francois villeroy de galhau : new year wishes 2023 new year wishes to the paris financial centre by mr francois villeroy de galhau, governor of the bank of france and chairman of the autorite de controle prudentiel et de resolution ( acpr ), paris, 5 january 2023. * * * allow me to extend my warmest wishes for 2023 on behalf of the banque de france and the acpr. i don't know if i dare wish you, or wish us, a year free of shocks after those of 2020, 2021 and 2022. this past year has been marked by a climate of uncertainty, exacerbated by russia's war in ukraine and the energy crisis. it has also seen increased financial market volatility, compounded by the turmoil in the cryptoasset universe. in this unstable environment, i would like to make two double wishes for 2023 : 1 ) less inflation and more stabilisation. activity has, until now, proved more resilient than expected, which is good news ; however, inflation must not become entrenched. it is the number one concern for french people, and defeating it is our number one mission. it fell in december to 6. 7 %, which is encouraging but still not enough. it should peak in the first half, before declining towards 4 % by the end of this year. but our forecast, and our commitment, is that inflation should be brought down towards 2 % by end - 2024 to end - 2025. to achieve this, after raising interest rates to close to the " neutral interest rate " of 2 % in december, we are now embarking on the second phase towards monetary stabilisation : ideally, it would be good to reach the right " terminal rate " by next summer, but it is still too early to say what that level will be. we need to remain pragmatic and to be guided by observed data, including on core inflation, without getting fixated on overly mechanical rate hikes. we will then be prepared to remain at this terminal rate for as long as necessary : the sprint to raise interest rates in 2022 is now becoming more of a long - distance race, and the duration will count at least as much as the level. in parallel, we shall continue to focus on maintaining financial stability, helped by the strong resilience of french banks and insurers. in europe, 2023

##m. this can help normalise interbank markets and overcome financial fragmentation. that said, high standard banking supervision is not centred on preventing bank failures at any cost. in fact, to effectively perform its tasks, a supervisor must also be able to let failing banks exit the market. this is the reason why the ssm has also been given the competencies to withdraw from credit institutions, the authorisation to operate. however, given the role of banks in the financial system and in order to safeguard financial stability, the supervisor has to feel confident that the resolution of banks is conducted in an orderly fashion. this brings me to the second pillar of the banking union. the establishment of the srm is the second crucial step towards addressing financial fragmentation and breaking the sovereign - bank nexus. the main point here is that the orderly resolution of banks, even big ones, may contribute to avoid costly rescues by sovereigns that may endanger their own finances. the srm puts in place a single authority responsible for the resolution of banks in the euro area and participating member states. this will enable swift and unbiased resolution decisions, which will address notably cross - border resolution cases in an effective manner. in this respect, the srm should be viewed as a necessary – and logical – complement to the ssm. it would indeed be ill - advised to elevate the responsibility for supervision to the european level, while keeping resolution at the national level. this would create a mismatch of responsibilities, undermine the credibility of the ssm as supervisor, and delay the resolution of banks, a task that has to be done swiftly. an important element of the srm is the single resolution fund, which will be financed via levies on the banking sector and gradually mutualised. starting with national compartments, it will become one truly single european fund in the course of eight years. by mutualising the bis central bankers ’ speeches cost of bank resolution, this approach will loosen the link between domestic banks and their sovereigns and further level the playing field. a shortcoming of the srm is the absence of a clear common financing arrangement that would provide additional temporary resources when needed. however, the ssm and srm are not enough to completely sever the ties between sovereigns and their domestic banks. the ssm and harmonised supervision may not be enough to build sufficient trust among banks and, on the other hand, the srm may face legal limitations to autonomously manage orderly resolutions of significant banks, using its