Annual Report 2018 Annual Report 2018 Banque De France

Banque de France Annual Report 2018 Annual Report 2018 Banque de France

www.banque-france.fr

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The Governor’s Foreword THE GOVERNOR’S FOREWORD A trusted institution at the service of all

In this uncertain world, with the European Central the Banque de France’s Bank and the whole of the independence is a guarantee Eurosystem, we have started to all our fellow citizens. normalising monetary policy It ensures that, with an eye by ending our net asset to the long term, we are purchases in December. Over committed to our objectives: the last three years, there have price stability and therefore been 770,000 net job creations a robust currency; financial in France and monetary In 2018, there was a rise stability and therefore policy has contributed to in uncertainty in Europe the smooth financing of this achievement. As regards and throughout the world. the economy. But this Financial stability, our French GDP growth stood independence brings with it financial institutions have at 1.5%, slowing from its strong a requirement: accountability improved solvency and pace in 2017. This figure is still for our performance. liquidity ratios, and the relatively satisfactory, but the ACPR has coordinated their Banque de France remains This 2018 Annual Report preparations for the fallout particularly vigilant given the shows what we have achieved: from Brexit. The Central current international slowdown. As regards Monetary strategy, Banks and Supervisors This decline is notably due we met our price stability Network for Greening the to geopolitical uncertainties objective with an inflation rate Financial System (NGFS), stemming from US protectionist of 1.9% at end-2018. The euro, launched by the Banque postures and Brexit. Restoring which has just turned 20, is a de France in early 2018, confidence is therefore a stable currency that protects now has 28 participants priority for political leaders. purchasing power. Along from five continents.

3 Lastly, we have developed in the light of the ongoing the economic debate has Services to the economy demanding transformation been enhanced; our role thanks to our drive to of our institution. and our activities are better promote an inclusive finance. known and recognised by our Throughout the country, the The Banque de France has fellow citizens. Banque de France network placed great importance has provided support to on becoming increasingly We conduct all of these actions households and firms, in efficient, innovative, visible and to serve French and European particular those most in need. open. It is more efficient: while citizens. Attachment to the Thanks to the help offered to increasing its range of services euro reached an all-time high, overindebted individuals and and maintaining its nationwide with the support of 72% the implementation of the network, it lowered its of French citizens and 75% right to basic banking services, headcount by over 6% in 2018. of Europeans. 86% of French we helped 223,000 families This translated into a decrease citizens are satisfied with the to escape financial exclusion of over 11%, or EUR 120 million, quality of the services we offer in 2018. The Banque de France in our annual operating throughout France, but we are offered support to SMEs and expenses, and is one of our continuing to strive to improve VSEs through credit mediation, contributions to the national it further. The confidence of which is now unified under community. More innovative our fellow citizens obliges us to its aegis. It has developed too: the Banque de France has do so. In the following pages, its training in economic and better organised its branch you will see a breakdown of financial literacy for all citizens. network while continuing to our 2018 results. And rest receive the public in good assured, with the ten thousand These results have been conditions across the country members of the Banque obtained thanks to the women and has consolidated the de France’s staff, that we will and men of the Banque processing of requests. do our utmost to remain de France. They work with It created a laboratory a trusted and outstanding professionalism and a sense dedicated to innovation, public service provider. of public service. Along with “the Lab”, which works closely the two Deputy Governors with financial start-ups, and is Denis Beau and Sylvie Goulard, the first European central bank François Villeroy de Galhau I personally wish to pay tribute to use blockchain technology. to them. Their commitment Lastly, it is more visible and is particularly remarkable more open: our presence in

4 BANQUE DE FRANCE – ANNUAL REPORT 2018 2018 in figures

ACPR F B

5 10,257 full-time equivalent employees

95 branches

7.0 billion euro: profit before tax and exceptional items (of which 5.6 billion euro paid to the community in income tax and dividends)

121 million euro: reduction in net operating expenses versus 2015

13,567 secondary school pupils instructed in economic, budgetary and financial issues

177 tonnes of coins collected and sorted for the 2018 Pièces jaunes national charity campaign

3,877 entrepreneurs assisted by VSE correspondents

1.9% reduction in energy-related greenhouse gas emissions

6 BANQUE DE FRANCE – 2018 IN FIGURES 7 Monetary strategy in 2018

580.3 123.5 billion euro of securities purchased billion euro of private sector securities by the Banque de France since the purchased since the launch of implementation of the CBPP3, ABSPP, the private sector asset purchase PSPP and CSPP programmes programmes (CBPP3, ABSPP, CSPP)

¥ $ £ 140.0 52.2 billion euro: total value of France’s billion euro: total value of France’s net gold and foreign exchange reserves net foreign exchange reserves

¥ $ £ 87.8 2,436 billion euro: total value tonnes: weight of France’s gold reserves of France’s gold reserves (4th largest holding in the world)

1 5.7 billion euro banknotes billion banknotes distributed manufactured and distributed at Banque de France counters

789 29 3rd million individual items articles published in ranking Eurosystem of data accessible peer-reviewed journals central bank for via the Open Data Room research, by number of listed publications

8 BANQUE DE FRANCE – 2018 IN FIGURES Tasks

MARCH The Banque de France increases the frequency of its As a member of the Eurosystem, the Banque de France designs macroeconomic projections and implements monetary policy with the aim of safeguarding a for France to quarterly major public good: monetary stability • participation in Governing Council monetary policy decisions APRIL • gradual exit from non-conventional monetary policy to keep Innovation in monetary policy operations: auction inflation and growth on track system for securities lending • production of economic statistics and forecasts to provide transactions valuable insight

JULY Publication of the 2017 report by the Observatoire de la sécurité des moyens de The Banque de France’s cutting-edge expertise consolidates paiement (Observatory for the its position as the central bank for markets and ensures the Security of Payment Means) Paris financial centre is efficient and secure: • secure financing environment SEPTEMBER • increased capital market liquidity The ECB unveils the new €100 and €200 banknotes • management of foreign exchange reserves

NOVEMBER Launch of an Open Data Room at the Banque de France’s offices in New York The Banque de France maintains confidence in the currency: DECEMBER • printing and circulation of banknotes The ECB Governing Council decides to end net asset • security and innovation in payment instruments purchases as of 2019 • strong attachment to the euro among the French public

9 Financial stability in 2018

192 50 ACR 967 on-site inspections inspections on behalf ACPR employees of insurance firms, of the ECB as part banks (excl. SSM of the Single inspections) and Supervisory business practices Mechanism (SSM)

128 802 789 staff seconded banks authorised authorised to the ECB as part or inspected insurance firms of the SSM and mutual insurers

13.6% 24 250 the core tier one billion euro: average billion euro: average capital ratio of the daily flows processed daily flow of large- six main French by retail payment value payments banking groups systems in France processed by Target2 in December 2018 in France in December 2018

