March 2017

The road to hell is paved with good intentions!

Fostering open and competitive markets has become the ultimate goal of public policy efforts, particularly at European level. The banking sector is undaunted by competition and the underlying intention is good: to give consumers more choice and create value by encouraging new players to enter the field, spur diversification in products and services, and, of course, lower prices. However, we wonder if this is truly the right approach?

The French banking sector is already fiercely competitive, particularly among the retail banks used daily by individuals and small and medium-sized companies. The extensive range of products and prices, together with the very low cost of credit in the segment, are all evidence of this. However, the issue we are now facing goes beyond that of competition, raising questions as to what customer relationship model we want for retail banks in France.

Clearly, the retail banks need to reinvent themselves to overcome the unprecedented circumstances disrupting their business model. Indeed, the banks in general, and retail banks in particular, have had their profitability eroded by a sustained period of low interest rates (despite the slight upturn in long rates recently), combined with the digital shock, ever-mounting regulations with major knock-on effects on its model for financing the economy, and hefty tax rates (average tax rate of 51% over the last four years). French banks have had their profitability sliced in half since 2007, from nearly 15% at the time to 6.7% in 2015 (source: ACPR).

In France, everyday banking activities are founded on maintaining close relationships with customers. The French retail banking sector consists of some 37,567 branches, thereby covering the entire country. Adopting the Anglo-American approach stands to undermine the very foundations of this model, by compartmentalizing the relationship between banks and their clients. Indeed, the former can hardly be said to have proved compelling, as evidenced by the practice of granting subprime loans, which French banks refused to develop.

Let me give you two examples. French law recently gave mortgage holders the right to change their credit insurer at any time. In reality, only young and healthy borrowers, with sufficient financial guarantees, will be able to benefit from this new-found freedom. Meanwhile, all other borrowers face rising insurance costs as a result of the announced demutualization process. It seems fair to wonder whether the implications of this ultra-individualistic development have been properly gauged.

Another example concerns the second European Payment Services Directive (PSD2). This allows new non-banking players to enter the payment services market. In addition to the threats these new arrivals could pose in terms of payment systems security, their business model raises question marks over the use of customers' personal data. Securing client data and funds is a fundamental aspect of banking and the sector has invested huge sums in patiently building relationships with their customers founded on trust. We wonder if the latter are truly aware of what awaits them...

Marie-Anne Barbat-Layani
Chief Executive Officer of the French Banking Federation

Tweeter : @FBFFranceTweeter : Linkedin

Our Positions

LOANS: Record-breaking year for French banks in 2016
Last year, French banks had some €2,169bn in outstanding loans on their books, meeting both household and company funding needs while chalking up extremely robust growth on the previous year (+4.4%). The French banks are leading the way in this area in the eurozone, with total outstanding loans amounting to over 20% of aggregate eurozone bank lending and corporate lending growth (+4.9%) at more than double the rate for the eurozone as a whole (+2%).
Lending is proving to be a reliable growth driver, with banks funding the equivalent of 150 homes and two regional train lines per hour!

Press release

Practically one in two French citizens had loans in 2016
Results of the Household Debt Observatory (Observatoire des Crédit aux Ménages - OCM) survey show that the percentage of French households holding debt stabilised at 46.4%, while that for mortgage loans increased, from 30.2% to 30.7%, in 2016. Over 1.2m households took out new mortgages last year, implying growth of 4%. 2016 was therefore an outstanding year, with vibrant momentum in the supply and demand of bank services. The OCM emphasised that household sentiment with regard to improvements in their finances has picked up, with 62.5% saying they believed their financial situation had improved or stabilised in 2016 (up from 58.7% in 2015). This optimism is reflected in consumer intentions to take out new mortgage loans in 2017, which again increased and is now close to pre-2008/2009 crisis levels.

You’re never too young to talk money!
The FBF will be renewing its "J'invite un banquier dans ma classe" (Inviting a banker into my classroom) initiative at the European Money Week, which will run from March 27-31, 2017. Last year, local bankers participated in more than 150 financial education workshops to help teachers raise awareness of money-related issues among 3,300 children aged 8-11, using a board game.

More information

In their own words

“The last thing we need at this point in time is a softening in regulations. The idea of recreating the conditions that were in place prior to the crisis is very worrying”.

FBF in the media

Radio Classique: "The banking sector is already exceptionally competitive"


Marie-Anne Barbat-Layani was a guest on the Radio Classique morning talk show, hosted by Nicolas Pierron, on Monday, 6th February, 2017. This was the same day that the government launched its new mobile banking initiative, of which she discussed the main principles and the obligations of both banks and issuers. Asked about the expected effects of this new law, she emphasised the high level of satisfaction and loyalty expressed by French bank customers. “78% of French people have a positive image of their bank, with some even holding accounts with several banks at once, to take advantage of the best offers to suit their needs. As a result, the sector is already extremely competitive and French customers are not shy about playing rival banks off against each other, particularly when it comes to mortgages, or about switching banks.

EUROPE 1 - LE ZOOM ECO, Axel de Tarlé


“We should celebrate the robust health of French banks, as this means: 1) They do not need to be bailed out using taxpayers’ money; 2) Healthy banks means French companies are well-funded; and 3) With Brexit looming, it provides an excellent business case with which to attract international banks based in London, by saying: Come to France, the banks are actually doing quite well over here!.”



Marie-Anne Barbat-Layani to award the Turgot 2017 prize for best financial economics book


National Chamber of Financial Advisers and Experts (Chambre nationale des conseils experts financiers) conference on Women in Finance, featuring Marie-Anne Barbat-Layani


ECB press conference on monetary policy

9 / 10

European Council

15 / 16

French employers’ federation (MEDEF): Digital University / IIF G20 Conference "The G20 Agenda under the German Presidency", Frankfurt

17 / 18

Meeting of G20 finance ministers and central bank governors in Baden-Baden

20 /21

Eurogroup and Ecofin

27 / 31

European Money Week - FBF initiative "J'invite un banquier dans ma classe" (Inviting a banker into my classroom)

6 / 7

G20 meeting of Digital Ministers in Dusseldorf, Germany

Tweet of the month

Figure of the month

Banks are at the heart of #innovation. #FinTech are not a threat but an additional opportunity to #innovate #PFF17

€ 911 billion: Highest level of #business #loans granted in 2016