Opinion of the European Central Bank of 21 October 2016 on a modification of the remuneration formula in respect of the French livret A (CON/2016/51)
Date: 2016-10-21
Institutions: European Central Bank
Subjects: France, financial stability, interest, monetary policy, national law, savings, savings bank

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 21 October 2016  

on a modification of the remuneration formula in respect of the French livret A 

(CON/2016/51) 

Introduction and legal basis 

On  4  October  2016  the  European  Central  Bank  (ECB)  received  a  request  from  the  French  Ministry  of 
Economy and Finance for an opinion on a draft regulatory provision (hereinafter the ‘draft amendment’) 

amending the remuneration formula in respect of the livret A, which is a type of French savings account. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  third  and  sixth  indents  of  Article 2(1)  of  Council  Decision 
98/415/EC1,  as  the  draft  amendment  relates  to  (a)  the  basic  task  of  the  European  System  of  Central 

Banks  (ESCB)  of  implementing  the  monetary  policy  of  the  Union  pursuant  to  the  first  indent  of  Article 

127(2) of the Treaty, (b) the Banque de France and (c) the rules applicable to financial institutions insofar 

as they materially influence the stability of financial institutions and markets. In accordance with the first 

sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 

has adopted this opinion. 

1.  

Purpose of the draft amendment 

1.1  The  purpose  of  the  draft  amendment  is  to  modify  the  calculation  formula  for  setting  the  annual 

nominal remuneration rate of the livret A. 

1.2  The livret A is a short-term, i.e. fully liquid, tax-free savings instrument. The total level of savings 

under the livret A and livret de développement durable (sustainable growth savings account), which 

is fairly similar to the livret A, currently amounts to approximately 350 billion euro. Credit institutions 

collect savings under the livret A, but approximately 60% of the collected savings are centralised by 

a  special  fund  of  the  Caisse  des  dépôts  et  consignations  (CDC,  Deposits  and  Consignments 

Fund).  The  bulk  of  the  funds  centralised  by  the  CDC  is  used  to  finance  social  housing,  with  the 

remainder used to finance small and medium-sized enterprises. 

1.3  Currently  the  remuneration  rate  of  the  livret  A  is  calculated  by  the  Banque  de  France,  in 

accordance  with  its  standard  revision  procedure,  twice  a  year  on  15  January  and  15  July.  The 

Banque de France may depart from this standard revision procedure in the event of steep rises or 

falls in the inflation rate or in money market rates by initiating, on 15 April or 15 October, a revision 

of  the  anticipated  remuneration  rates  applicable  as  of  1  May  or  1  November.  Furthermore,  in 

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Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
                                                 
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situations where the calculation made would lead to a rate that would not allow for the preservation 

of  household  purchasing  power,  and  in  certain  other  exceptional  circumstances,  the  Governor  of 

the Banque de France has the right to propose to the minister responsible for economic matters not 

to  apply  the  new  rate.  In  such  cases,  the  rates  are  maintained  at  their  previous  level  and  the 

Comité  de  réglementation  bancaire  et  financière  (Banking  and  Financial  Regulatory  Board)  will 

consider  whether  it  is  appropriate  to  amend  them.  The  draft  amendment  does  not  modify  these 

provisions.   

1.4  According  to  the  current  calculation  formula  the  remuneration  rate  of  the  livret  A  corresponds  to 

whichever  is  the  higher  of:  (a)  (i)  the  monthly  average  three-month  Euribor  rate  and  the  monthly 

average euro overnight index average (EONIA) rate combined and then divided by two, plus (ii) the 

French inflation rate as measured by the percentage change over the latest available 12 months of 

l’Indice INSEE des prix à la consommation de l’ensemble des ménages (INSEE, National Institute 

of Statistics and Economic Studies consumer price index), with the sum of (i) and (ii) then divided 

by  two;  or  (b)  the  French  inflation  rate  as  measured  by  the  percentage  change  over  the  latest 

available 12 months of the same price index plus 0.25%. 

1.5  Under  the  new  proposed  calculation  formula  the  remuneration  rate  of  the  livret  A  would  be  the 

higher  of:  (a)  the  French  inflation  rate  measured  as  the  six-month  average  of  the  percentage 

change in the INSEE consumer price index over the latest available 12 months and the six-month 

average  EONIA  rate  combined  and  then  divided  by  two;  or  (b)  the  inflation  mentioned  under 

(a) increased by 0.25% except in situations where the difference between the money market rate 

and the inflation rate mentioned under (a) is more than 0.25%.  