10 BANQUE DE FRANCE – 2018 IN FIGURES Tasks

MAY

ACR At the proposal of the Governor of the Banque de As well as securing confidence in the currency, France, the HCSF adopts a the Banque de France guarantees another essential public good: measure capping systemic the solidity of the financial sector banks’ exposure to large, highly indebted French • European inspections to ensure banks meet international corporations at 5% of standards of resilience their capital • protection of customers

JUNE At the proposal of the Governor of the Banque de France, the HCSF raises The Banque de France anticipates and prevents risks: the countercylical capital • evaluation of new risks buffer to 0.25% for French banks • contribution to changes in regulation • provision of guidance to banks in their digital transformation

SEPTEMBER Inauguration of the ACPR’s new premises, in the presence of Mario Draghi and Danielle Nouy The Banque de France ensures the sound functioning Conference on European and security of payment instruments: banking supervision • prevention of systemic risks • sound functioning of payment and market infrastructures

OCTOBER Paris financial centre cyber-crisis simulation exercise

11 Services to the economy in 2018

55,979 177,591 235,000 basic bank accounts overindebtedness calls handled by the opened at the cases handled by Assurance Banque Banque de France’s Household Debt Épargne Info Service request (under the Commissions (ABE IS) telephone right to a bank service, the AMF account procedure) and the ACPR

13,000 2,500 37,300 companies subscribers to statistical series participating monthly Banque de France disseminated via in Banque de France business surveys webstat.banque- business surveys france.fr

7.9 266,730 757 million companies non-financial businesses assisted listed in the FIBEN corporations (mainly by the credit database (13.3 million SMEs) assigned a mediation services consultations) Banque de France (10,565 jobs saved rating or secured)

12 BANQUE DE FRANCE – 2018 IN FIGURES Tasks

MAY Inauguration of the new premises of the Lab, a We also have a duty to help the public understand laboratory and co-working space for testing innovative the economy: technologies of interest to • the Banque de France – operator for France’s national the Banque de France financial literacy strategy JULY • major initiatives and partnerships Renewal of the Accord de Place sur la médiation du crédit (national credit mediation agreement), attachment of all national The Banque de France provides advice and guidance for credit mediation services individuals, especially the financially vulnerable: to the Banque de France and appointment of a new • help for the overindebted, right to an account procedure national credit mediator, • maintenance of payment incident registers, monitoring Frédéric Visnovsky of bank fees SEPTEMBER European Heritage Days – visitors take part in a Citizen’s Forum on “Our currency, the euro”, with the Governor The Banque de France assists and guides companies, François Villeroy de Galhau especially small businesses: OCTOBER • guidance for VSEs and SMEs The Banque de France holds • credit mediation its annual VSE correspondents’ convention

NOVEMBER Inauguration of the new, The Banque de France provides financial services to the fully automated and ultra‑secure cash centre in French government: Paris‑La Courneuve, and • holding of the French Treasury’s bank account of the economic centre in • management of government debt auctions Seine‑Saint-Denis

13 Monetary strategy 16

At the heart of the Eurosystem, the Banque de France designs and implements monetary policy 18 The Banque de France’s financial innovations for the Paris financial centre consolidates its position as the central bank for markets 26 As a major player in the cash industry, the Banque de France maintains confidence in the currency in all its forms 29 Financial stability 34

The Banque de France guarantees a sound financial sector and protects the customers of banks and insurers 36 The Banque de France is preparing for new risks and contributing to efforts to adapt financial system regulation accordingly 41 The Banque de France ensures that financial infrastructures operate smoothly and securely 49 Services to the economy 50

Economic and financial education: a key mission for the Banque de France 53 Services for private individuals: protection and prevention 56 Working with businesses: solid expertise and support services 60 Ambitions 2020: transformation 66

Ambitions for our staff: a simpler, more modern working environment for managers and staff 70 Ambitions to raise the profile of the Banque de France 72

14 BANQUE DE FRANCE – ANNUAL REPORT 2018 CONTENTS

Corporate social responsability 78

An educational and cultural commitment 81 An economic and civic commitment 83 An environmental commitment 88 A commitment towards Bank staff 91 Governance 96

Executive bodies 98 Decision-making and control bodies 100 Internal audit and operational risk management 101 Financial management and accounts 104

Report on assets, liabilities and performance 106 Individual financial statements of the Banque de France 107 Consolidated financial statements 136 Appendices 144

Organisation of the Banque de France as at 1 June 2019 and the Banque de France branch network as at 1 January 2019 146 The scope of the Banque de France 149 The recirculation of euro banknotes and coins by private operators in 2018 150 Summary of the Household Debt Commissions’ activity reports for the year 2018 153

Monetary strategy

markets means of payment forecasts monetary policy refinancing Eurosystem research money 18 MONETARY STRATEGY characterised howeverby strong in aneconomicenvironment growth andagradualriseininflation, marked bystillsolideconomic In the euro area, was the year 2018 from exceptionalmeasures Monetary policyprepares theexit of theeconomy. de Francefacilitatedthefinancing and preparatory work,theBanque policy decisions and to its research the implementation of monetary thanksto its active role in In 2018, objectives oftheEuropean Union. support theeconomicpolicy jeopardising this objective, to ensure pricestabilityand,without of theEurosystem isclear:itto France andtheothercentralbanks The mandate of the Banque de 1 The BanquedeFranceistheguarantorofasoundandreliable currency Monetary policyisakeyfactorinthecountry’s economicsuccess. Price stabilityandconfidenceinthecurrency BANQUE DEFRANCE– ANNUALREPORT 2018 monetary policy designs andimplements the BanquedeFrance At theheartofEurosystem, financial conditionsthat occurred to thechangesineconomicand The ECBadjusteditscommunication policy decisions). in place (see box below on monetary willremain Eurosystem since 2014 measures implemented by the in the “quartet” of non-standard stimulus asthree oftheinstruments mean theendofmonetary previously made, does not, however, with theannouncementthathadbeen net assetpurchases from 2019, inline todiscontinue 13 December 2018, Council, taken at its meeting of The decisionoftheECBGoverning monetary support. while maintainingahighdegree of phasing out its netasset purchases, its monetarypolicybygradually the Eurosystem startedtonormalise financial markets.Inthiscontext, the volatility of commodity and factors, protectionist threats and uncertainties linkedtogeopolitical 14 June 2018: thehorizonupto 14 June 2018: evolved after the meeting of guidance on key interest rates 2018.Forexample,forward in degree ofmonetary accommodation. expectations andstrengthen the helped toguideeconomicagents’ policy for central banks, has also essential dimensionofmonetary Communication, whichisan begins toraisekeyinterest rates”. of timepastthedatewhenECB maintained “foranextendedperiod full, ofmaturingsecuritieswillbe that thephaseofreinvestment, in normalisation intheeuro area, stating the sequenceofmonetarypolicy Council provided guidanceon December meeting,theGoverning asset purchases”. Similarly, atthe and wellpastthehorizonofnet was “foranextendedperiodoftime Thepreviousof 2019”. formulation was thus set at “through the summer maintained attheirpresent levels which keyinterest rateswere tobe

