francois villeroy de galhau : addressing brexit, and unlocking europe ’ s investment potential welcome address by mr francois villeroy de galhau, governor of the bank of france, at the paris europlace international financial forum, paris, 6 july 2016. * * * welcome to paris! it is a pleasure for me to be here today, and to share with you our responses to the new disruptive challenges facing europe. brexit is certainly a new one : the decision has serious consequences, especially for the united kingdom. and obviously, europe is at a crossroads. but let me just stress that this is nothing new. i ’ ve said it before, notably in a joint article with jens weidmann last february. brexit is not a game - changer, but it does highlight the need to give renewed impetus to the european project. it also reminds us what finance is for : achieving the best balance between savings and investment. how this is done is still more important than where it is done ; but there is clearly a link between the two. before i share my views on the way forward for unlocking europe ’ s investment potential, let me add a few more words on brexit. 1 ) addressing the consequences of brexit obviously, brexit is bad news, first and foremost for the united kingdom. the priority right now is to deal with the fallout as smoothly as possible. for economic and monetary authorities, this means reducing uncertainty and fostering confidence, in at least three ways : – first, by managing the financial shock. financial markets experienced sharp corrections, with a significant drop of the pound, but they did not freeze. cooperation between central banks to cope with the brexit vote has been effective. we, on the ecb governing council, remain fully mobilised and determined. – second, by maintaining the proper functioning of the euro area – a collective asset belonging to 340 million people. more than two - thirds of euro area citizens support the single currency, according to the eurobarometer survey. of course, brexit will have an impact on the euro area economy, but this impact will be more modest than in the uk. brexit does not change our economic projections for this year in france : we still expect growth of at least 1. 4 %. but it is important to reduce the uncertainty over britain : the quicker, the better. – third, by preparing the new trade deal between the uk

that the liquidator ’ s primary objective would be to assist the fscs in protecting depositors. i can understand why there has been some nervousness among banks and investors about this regime and particularly about the powers to split failing banks into “ good ” and “ bad ” parts. but equally i think they can see that when a bank is failing it is in everyone ’ s interests to resolve the situation quickly and cleanly. i hope that they will be reassured by the extensive safeguards we are now proposing, including the guarantee that no creditor will be made worse off in such a split than they would have been in a conventional insolvency and protection of netting and set - off. finally, the financial turmoil has also revealed the need for better international crisis management. the experience of lehmans has shown once again the problems that arise in the insolvency of a large international bank with operations in many countries. we also saw in late september and early october the danger emerging, of the banking equivalent of the old beggar thy neighbour policy on currency depreciation, as individual countries began to guarantee their own banks ’ debt. on the other side, recent events have also demonstrated how effective international action can be : the coordinated interest rate cuts on the 8th of october ; the provision of dollar liquidity by central banks and the adoption of national measures to support banks at international meetings during the weekend of 11 / 12 october. international groups such as the financial stability forum ( fsf ) have already started to take action. it has begun to develop a practical checklist of issues and principles that should guide the management of a distressed cross - border institution. having started with mark twain i want to finish with another quote this time from santayana : “ a man ’ s memory may … become the art of continually varying and misrepresenting his past, according to his interests in the present. ” 1 one lesson from recent events is the need for rigour, balance and transparency in policy making and risk assessment. i hope that the bank can play a part in that in future as it has in the past. “ reasons and places ”, george santayana. chart 1 : financial market liquidity chart 2 : household consumption growth : what happened to the boom? liquidity index 1. 0 percentage changes on a year earlier 1973 q3 1980 q1 1990 q3 2008 q3 0. 5 + 0. 0 0. 5 1. 0 1. 5 - 2 2. 0 -