France : Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools

This Technical Note examines macroprudential policy framework and tools as part of Financial Sector Assessment Program (FSAP) in France. Authorities took and maintained several strong actions to mitigate risks to financial stability and further enhance macroprudential oversight since the last FSAP. While the High Council for Financial Stability (HCSF) is well-functioning and effective overall, its framework should be strengthened by adopting stronger rules on HCSF governance, transparency, and public accountability, and by clarifying its semi-hard and -soft powers. Communication of macroprudential policy can be further improved through periodic strategy reviews and adopting best practices in financial stability communications. Borrower-based measures on housing loans should be broadened to prevent leakages and reflect best practices. The availability of releasable capital buffers should be formalized by improving guidance regarding the neutral level of the credit protection reserve. Authorities should continue to closely monitor the vulnerabilities in the nonfinancial corporate sectors and stand ready to raise the countercyclical capital buffer rate if warranted. The report recommends that French non-bank financial institution macroprudential oversight has been proactive and should continue to be vigilant to emerging risks