MONETARY STRATEGY MONETARY Monetary policy decisions

Non-standard measures implemented by the Eurosystem maintained very accommodative monetary conditions in 2018

The first instrument is the provision of liquidity and economic growth, the Governing Council considered credit to banks. The Targeted Longer-Term Refinancing that this adjustment would maintain a high degree of Operations (TLTRO) launched in 2016 and 2017 for a monetary support. In December 2018, it announced four-year period and the Fixed Rate Full Allotment (FRFA) the end of net asset purchases. This decision was procedure are still in place. In total, TLTRO outstandings underpinned by stronger pressures on prices (with amounted to EUR 762 billion in 2017, for all Eurosystem inflation in the euro area at 1.9% in November, after banks, and still stood at EUR 719 billion at end-2018. 2.2% in October and forecasted at 1.8% for 2018, after 1.5% in 2017) and, more generally, by still favourable The second instrument is the Asset Purchase Programme economic conditions (annual GDP growth forecasted at (APP), which has been implemented since 2015. The net 1.9% in 2018, after 2.5% in 2017). volume of asset purchases was cut back in January 2018 to a monthly rate of EUR 30 billion (against The reinvestment of the stock of assets acquired, EUR 60 billion previously). In a context of robust the third instrument of the quartet of measures, will continue: in October 2017, the Governing Council Eurosystem assets reaffirmed its commitment made from the outset (as a % of annual GDP) to reinvest the principal payments from maturing 45 securities purchased under the APP. As a result of the 40 35 Eurosystem reinvestment policy, the size of the asset 30 portfolio acquired under the APP will be maintained 25 at the level reached at the end of the net purchases 20 “for an extended period of time”. The Eurosystem will 15 therefore remain a major purchaser of euro-denominated 10 bonds over the long term, which will help maintain 5 favourable liquidity conditions and a high degree of 0 March March March March March March March March March March March monetary accomodation. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Other assets The fourth instrument is maintaining one of the key rates Loans to credit institutions Securities held for monetary policy purposes in negative territory. The deposit facility rate remained at –0.4% in 2018, a level unchanged since 2016. The Source: European Central Bank. rate of the main refinancing operations remained at 0%. …/…

19 20 MONETARY STRATEGY medias/documents/ecb.mp181213.en-3.pdf https://www.banque-france.fr/sites/default/files/ net assetpurchases asof 2019 Decision oftheECBGoverningCounciltoend 13 December 2018 BANQUE DEFRANCE– ANNUALREPORT 2018 an extended period of time, and well past the horizon of an extendedperiodoftime,andwellpastthehorizon rates shouldbemaintainedattheirpresent levels“for Councilhadindicatedthatkeyinterest the Governing of monetaryaccommodation.WhileuntilApril 2018, agents’ expectationsandthereby strengthen thedegree Forward guidancealsohelpedtoguideeconomic (annualised %) ECB keyrates Source: European CentralBank. Highlight - March 1 0 1 2 3 4 5 6 2008 March Overnight interbankrate( Rate onthemarginal lendingfacility Rate onthemainreﬁnancing operations Deposit facilityrate 2009 March 2010 March 2011 March 2012 March 2013 E o n ia March ) 2014 March 2015 March 2016 March 2017 Key figures for 2018 March 2018 PSPP andCSPPprogrammes implementation oftheCBPP3,ABSPP, by theBanquedeFrancesince billion euro ofsecuritiespurchased 580.3 medium term. inflation towards levelsbelow, butcloseto,2%overthe continue tosupportthesustainableconvergence of of thelarge volumeofsecuritiesacquired, willtherefore rates. Forward guidance,togetherwiththereinvestment Councilstartsraisingkeyinterest when theGoverning maintained foranextendedperiodoftimepastthedate the principalpaymentsfrom maturingsecuritieswillbe accommodation. Thephaseofreinvestment, in full, of stimulus, whichwillcontinuetoprovide ahighdegree of purchases doestherefore notmeantheendofmonetary price pressures. Thediscontinuationofnetasset monetary supporttocontinuereinforcing domestic on theglobaleconomyrequires asignificantlevelof The highdegree ofuncertaintythatcontinuestoweigh in place The Eurosystem’s monetarystimulusremains through thesummerof 2019”. at themeetingof14 June 2018,whenitstated“atleast the netassetpurchases”, itadjusted itscommunication (CBPP3, ABSPP, CSPP) private sectorassetprogrammes purchased sincethelaunchof billion euro ofprivatesectorsecurities 123.5

MONETARY STRATEGY MONETARY The Banque de France made almost a quarter of Eurosystem securities Benchmark indices on money markets purchases A reform of benchmark indices on money markets has been launched, The Banque de France continued following a series of disputes in recent years over how certain interbank to actively participate in the market rates were set. As of 1 January 2020, the indices used in the European Union will in principle have to comply with the Benchmark implementation of the APP Regulation (BMR), which came into force on 1 January 2018. A new programme, both in its Public benchmark rate known as €STR (Euro Short Term Rate) was created by Sector Purchase Programme the ECB, which will be responsible for calculating it and administering (PSPP) component and in the three it. This rate, which will be calculated based on daily transaction data private sector purchase programmes collected by the ECB from a wide range of euro area banks, is intended (CBPP3, CSPP and ABSPP).1 It also to replace the Eonia as an overnight benchmark and should start to be successfully contributed to making published at the latest in October 2019. In anticipation of this rate, the the repo market more fluid through ECB regularly publishes a series of daily data on a "pre-€STR" indicator. its daily securities lending, particularly As regards Euribor rates, the European Money Markets Institute towards the end of each quarter. (EMMI), as administrator, has begun overhauling their calculation methodology in order to bring them in line with the BMR Regulation The Banque de France actively before 1 January 2020. contributed to the methodological work on the calculation of €STR, the euro area’s new money market overnight index

Together with the Eurosystem and will be published by October 2019 Cutting-edge studies and research financial market professionals, the at the latest (see box). The Banque to consolidate monetary policy Banque de France participated de France is contributing to the decisions and strengthen the in defining the methodology for implementation of the new index Banque de France’s influence calculating a new money market by adapting the European Money in France and abroad overnight index. This index, known Market Statistical Reporting (MMSR) as €STR (Euro Short Term Rate), was platform and its local Money Market The decisions of the ECB Governing announced on 28 June 2018 and French Reporting (MMFR) platform. Council draw on the analyses of Eurosystem central bank experts. Original scientific research fuels debate and enables the Banque 1 CBPP: Covered Bond Purchase Programme; CSPP: de France to contribute to the Corporate Sector Purchase Programme; ABSPP: Asset Backed Securities Purchase Programme. decision-making process both at the

