Constraints On French Banking Sector

• Low growth rate, low interest rate environment and regulatory constraints are putting pressure on the french banking sector's margins, estimated at around 6.5% in 2016.
• France is one of the most challenging countries for processing payroll taxes due to rigid regulations. Employment in the banking sector is directly affected by the payroll taxes which are extremely heavy in case of France.
• International Monetary Fund has warned about the rising debt levels due to low interest rates, creating financial vulnerabilities that can upset the stability in the french banking system.

Relaxation Of French Banking Monopoly

• In October 2017, a new ordinance was passed to modernize the regime of assets management and financing debt. The banking monopoly in France prohibited non-bank entities from carrying out any banking activity and this ordinance changes that system to include alternative forms of financing.
•  French Insurance Code was amended to permit insurance companies to provide loans to SMEs.

Tough Bank Capital Requirements

• French banking regulators are applying capital buffer which will oblige french banks as well as foreign banks operating in France to hold capital amounting to 0.25% of risk-weighted French assets.
• This creates additional capital while economy is going strong and was implemented as a resistance for any international financial crisis.