities, enhanced by the
arrival of the EBA, in order to become the main euro area centre for market activities. This is
our collective challenge, over and above announcements of welcoming registered head
offices.
Lastly, better channelling our savings. Overall, the French economy has no lack of
financing, thanks also to the soundness of its financial institutions. Our challenge concerns
more the nature of this financing: developing equity financing more than debt financing. Flat
tax is a welcome step towards a greater tax neutrality between the different forms of
investment. I have already stated this, insurers must create new tailored products, in the
area of life insurance, which are less liquid but allow savers to benefit from the higher
returns offered by equities in the long term, with a form of capital protection. The PACTE law
on growing and transforming companies, presented by the Minister of the Economy, could
provide an opportunity. Banks are also considering offering a new long-term
savings product: I understand this point of view, provided that the aim isn't to create a new
tax loophole; we have had enough of this great French speciality.
My last wish concerns the Banque de France, and it is a commitment to our transformation,
which we want to be exemplary for the public service. In 2018, we will be over half way with our
which aims to improve our services to the French and
strategic "Ambitions for 2020" plan,
European economies, while achieving significant savings: as of this year, our net spending will
be almost EUR 100 million lower, in current euro, than it was in 2015: this is what we are "giving
back" to the national community. In 2018, let us also be exemplary in our
commitment to the
social and territorial cohesion of the country, in order notably to help our most underprivileged
citizens. In this respect, I wish to make a concrete commitment to the
fight against
overindebtedness, with, since 1 January 2018, a simplified procedure, which will reduce
processing times by several months for many of the 180.000 families that we help each year. I
also wish to commit to promoting financial inclusion: we have recently adopted, together with
banks and associations, the recommendations to extend the diffusion of specific banking
services to vulnerable customers, because there is still insufficient awareness of this right, with
only 10% benefiting from it. Lastly, as regards the economic and financial education of the
public, in order to build on the achievements of 2017 with our 450,000 pages consulted on our
website "mesquestionsdargent.fr", and almost 15,000 social service providers and 3,000
teachers have been given information by Banque de France staff, we will do more still in 2018.
I have two last wishes to make, anniversary wishes this time: for our Golden Gallery, whose
300th anniversary we are celebrating, a venerable age, and for the European Central bank, which
will celebrate its 20th anniversary on 1 June 2018. Two more joyous occasions for us to meet
again this year. Happy New Year to you, to your businesses, and to our country.