21 22 MONETARY STRATEGY https://www.banque-france.fr/en/communique-de-presse/banque-de-france-opens-open-data-room-new-york Launch ofanOpenDataRoomattheBanquedeFranceoffices inNew York 9 November 2018 of conferences andseminars,ithas publications andtheorganisation all types ofpublic. Thanks to its dissemination policy aimed at more visible thanks to a diversified economic research and makes it The BanquedeFranceencourages within internationalorganisations. European monetarypolicyleveland BANQUE DEFRANCE– ANNUALREPORT 2018 Key figures for 2018 Highlight in theOpenDataRoom researchers welcomed 112 and publications and quantityofresearch work of globalinstitutionsforthequality publications; rankedinthetop1% central banks,bynumberoflisted ranking amongEurosystem 3 rd

to anonymousdatafrom theBanque research byoffering secure access York contributetopromoting Banque deFrance offices inNew of anOpenDataRoomatthe Room inParisandtheopening of researchers in an Open Data the fieldof research. Thehosting and abroad, and its reputation in extended itsinfluence,inFrance international journals articles publishedinpeer-reviewed 29 working paperspublished 46 Banque published editions ofRuedela 19 2 Source: work andpublications. the qualityandquantityofresearch among Eurosystem central bank for Banque deFrancestillrankedthird the current legislation.In 2018, de France,incompliancewiththe Research PapersinEconomics(RePEc). international (IBFI) Institut bancaire etfinancier individuals trainedbythe 1,110 the BanquedeFrance seminars organised at 152 2 MONETARY STRATEGY MONETARY Growth and inflation forecasts contribute to making the most appropriate monetary policy decisions

In 2018, the Banque de France increased the frequency of publication of its macroeconomic projections for France

The Banque de France, together with the other Eurosystem central banks, assesses the economic situation of the euro area. In particular, every quarter, it prepares detailed macroeconomic projections for France over a period of three to four years. This work is based on the combination of various Since 2018, the Banque de France Creation and Unemployment” and areas of expertise, integrating the has published its forecasts3 for “The Outlook for the Government contributions of macroeconomists, France on a quarterly basis (instead Debt Burden”. modellers, public finance specialists of a half-yearly basis previously). The and the exploitation of business forecast note presents its analysis According to the forecasts of the surveys. These analyses contribute of the macroeconomic outlook for Banque de France and the Eurosystem significantly to the Eurosystem’s France over the short and medium published in December 2018, GDP monetary policy decision- term, and contains two or three is expected to continue growing at making process. boxes on important specific topics. a faster pace than that of potential For example, in December 2018, the growth until 2021, both in France topics covered were “Changes in and in the euro area, despite a highly 3 https://publications.banque-france.fr/en/liste- chronologique/macroeconomic-projections Purchasing Power in France”, “Job uncertain economic environment.

Highlight

15 March 2018 First quarterly publication by the Banque de France of its macroeconomic projections for France

23 24 MONETARY STRATEGY statistics, itispossibleto easily European harmonisationofthese securitised loans.Thankstothe of credit institutions and that of recorded on the balance sheets assess boththedynamicsofloans The BanquedeFrancecanthus securitisations onamonthlybasis. credit institutions and theirloan to monitor loans granted by Monetary statisticsare used medium-term economicgrowth. negative consequencesfor weaken borrowers, withpotentially to berepayed eachyear)could the debtburden (theamount financial system). the riskassessmentofFrench (see theDecember 2018 report on major economiesoftheeuro area is a singular situation among the than thatofeconomicgrowth. This growth rateissignificantlyhigher carefully monitored given that its corporations and households, is particular thatofnon-financial private agents in France, in The debtlevelofnon-financial to businessesandhouseholds Careful monitoringofloans monetary situation country’s economicand Statistics shedlightonthe BANQUE DEFRANCE– ANNUALREPORT 2018 4 Anincrease in financial markets. non-financial corporationsinthe are used to monitor the debt of statistics onsecuritiesissuance to themonetarystatistics, that ofitspartners.Inaddition compare theFrench situationwith (as a%ofGDP) Debt ofhouseholdsat3rd quarter 2018 (as a%ofGDP) Debt ofnon-financialcorporationsat3rd quarter 2018 -40 -20 -30 -15 20 40 60 80 15 30 45 60 75 0 0 Change onQ2 Change onQ2 F F r r 59.2 74.1 a a n n c c 18.7 12.6 e e 20 20 08 08 eran eran 52.7 38.7 -7.0 -2.9 chronologique/assessment-risks-french-financial-system 4 300 banks affiliated totheFrench transactions processed byabout loans anddeposits,whichlists The financial centralisation of https://publications.banque-france.fr/en/liste- an an 59.6 65.5 -39.2 -2.6 40.9 65.7 a a 2.2 -7.6 MONETARY STRATEGY MONETARY Banking Federation, provides Opinion on trends in industrial production The monthly business survey covers (balance of opinions adjusted for seasonal and working indications on the role played day variations) industry, market services and by banks in credit distribution construction, and is supplemented by and deposit collection at the 20 a monthly survey on retail trade (brick- regional level. 15 and-mortar and e-commerce). The Banque de France also conducts a 10 The key results of these statistical quarterly survey on public works. The collections are published in statistical 5 results are published about ten days releases (Stat Info) and downloadable 0 after the end of the month under series (“Webstat” portal5). review on the Bank’s website6 and -5 the national series are available on -10 Business surveys are used to rapidly 2013 2014 2015 2016 2017 2018 2019 the “Webstat” portal for accessing assess the economic situation Past production and forecast the Banque de France interactive Average since 2002 database. They are presented in an Trend Business surveys conducted by the aggregate form at the national level, NB: A positive (negative) balance corresponds to an Banque de France are a valuable increase (a decrease). but also in a disaggregated form in tool both for the monetary the Regional Trends. policy stance and for public Data are collected directly from information, as they are used to companies by the Banque de Measuring foreign trade rapidly establish an assessment France via its branch network. Each using the balance of payments of economic developments. month, over 13,000 companies are surveyed across France, providing The Banque de France, which is 5 http://webstat.banque-france.fr/en/ data representative of the entire charged with establishing France’s 6 https://www.banque-france.fr/en/statistics/businesssurveys/business-surveys French economy. balance of payments, pays particular

