International banking regulators are setting new standards that will lead banks to significantly reduce their credit activity.
The election campaign that has just opened will necessarily address the role of banks in the crisis and lead to proposals for reforms of banking regulations. Without the least of the world we wish to take sides, we would like to draw the attention of the candidates to a fight which is unfolding before our eyes, in the general indifference, and which, nevertheless, will determine, fundamentally and for many years, the role played by banks in financing the French economy.
International banking regulators are setting new standards that will lead banks to significantly reduce their credit activity. The idea of the Basel Committee, which drives this work, seems sensible: to limit the risks, sometimes exaggerated, that banks took before the crisis. The goal is fair, but the proposed liquidity solution is much less so. If the proposals of the Basel Committee are adopted as they stand, then the French banks will no longer be able to integrate, as they do today, the refinancing of the Central Bank with the liquidity they need for the development of the credits granted to them. businesses and local authorities (removal of credits available in the so-called LCR ratio). They will also have to adapt the duration of the credits they grant to the resources they hold (so-called NSFR ratios).
This new regulation on liquidity presents a double danger. First, it is a negation of the very principle of the bank which is to transform short-term deposits into long-term loans and it will, thereby, push banks to “securitize” their debts say, to turn their loans into market products), which is at the root of the subprime crisis. It will, more generally, put the banks in total dependence on the markets, putting an end to the sovereign power of central banks to provide banks, when necessary, liquidity related to the possible mobilization of their best credits. But that may not be the most serious.
This new regulation will also penalize the European economy in relation to the US economy.
We do not say it often enough: the European economy is 70% financed by the banks and only 30% by the financial markets, while the percentages are reversed in the United States. Any restriction of credit activities, therefore,penalizes both banks and European companies in relation to their US competitors. This reform, seemingly “technical”, is, therefore, fundamentally “political”. It suspends a sword of Damocles on the financing of European companies and therefore on the resumption of growth.
We urge candidates in the presidential election not to let go of the prey for the shadows. Banks undoubtedly have a share of responsibility in the crisis and reforms are essential to further French banks serve the economy. But it is not by breaking up banks or limiting their ability to extend credit that this goal will be achieved. It is the honor of great politicians to prepare the future of their country. The challenge is not that of the future of banks, because they will certainly adapt to any new regulation, but that of financing our economy. By making concrete proposals to prevent the French bank from “Anglo-Saxon”, in the wrong sense of the term, our politicians have a historic opportunity to allow banks to contribute more directly to job creation. Our dearest wish is that they take this opportunity before it is too late.