1.6  The  main  differences  between  these  two  calculation  methods  are  as  follows:  (a)  the  additional 

0.25% remuneration  over  the  relevant inflation  rate  would  not be applied in  circumstances  where 

the difference between the money market rate and the inflation rate was more than 0.25%; (b) the 

money  market  and  inflation  rates  would  be  based  on  six-month  averages  instead  of  monthly 

figures;  and  (c)  the  calculation  of  the  money  market  rate  would  no  longer  be  based  on  Euribor 

rates. 

1.7  The  change  in  the  calculation  formula  used  in  respect  of  the  livret  A  would  also  affect  the 

remuneration rate  of other types of French savings accounts that are based on the remuneration 

rate of the livret A, including comptes spéciaux sur livret du crédit mutuel (special savings account 

of  Crédit  Mutuel),  livret  de  développement  durable  (sustainable  growth  savings  account),  livret 

d’épargne  populaire  (popular  savings  account),  livrets  d’épargne  entreprise  (corporate  savings 

account) and compte d’épargne logement (housing savings account).  

2. 

General observations 

2.1  The ECB observes that in setting the remuneration rate of the livret A, the French Government has 

to  strike  a  balance  between  preserving  household  purchasing  power  and  providing  affordable 

funding  for  investments  mainly  in  social  housing.  Over  the  past  few  years,  money  market  rates 

have decreased significantly and even turned negative. On the other hand, the remuneration rate 

of the livret A has remained positive and well above money market interest rates. It currently stands 

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at  0.75%.  The  reason  for  the  divergence  between  the  money  market  rates  and  the  remuneration 

rate of the livret A lies in part in the current calculation formula which offers a 0.25% step-up on the 

12-month average French inflation rate, as evidenced by the corresponding INSEE consumer price 

index. This growing divergence raises serious issues as regards the efficiency of monetary policy 

transmission. Furthermore, the implied liquidity costs for banks collecting savings under the livret A, 

may raise financial stability concerns by potentially impeding banks’ intermediation capacity.  

2.2  The  ECB  is  generally  not  in  favour  of  the  regulation  of  savings  remuneration,  as  this  derogates 

from  the  principle  of  an  open  market  economy  with  free  competition,  presents  challenges  for  the 

efficient transmission of monetary policy and, to a certain extent, for financial stability.  

2.3  Against this background, the ECB understands that the aim of the draft amendment is to limit any 

potential excessive divergence between money market interest rates and the fixed remuneration of 

the livret A and thereby to: (a) allow monetary policy to be transmitted more effectively; (b) reduce 

the  costs  associated  with  the  collection  of  such  regulated  savings  for  credit  institutions  and  the 

savings fund operated by the CDC; and (c) render the new formula more stable by smoothing the 

references used for short-term interest rates and inflation, and thus mitigate the problems related to 

the  volatility  of  the  current  formula  and  the  need  for  the  Governor  of  the  Banque  de  France  to 

request derogations.  

2.4  The  ECB  considers  that  the  abovementioned  objectives  pursued  by  the  French  authorities  are 

legitimate.  The  ECB  has  no  specific  comments  as  regards  the  best  formula  to  be  used  for  the 

calculation of the remuneration rate of the livret A. However, the ECB regrets that the principle of 

regulated savings remuneration is maintained in the draft amendment. 

2.5  Finally, the  draft amendment  does  not introduce any changes to a task that has been  historically 

exercised  by  the  Banque  de  France  and  its  Governor  on  behalf  of  the  French  Government. 

However, exercising this government task has the potential to place the Banque de France and its 

Governor in a position in which there is a conflict of interest between the exercise of this task and 

the exercise of the Banque de France’s central banking tasks. This may in turn potentially have an 

impact  on  the  Banque  de  France’s  independence  in  pursuing  the  Eurosystem’s  objective  of 

maintaining price stability. 

This opinion will be published on the ECB’s website following its adoption, and in any case no later than 

six months following its adoption.  

Done at Frankfurt am Main, 21 October 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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