Key figures for 2018 13,000 2,500 100,000 companies surveyed subscribers to recipients of national and each month business surveys regional publications on business conditions

25 26 MONETARY STRATEGY main touristdestinations. France’s position among the world’s whichstrengthens EUR 50 billion, tourism amounttomore than annual receipts from international France’sreleased inearly 2018, data. According to revised figures exploits some big data and “mirror” afield (China,India,Japan)and take intoaccountcountriesfurther has thusadapteditssurveysto sectors of the French economy. It the dynamicsofoneleading travelers, inorder tobetterreflect information ontheprofile of adding more and more precise international tourismstatistics, also continuedto improve its The BanquedeFrancehas under aharmonisedframework. digital commerce andtogroup them the different formsofinternational order togainaclearer picture of a setofnewstatisticalstandards in part, withintheOECD,indeveloping global economictrends. Ithastaken attention tothemeasurement of BANQUE DEFRANCE– ANNUALREPORT 2018 Key figures for 2018 million itemsofdataaccessibleviathe OpenDataRoom 789 reasons. First,itmustbeableto exchange marketforseveral an activerole intheforeign The Banque de France plays several objectives exchange marketthatmeets A presence ontheforeign 2 the centralbankformarkets consolidates itspositionas the Parisfinancialcentre financial innovationsfor The BanquedeFrance’s statistical seriespublishedonwebstat.banque-france.fr/en/ 37,300 expertise andknow-howtoits the BanquedeFranceoffers its of foreign currencies. Finally, conducts purchases and sales foreign currencies andtherefore of bondportfoliosinvestedin exchange reserves intheform Second, itmanagesforeign framework oftheEurosystem. market, withinthedecentralised intervene intheforeign exchange on behalfofitsclients. out foreign exchange transactions institutional clientsbycarrying MONETARY STRATEGY MONETARY The Banque de France, the central bank Banks (ESCB), and by investing in for markets, at the cutting edge an aggregator that enables it to of technology in Europe perform its tasks in this renewed environment (see box on algorithmic The Banque de France has trading). This tool mainly makes it consolidated its position as the possible to pit about forty different central bank for markets by setting up, trading systems against one another together with the Banco d’Espana, and thus to carry out transactions a common market operations at the best prices available at every management platform (Maps), which moment. The tool also provides is also open to the other central banks access to sophisticated algorithmic orders and to market data with a of the European System of Central tools for executing foreign exchange maximum granularity.

A deeply changing foreign exchange market

Technology has caused deep-seated changes This “electronification” of the market has led to a in the structure and organisation of the foreign significant increase in the speed of transactions, which exchange market, both spatial – the market is more has caused profound changes in the interactions fragmented – and temporal – the speed of execution between market participants. For example, while of transactions has increased. As the currency market the first electronic trading systems published price is an over-the-counter market, which is by nature updates every tenth of a second, in recent years this decentralised, technological advances have led to a frequency has increased almost twentyfold, with the multitude of electronic systems for conducting foreign exchange rate being updated every five milliseconds exchange transactions. (i.e. 200 updates per second). Speed having become a comparative advantage in this financial ecosystem, Nowadays, 90% of transactions are carried out new technological players have emerged, beyond the electronically (source BIS, 2016). In order to obtain the traditional sphere of historical banking players. In order best execution prices, an operator wishing to conduct a to be able to respond at such high speeds, participants transaction now compares the prices displayed on about have developed new tools such as aggregators or fifty different electronic platforms. execution algorithms.

27 28 MONETARY STRATEGY thanks to Target2 and T2S, collateral between different financialmarkets circulate almostinstantaneously Unlike cashandsecuritiesthat collateral marketintheeuro area initiatives todevelopasingle The BanquedeFrancesupports BANQUE DEFRANCE– ANNUALREPORT 2018 very unevenlevelsofsophistication. the impactonmarketormaximisingprofits. 3 2 extremely rapidly. use algorithms,butnotallusersofalgorithmsare highfrequency. Highfrequency tradingischaracterisedbytheability tosendanextremely large numberoforders 1 other relatively simplealgorithms,certainrepetitive market byreducing theimpactonliquidity. Thanksto that ismore representative oftheinitialstate into smallertranchestoobtainafinalexecutionprice Price –VWAP). Theobjectiveistodividealarge order Average Price–TWAP –orVolume Weighted Average These were mainlyweightedaverages(Time Weighted The firstalgorithmicstrategieswere relatively simple. ”Static” algorithms types ofbehaviour, computer programmes. Itthus coversverydifferent the executionoffinancialmarkettransactionsusing Algorithmic tradingisaconceptthatencompasses Algorithmic trading penetrate amarketlargely dominatedbybanks. by capitalisingoninnovativetechnologiesinorder to disruptive playersfocusedonthespeedofexecution The criterionusedfordefiningthequalityofliquiditywilldependonobjectiveparticipant.Itmaybe,amongotherthings,anminimising For more details,seeBox4 in theJune 2016ERSpublication:https://publications.banque-france.fr/sites/default/files/medias/documents/ers_06_16_envf.pdf Although itisoftenusedasasynonym,highfrequency tradingisonlyasmallpartofthealgorithmicuniverseinfinancialmarkets.Ahighfrequency traderwill 1 varioustypologiesofplayersand 2 Initially, non-bank the developmentof a single supporting initiatives that promote the Banque de France has been fragmented. Forseveralyears, and thetradingtermsremain the euro area where theplayers monetary policy, isimperfectin management, inparticularthatof of algorithmsseekingthegreatest liquidity The fragmentationofthemarketthenledtorise “Smart” algorithms management oftheunderlyingmarketexposure. currency optionportfoliosthrough afullyautomated tasks havebeenautomated,suchasthehedgingof world decision-makers. economic indicatorsorspeechesdelivered by algorithms capableofinstantlyinterpreting published have beenfurtherenhancedwiththeemergence of behaviour accordingly. More recently, thetoolsused them viadifferent indicatorsandadjustingtheir “smart” agents,attentivetotheenvironment around flexibilitytobecomeincreasinglytheir internal The computerprogrammes involvedhadtoimprove the multitudeofavailableelectronic tradingsystems. a multilateral trading facility, which TheElixiumplatform,since 2015. available to market participants repo clearingservice,hasbeen (Euro GC+),atri-partybasket The Euro GeneralCollateralPlus secure marketfinancingmethods. collateral marketintheeuro area to 3 among MONETARY STRATEGY MONETARY offers advanced functionalities private operators in 2018). It also In 2018, the Banque de France and fluidifies the exchange of puts into circulation and withdraws confirmed its position as the leading collateral, was launched in 2018. It euro coins on behalf of the State. public printer of euro banknotes and unifies collateral trading methods, It thus enables everyone to choose a major player in the Eurosystem’s which are still largely dominated by their means of payment. cash industry, relying on its Europafi voice trading, and integrates the paper manufacturing subsidiary and specificities of certain exchanges. While cash is less used in France its printing works, both located in In order to secure transactions, than in its main neighbouring the Puy-de-Dôme department. It is a clearing solution will also countries, it is still the most widely also the main supplier of banknotes have to be made available to used payment instrument: 68% of issued in overseas Pacific territories, interested participants. transactions at points of sale are in about twenty foreign countries, paid in cash. It is mainly used for and especially for some African small daily purchases. monetary areas. 3 As a major player in the cash industry, the Banque de France maintains confidence in the currency in all its forms

