(b) Balance sheet consolidation and a reduction in NPLs Continuing high levels of non-performing loans in some euro area countries pose a number of problems, since they constrain banks’ profitability and generate provisioning needs that weigh on the level of own funds, and even a viability risk for the most fragile banks. But since the introduction of the SSM, large European banks have overall significantly reduced their outstanding NPLs. This outstanding amount reached EUR 587 billion in March 2019, compared with over EUR 1,000 billion at the end of 2014. French banks, for their part, have always outperformed their European peers: their NPL ratio has always been below the European average, now standing at 2.8% (against 3.1% for the EU). Furthermore, French banks consistently displayed an NPL coverage ratio of more than 50% over the December 2009-June 2019 period, well above the 45% average for European banks. (c) Results of the recent stress tests Prudential stress tests are simulation exercises designed to assess the impact of a given economic and financial scenario on an institution’s prudential situation, in order to test its financial soundness. During the crisis, they were first used as a crisis management tool to identify the most vulnerable banks for which recapitalisation measures were needed. Their role then evolved into an essential and flexible tool for the supervision, oversight and management of risks and vulnerabilities of banks considered individually (microprudential supervision) as well as for financial stability purposes (macroprudential supervision).

The FinTechs and BigTechs (especially the big US and Asian companies that are driving the digitalisation of the economy) offer new opportunities (new cyber security solutions, reduction in the cost of internal management for client entities, increase in financial inclusion, etc. ), but are equally a source of additional vulnerabilities, notably in terms of cyber risk, the weakening of financial ecosystems and the development of questionable practices in the use of data. The Banque de France is working actively on these issues within international and European fora, to promote the sharing of experiences and harmonisation of rules and practices, and encourage efforts to make financial sector agents more resilient. We also need to continue assessing the reforms already put in place, to check that they deliver the expected effects and to identify any unintended consequences. The FSB’s assessment shows that although certain measures have largely been implemented requirements for systemically important institutions, clearing – other aspects still have to be finalised, notably with regard to the monitoring of non-banking financial institutions. Only when these reforms are fully implemented will the financial system be effectively protected. T h e European integration projects are also essential for increasing the EU’s macroeconomic resilience. First we need to finalise Banking Union on an institutional level. One positive contribution would be to work towards a European deposit guarantee scheme. This could be based, at least initially, on covering liquidity requirements, with no permanent transfers between Member States.