same kinds of difficulty. thirdly, some financial intermediaries may need to increase capital so as to absorb potential losses or to refinance investment vehicles which until now were off - balance - sheet items, and which, with basel ii as from next year, should appear on the balance sheet. what impact will these developments have on banking consolidation? on the one hand, banks could focus on themselves over the next few months and aim to review their internal organisation, improve their balance sheets and restructure. there could then be a pause in the consolidation process. furthermore, the more restrictive financing conditions could discourage mergers and acquisitions, which are often financed over the short term by bank loans. on the other hand, one way of reinforcing the solidity of the assets side of the balance sheet could be to proceed with either mergers or acquisitions. recently, we have witnessed a strengthening of the capital of some large banks with the emergence of new shareholders, in particular foreign shareholders. the emergence of large sovereign funds in countries where the financial system needs to be strengthened is an interesting development for the international financial system, even if it raises a number of questions in terms of transparency, objectives and stability. see francis, hasan and wang ( 2007 ) and black and strahan ( 2002 ). overall, the process of concentration may continue over the next few months and affect some of the major financial institutions. recent developments have also shown that the process of concentration is not necessarily all in one direction, i. e. consolidation. in particular, we have seen the break - up of one large european institution, which had perhaps grown disproportionately large. the need to strengthen the asset base of some banks could lead to the downsizing or elimination of some business lines, thereby creating opportunities for other institutions. what are the effects of these trends on credit to non - financial firms, in particular on small and medium - sized companies? on the one hand, the need for the restructuring and strengthening of assets, beyond the drying - up of securitisation, could lead to a slowdown in lending by the banks, particularly those more affected by the recent turbulence. on the other hand, maintaining the profitability of the banks could lead to a reinforcement of the relationship with their own clients, particularly the high - quality ones in terms of balance - sheet profitability and transparency. from this point of view, credit to small and medium - sized companies, which is less standardised, could suffer.

annual financial lunch of the french chamber of great britain london, 23 november 2017 speech by francois villeroy de galhau, governor of the banque de france “ europe, france and the united kingdom : facing our common economic challenges ” press contact : clemence choutet ( + 33 1 42 97 74 51 ; clemence. choutet @ banque - france. fr ). page 1 sur 5 ladies and gentlemen, it is a pleasure to be in london today and i wish to thank you for inviting me to speak at your annual financial lunch. the destiny of france and the united kingdom has indeed been linked for a very long time ; the existence of the french chamber of commerce in great britain, which was established 143 years ago, is a good illustration of these firm and lasting ties. in this regard, i would like to express our full solidarity for the series of terrorist attacks that hit london recently. king georges vi declared in 1940, and his words still apply to this day, that : “ it is not the walls that make the city, but the people who live within them. the walls of london may be battered, but the spirit of the londoner stands resolute and undismayed. ” i believe that the spirit of resilience that is so characteristic of londoners is what we need the most in times of crisis. we are and will always remain close friends and partners, even if we will no longer – unfortunately – be in the same european club when brexit is completed. today, i will first elaborate on two challenges that will continue uniting us : the need for good national economic policies, pro - business and long - term oriented ; and the need for active multilateralism to face our global challenges. then, i will dwell on a challenge that we will have to address together : our future relationship and brexit. * * i. the need for pro - business and long - term national economic policies let me start with the challenge of national economic policies. in the euro area, the economic recovery is now robust and broadly - based across countries and sectors. gdp growth should stand at at least 2. 2 % in 2017 according to our ecb forecast. the ecb ’ s accommodative monetary policy has contributed to this acceleration of growth in the euro area. yet monetary policy cannot be the only game in town. structural reforms in each country, along with stronger european coordination, are of the essence to boost