The Banque de France, guarantor of the quality and security of all means of payment, manufactures the new secure banknotes

The Banque de France issues and puts into circulation euro banknotes in mainland France and in the overseas departments, and organises the regular sorting of banknotes: it removes counterfeit banknotes, destroys banknotes whose quality has deteriorated, and puts back into circulation high- quality banknotes. It controls the sorting done by private operators (see Appendix 3 on the recycling of euro banknotes and coins by

29 30 MONETARY STRATEGY series. Itwillproduce 20.2%ofthe oftheEuropa€200 denominations and producing thenew€100 and started €50 denominations continued to produce the €20 and the Banque de France In 2018, BANQUE DEFRANCE– ANNUALREPORT 2018 Key figures for 2018 sorted billion banknotes 5.1 manufactured anddistributed billion euro banknotes 1

in thesecondquarterof 2019. which will be issued simultaneously Eurosystem forthe€200 banknote, 46% ofthetotalvolumeissuedin issue ofthe€100 banknote, aswell total volumerequired forthefirst the introduction oftheeuro issued bytheBanquedeFrancesince billion euro: valueofallthebanknotes 138.7 at BanquedeFrancecounters billion banknotesdistributed 5.7

being thatatParis-LaCourneuve. centres, thelastsitetobeopened automated currency management on high-capacity, state-of-the-art The BanquedeFrancecanrely at French stores share ofpaymentsincash 68 distributed since 2001 billion euro banknotes 22.2 %

MONETARY STRATEGY MONETARY

Growth in net banknote issuance Flow of banknotes at Banque de France and IEDOM counters (in billions of banknotes) (in billions of banknotes)

6.0 8 5.53 7 5.0 6 5.74 4.0 5.37 5 3.0 4 3 2.0 1.22 2 1.0 1 0.0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: Net issuance is gross issuance (new banknotes) minus banknotes withdrawn from Return from circulation Issued to circulation circulation Source: European Central Bank. Note: Flow statistics cover all banknotes in circulation.

Highlights

17 September 2018 The ECB unveils the new €100 and €200 banknotes https://www.banque-france.fr/sites/default/files/medias/documents/cp-bce-gb-news-200-100e-20180917.pdf

13 November 2018 Inauguration of the new automated currency management centre in La Courneuve https://www.banque-france.fr/sites/default/files/medias/documents/dossier-de-presse-inauguration-plc-13-novembre-2018.pdf.

31 32 MONETARY STRATEGY of paymentstrategy Validation bytheNationalCashlessPaymentsCommittee(CNPS)ofmainpointsanewnational means 12 November 2018 https://www.banque-france.fr/sites/default/files/medias/documents/annual-report-2017-osmp2017-gb-20181108.pdf Publication ofthe 2017annualreport oftheObservatoryforSecurityMeansPayment 18 July 2018 banknotes, thepublicauthorities to the manufacture of high-security payment. That is why, in addition reliable andsecure meansof or administrations,haveefficient, be theyindividuals,businesses that theusersofpaymentservices, It is therefore of utmost importance public confidence in the currency. is apre-requisite formaintaining The securityofmeanspayment means ofpayment and innovationforall Security, monitoring BANQUE DEFRANCE– ANNUALREPORT 2018 series, whichwillbeputintocirculation in 2019. security features integratedinthe€100 and€200 banknotesofEuropa authentication are nowpreparing theprofessionals torecognise thenew over 21,000 professionals (bank staff, retailers, police,etc.).Thetrainersin counterfeiting. In 2018,itprovided traininginbanknoteauthenticationto The BanquedeFrancecontributesactivelytothefightagainst Training inbanknoteauthentication Highlights

watch onthesecurityofmeans de Francemaintainsapermanent As partofthismission,theBanque culture vouchers. vouchers, holidayvouchersand payment vouchers, suchasluncheon certain categoriesofpaperless etc. This mission also extends to cheques, transfers,direct debits, other thancash:credit cards, payment, i.e.allmeansofpayment the securityofcashlessmeans France withthetaskofensuring have alsoentrustedtheBanquede in the payments market (suppliers, in thepaymentsmarket(suppliers, representatives of allpartiesinvolved body, whichbringstogether a financialmarketcoordinating of MeansPayment(OSMP), the Observatory for the Security also provides thesecretariat for inspections. TheBanque de France players, through onsiteand off-site properly implemented by market of thenationalpaymentsstrategy. task ofensuringtheimplementation Ministry oftheEconomywith (CNPS), thebodyentrustedby Cashless PaymentsCommittee the secretariat fortheNational payments market. Assuch,it provides a catalystforthedevelopmentof level, the Banque de Franceactsas interoperability attheEuropean security, easeofuseforusersand solutions, combining robustness, Lastly, by promoting innovative users andpublicauthorities). of payment.Itensures thatitis

www.banque-france.fr ISSN XXXX-XXXX Security ofPaymentMeans of theObservatoryfor Annual report 2017 MONETARY STRATEGY MONETARY The management of foreign The national payments strategy exchange reserves: a key element in ensuring confidence in In the second half of 2018, as part of its secretarial duties for the National the currency Cashless Payments Committee (CNPS), the Banque de France coordinated the work of defining a new payments strategy for the period 2019-2024. The Banque de France manages This new strategy, which is the result of a series of meetings held with France’s foreign exchange reserves, the players in the payments market, will replace that launched in 2015 by as well as some of those of the ECB. the Minister of the Economy, whose objectives have been met. Its main objectives will be to continue modernising payments and their ecosystem As a manager of gold and foreign in France, while contributing to European independence in the field. It will currency reserves, the Banque be organised around the following three axes: de France plays a major role in international markets. • continue, in the wake of the previous strategy, the work to promote secure electronic means of payment for the benefit of the economy; French support for the euro • speed up and foster the deployment of innovations, in order to encourage the emergence of new payment practices in an environment In 2018, French support for of trust; the euro continued to grow. In • contribute to European efforts to deepen the single market December 2018, according to the for payments. European Eurobarometer, 72% The final version of the strategy, including the timetable for of French citizens supported “an implementation, will be published in the course of 2019, after validation economic and monetary union with by the CNPS. one single currency, the euro”. This is the highest level since June 2009.

