April 2017

Time for some straight talk on tax

Contrary to popular misconception, French banks pay a lot of tax... This excessive taxation is not only a severe handicap in competing at international level, it also coincides with ever-increasing bank capital requirements, as imposed by prudential regulators to fund the economy, and the need for mounting investment in the transition to digital.

The French banks' mandatory contributions (social security payments, tax and regulatory levies) increased by a net 13bn over the period 2010-2017, notably as a result of sector-specific taxes, i.e. payroll tax, systemic risk tax, contributions levied by regulatory authorities and, now, contributions to finance the EU's Single Resolution Fund.

Like all companies, the French banks contribute directly to the national budget in the form of tax (15bn in 2015). Note, in passing, that France is the only European country in which the banks did not require a single bail-out by the government as a result of the financial crisis: in fact, they earned the country 2.3bn during the period (according to the French Court of Auditors).

Over the last four years, the average tax rate levied on the French banking sector has reached 51%, taking all corporate and other taxes combined (excluding social security payments).

As for corporate tax, a report published in December 2016 by the French Council of Mandatory Contributions (Conseil des Prélèvements Obligatoires - CPO), entitled "Adapting corporate tax to an open economy", revealed that the implicit average tax rate for large corporations came to 31% in 2014. This turns out to be the same rate as applied to small and mid-sized enterprises. The CPO also points out that the financial sector provides one quarter of gross corporate tax returns, which means it contributes nearly five times its weight in national value-added to corporate tax revenues.

Meanwhile, one specific mandatory levy has hit the French banking sector extremely hard and that is the payroll tax, of which there is no equivalent in Europe or the main OECD countries. The levy, which raised 2.1bn for the government in 2015, takes a direct toll on employment in the French banking sector. It constitutes a major hurdle in attracting value-added jobs to France, at a time when BREXIT offers opportunities. (note that an additional tax layer was introduced in 2012 that has been damaging for jobs).It also amounts to a "tax on production", a category of tax which is regularly condemned specialists, and which the European Commission recently decided to scrap as part of its National Reform Programme for France.

Reducing the tax burden is therefore crucial to ensuring the French banking industry's competitiveness. The banks need to be able to continue playing a role in funding the economy and also to remain competitive, so that all stakeholders in the French economy - households, companies, and the government - have access to top-flight banking services.
Marie-Anne Barbat-Layani
Chief Executive Officer of the French Banking Federation

Tweeter : @FBFFranceTweeter : Linkedin

Our Positions

Payment security: constant vigilance required!
Implementing the new European Payment Services Directive (DSP2) poses an unprecedented challenge to payment security systems that have already been faced with cybercrime. The directive gives non-banking sector players the right to open payment accounts, but only on the indisputable condition that these be subject to the same security requirements as bank accounts. The competent authority in this matter, the European Banking Authority, has just finalised the security standards underpinning this directive. However, and while the banks are willing to comply with the latter, new entrants have been doing everything in their power to convince the European institutions (Parliament, Council and Commission) not to adopt these standards and to soften the rules. This does not bode well in terms of their genuine commitment to securing funds and customer data! Bearing in mind that the payment chain is only as secure, or as solid, as its weakest link, it is only natural to be concerned about the consequences of this directive and hope that the European institutions keep up their guard.

"Signposts in banking economics: The new challenges for financing the economy"
Written to address the widest possible audience, this educational book provides the keys to understanding the challenges involved in financing the economy in 2017 and explains how financial regulation has become a political and competition-related issue.
In the book, economists from the French banks and the FBF explain the far-reaching changes currently sweeping the banking industry, at a time of unprecedented regulatory, technological and economic shocks; the limits of European Central Bank monetary policy; the mounting recourse to financial markets in corporate finance; the challenge of generating a profit in the banking sector and the need to understand the challenge facing Europe's banks in remaining competitive relative to the US giants.

"Inviting a banker into my classroom" initiative is a big hit
The FBF renewed its successful "J'invite un banquier dans ma classe" (Inviting a banker into my classroom) initiative at this year's European Money week, which ran from March 27-31. The programme, which was rolled out across France, addressed nearly 250 classes and over 5,000 primary school pupils aged 8-11, with the aim of raising awareness about budget management issues and how the different means of payment are used. Nearly 10,000 pupils have taken part in the initiative since its launch in 2015. This financial education drive is the only one in France to benefit from impact measurement. The new French agency for active solidarity (ANSA) conducted an assessment on a panel of 7-10 classes this year. The ensuing report will be published in the autumn.

In their own words

ECB president Mario Draghi – at a press conference in Frankfurt, Germany on march 9
"The euro has been the cornerstone, the pillar upon which the single market has survived and prospered and has increased prosperity for Member States

FBF in the media

L’Opinion magazine: “the French banks account for more than 40% of funding for the European economy”


Marie-Anne Barbat-Layani gives a detailed outline of the French banking sector and discusses the key issues facing banks today: profitability, Europe’s push back against the Basel Committee’s proposals in an effort to defend its own model for financing the economy, and the shift to digital, which has been gaining momentum in the banking sector and requires staff training and hefty investments, notably to ensure personal data security. Finally, she discusses Brexit, not as a challenge for the banks but rather for Paris as a financial centre, and for the French government and local authorities, which have much to gain in terms of jobs, growth and tax revenue.

Full interview

Préventique magazine: "Banking is a strategic industry in France"


In a column for bimonthly magazine Préventique, Marie-Anne Barbat-Layani discusses the need for a robust banking industry to safeguard French economic independence. This is because, in her view, there can be “no economic power without solid banks”. She emphasises the priorities to be addressed by the powers that be on behalf of the profession, namely, that the French government defend the French banking industry and that European interests be given a stronger voice vis-à-vis the Basel Committee, to ensure that the abundance of savings in France is steered towards companies and the French economy.

Read the interview

BFM BUSINESS – economics talk show "Les décodeurs de l’Eco"


Marie-Anne Barbat-Layani was among the guests on the show invited to discuss the topic: “BNPP’s acquisition of Nickel: are the fintechs being absorbed by the “establishment” ?”. She pointed out that the banks themselves are major players in digital and are undaunted by competition. They are the natural leaders of the digital finance sector. She also discussed the need for banks and fintechs to work together and raised the issue of the latter’s business model, which often relies on the sale of data, this being a source of concern for the banking sector, which is constantly striving to keep customer data safe. Finally, she emphasised the importance of regulation in the financial services sector, as this ensures customers are protected and must therefore be applied to new market entrants, including on the issue of security. However, the latter have at times argued in favour of less stringent regulations, as witnessed during the implementation of the EU’s new payment services directive, which is hardly reassuring.

Read the interview


21- 23

Meeting of World Bank, IMF and G20 Finance Ministers - Washington

23 & 7 May

French presidential elections


Science-Po/Bank of France research seminar on "The banks and the financial system: what regulation?” on the economics of blockchain – Paris


ECB: Press conference on monetary policy - Frankfurt


European summit on Brexit - Brussels

11 - 13

Meeting of G7 Finance Ministers - Bari, Italy

Tweet of the month

Figure of the month

#APropos Confidence grounded in #innovation and #security: #Banks are digital businesses and innovation is in their DNA

One quarter of payments under €20 are contactless transactions