Key figures for 2018

66 75.5 58% million: daily number billion euro: daily value share of bank card payments in total of cashless payments of cashless payments number of transactions, compared to 33% for SEPA payment means and 8% for cheques 140.0 52.2 87.8 billion euro: total amount of France’s billion euro: total foreign exchange billion euro: value of France’s gold gold and foreign currency reserves reserves net of forex liabilities reserves (2,436 tonnes of gold) net of forex liabilities including SDRs including SDRs (vs 133 billion euro in 2017)

Financial stability

banks insurers ACPR infrastructures supervision anti-money laundering risks customer protection 36 FINANCIAL STABILITY within amacroprudential policy the stabilityoffinancialsystem Stability), itcontributestomaintaining (HCSF –HighCouncilforFinancial Haut Conseil de stabilité financière Working incoordination withthe T ensuring astablefinancialsystem,protecting customersandpreventing risk The BanquedeFrancewantstobeareference inEurope inthefieldofsupervision, A soundfinancialsectorthankstotheBanquedeFrance an individual and systemic level. BANQUE DEFRANCE– ANNUALREPORT 2018 financial stabilityatboth responsible forsafeguarding he Banque de France is banks, financialcorporationsand makes sure thattheindividual microprudential supervision,it de France and responsible for authority attachedtotheBanque Authority), anadministrative Supervision andResolution de résolution (ACPR–Prudential Autorité decontrôle prudentielet framework. Acting through the market infrastructures. financially sound. Italso supervises insurers underits supervision are in 2018: bank business models and effect, pursued two sets of priorities below)cameinto (SSM –see box Single SupervisoryMechanism whenthe the ECBsincelate 2014 which hascooperatedcloselywith In bankingsupervision,theACPR, betweenauthorities and cooperation basedonexpertstaff Supervision financial institutions Ensuring sound 1 and insurers the customersofbanks financial sectorandprotects guarantees asound The BanquedeFrance https://www.youtube.com/watch?v=XBcI2X2ZVZc The ACPR

FINANCIAL STABILITY

Supervision within the framework of the Banking Union

The Single Supervisory Mechanism (SSM), which inspections. In addition, the ACPR conducts direct came into effect at the end of 2014, gives the ECB supervision of 115 “less significant” institutions. responsibility for supervising the euro area banking The SSM promotes harmonisation of national sector. The ECB takes on this responsibility directly for supervisory practices by leading coordination networks the main banks while delegating the task of overseeing covering cross-cutting themes and continuing efforts smaller institutions to national supervisors, within a to set up a shared information system for the ECB framework of close cooperation between authorities. and national authorities. The ACPR takes part in SSM Joint supervisory teams (JST) made up of staff from governance through the ECB’s Supervisory Board, the ACPR and the ECB supervise the largest credit attended by the national authorities, which prepares the institutions, of which there are 12 in France. The ECB ECB Governing Council’s supervisory decisions. also relies heavily on national authorities for on-site

Breakdown of prudential and business practice inspections conducted on-site profitability (notably sensitivity by the ACPR in 2018 in the banking and insurance industries to interest rate risk); and control (%) of credit risk and reduction of

ACPR inspections Prudential inspections of banks non-performing loans (NPLs). Action of bank and insurance on behalf of the ECB (SSM) business practices included publication of guidelines 21 32 for dealing with NPLs. The SSM and ACPR also monitored preparations for the United Kingdom’s departure

ACPR prudential from the European Union (see box and AML/CFT below on the prospect of Brexit). inspections of banks 14 In insurance supervision, in 2018 the ACPR prudential and AML/CFT ACPR oversaw the implementation inspections of insurers of the European Solvency II 33 framework, whose rollout is Note: AML/CFT refers to anti-money laundering and combating the financing of terrorism. continuing after coming into force

37 38 FINANCIAL STABILITY (EBA), which published several by theEuropean BankingAuthority of supervisoryaction,includingwork the consistencyandcoordination international efforts to enhance ACPR wasalsoheavilyinvolvedin Beyond supervision proper, the pension funds)inOctober 2018. (FRPS – complementary occupational retraite professionnel supplémentaire ACPR licensedthefirsttwo retirement savings framework,the Lastly, as France modernises its (see below). cybersecurity and climate change examined emerging risks such as interest rate environment and institutions ofapersistentlylow potential consequences for financial It alsokeptaclosewatchonthe of France’s main insurance firms. reviewed thegovernance practices Aspart ofthis,theACPR in 2016. BANQUE DEFRANCE– ANNUALREPORT 2018 Key figures for2018 and itssupervisionofbusinesspractices prudential oversightmandate(excludinginspectionsonbehalfoftheECB) on-site inspectionsofinsurancefirmsandbanksasparttheACPR’s national 192 fonds de fonds de

in 2019. preventive plansstarting draw up will besubjecttorequirements to groups orentities 14 insurance As a result, of November 2017. system provided for in the ordinance implementing theinsurer resolution the bankingsector. Italsobegan implementing resolution plansin role inEurope inelaboratingand its experiencetoplayadriving The ACPRcontinues to drawon of theresolution framework implementation Continuing theoperational freedom toprovide services. of activities performed under the particularly onimproving supervision Pensions Authority(EIOPA), Insurance andOccupational took partinworkbytheEuropean risk andstress testing.TheACPRalso on internal governance,interest rate important guidelinesin 2018, notably

the purviewofnationalsupervisors CFT), anarea thatremains under the financingofterrorism (AML/ money launderingandcombating The ACPR’s workalsoextendstoanti- the financingofterrorism Anti-money launderingandcombating and evolvingpractices A broad scopeofsupervision customers of banks andinsurers, the As partofitstaskprotecting the and insurercustomers Protecting theinterestsofbank your customer(KYC)requirements. correspondent bankingandknow on politically exposedpersons, the fourthAMLdirective, including transposing obligations arising from ACPR publishedseveralguidelines the supervisory priorities.In 2018, and represents oneoftheir Supervisory Mechanism(SSM) ECB aspartoftheSingle inspections onbehalfofthe 50

FINANCIAL STABILITY

The prospect of Brexit

Since the UK referendum on its membership of during contract lifecycles. UK payment systems would the European Union (EU) on 23 June 2016 and its become third-country systems, so deposits by French activation of Article 50 of the Treaty on European participants would no longer be protected in the event Union on 29 March 2017, the Banque de France and of failure. the ACPR have regularly assessed the various exit National and European authorities have already scenarios and their potential consequences for financial adopted or are in the process of adopting measures stability. Heightened political uncertainty continued to prevent and limit the impact of these risks. On throughout 2018: although the United Kingdom and the 6 February 2019, France published an ordinance on EU reached a withdrawal agreement and a statement on preparatory measures for financial services ahead of the future relations on 14 November 2018, they have not United Kingdom’s departure from the EU. To deal with been ratified by British Parliament. Within the framework the consequences of a no-deal Brexit, the order covers, of their tasks, the ACPR and the Banque de France among other things: are monitoring the two main sets of risks linked to Brexit, namely those that could affect financial stability • continued access for French entities to UK interbank and those that could threaten customer protection. payment and settlement systems; Accordingly, they participated actively in domestic and • clarification of the rules applicable to insurance European work on assessing and mitigating the impact contracts entered into with UK insurers under of different Brexit scenarios on the financial system and European passporting rights before the United its participants. Kingdom’s withdrawal; In a no-deal situation, UK financial participants • amendments to French law to accommodate (banks and insurers) would lose their European International Swaps and Derivatives Association (ISDA) passporting rights and access to the common market master agreements; on 29 March 2019. It is up to the financial industry to prepare actively for the consequences. The ACPR has • introduction of rules to facilitate transitioning for already issued authorisations and is supporting over collective investment schemes. 50 financial institutions from a range of sectors in their The European Commission, meanwhile, has already relocation efforts. proposed a number of solutions to address the UK central counterparties (CCPs) would also lose their identified risks to financial stability. Temporary recognition under EMIR, meaning that the bulk of new recognition of UK CCPs was announced on OTC derivatives contracts could no longer be cleared 19 December 2018, which will allow them to continue in London. The validity of in-force OTC derivatives to provide their services to European participants during contracts could be called into question if events arose the scheduled one-year transition period.

39 40 FINANCIAL STABILITY related incidents.Supervisory especially in the event of account- inclusion schemesandfeesearned, work focusedonmonitoringfinancial customers. Accordingly, in 2018, its to safeguard themostvulnerable institutions applytherulesdesigned interests. Inparticular, itchecksthat take proper account of customer ACPR ensures thatbusinesspractices BANQUE DEFRANCE– ANNUALREPORT 2018 the eventofmajorandevenfataldifficulties. The plans recovery andresolution strategiesthat canbeappliedin The frameworkrequires bankstodrawupimpartial Resolution Mechanism(SRM). European UnionimplementedintheshapeofitsSingle coordinated thedesignofaglobalframework,which limiting theneedforpublicmoney. AtG20level,theFSB operate, whileprotecting customerassetsandfunds (particularly financingeconomicparticipants)continueto this need.Itseekstoensure thatbanks’criticalfunctions A bankresolution regime wasestablishedtoaddress overall financialsystem. financial institutionwhilepreserving thestabilityof robust frameworktomanage thefailure ofabankor Brothers andAIGfailures, highlightedtheneedfora The 2007‑09 financialcrisis,andinparticulartheLehman Resolution plans Authority). Assuch,itishandled financiers (AMF–FinancialMarkets shared withtheAutoritédesmarchés The taskofcustomerprotection is and thedutytoprovide advice. governance, customerdisclosures changes inareas suchasproduct effective application of regulatory activities alsocovered the and Monaco-basedcredit institutions. somefinancingcompanies in thenon-EUoverseasterritories,investmentfirms, 1 scope oftheEuropean mechanism. established inFranceandthatindirectly belongtothe preventive resolution plansforcredit institutions jurisdiction, theACPRistaskedwithdrawingup As regards institutionsthatremain undernational drawing ontheresources oftheSingleResolutionFund. a European authoritythatcan,ifneedbe,intervene by the direct responsibility oftheSingleResolutionBoard, single supervisoryframework,themainbanksare under institutions orgroups intheeventofacrisis.Aswith absorbing andrecapitalisation capacityofaffected funds andeligibleliabilities,whichrepresent theloss- are supplementedbyminimum requirements forown The ACPRisalsoresponsible fortheresolution ofcredit institutionsbased

industry players. among membersofthepublicand take jointactiontobuildawareness consistent customerprotection and analytical frameworks to ensure has pavedthewaytodevelopshared authorities. Thisclosecollaboration assignments taken on by the two monitoring andsupervisory by a joint unit that coordinates 1 FINANCIAL STABILITY 2 The Banque de France is preparing for new risks and contributing to efforts to adapt financial system regulation accordingly

Assessing risks and contributing to the conduct of macroprudential policy

Ongoing supervision to identify systemic risks

In addition to supervising financial institutions individually, the Banque de France supervises the overall financial system. Its assessments also involve regular stress testing which involved the ACPR as regards help to inform the thinking of the exercises. In 2018, the European the nine French insurance groups HCSF, which is responsible for Banking Authority (EBA) organised in the scope. These assessments macroprudential policy, and are used a stress test of the European banking confirmed the resilience of France’s to set the supervisory priorities for sector,8 which the ACPR managed financial institutions. financial institutions. These efforts on behalf of the SSM for the give rise to the publication of a six largest French banking groups. This supervision is further twice-yearly Assessment of Risks to EIOPA, meanwhile, conducted a underpinned and informed by the French Financial System.7 They stress test of the insurance sector,9 research work, which in 2018 notably focused on developments in banks’ business models, profitability and solvency, the rise of non-bank finance 7 https://publications.banque-france.fr/en/liste-chronologique/assessment-risks-french-financial-system (see box below), contagion within 8 The macroeconomic and financial stress test conducted between January and November 2018 involved Europe’s 48 largest banking groups (covering 70% of the European banking system’s assets), including 33 groups under direct SSM supervision. the financial sector, and the risks to Six French groups were among the 33. The results confirmed the resilience of France’s banks. which households and companies 9 The stress test involving 42 European insurance groups (making up 75% of the market) looked especially at natural disasters and adverse financial developments, including a persistently low interest rate environment and a sudden increase in rates. are exposed and the appropriate While reinsurance helps to make the sector resilient to natural disasters, the tests confirmed the European sector’s sensitivity macroprudential response (see the to a combination of insurance and market shocks. Overall, the results showed that the sector is appropriately capitalised to absorb the tested shocks. ACPR’s Analyses et synthèses 10 https://acpr.banque-france.fr/en/liste-chronologique/analysis-and-synthesis-analyses-et-syntheses reports).10

41 42 FINANCIAL STABILITY https://publications.banque-france.fr/sites/default/files/medias/documents/financial_stability_review_22.pdf Banque deFrance(2018)“Non-bankfinance–trends andchallenges”,FinancialStabilityReview,No.22,April BANQUE DEFRANCE– ANNUALREPORT 2018 liquidity andleveragerisksintheassetmanagementsector. market regulators andsupervisors),tostrengthen thesupervisionof OrganizationInternational ofSecuritiesCommissions(whichincludes level, especiallythejointefforts oftheFinancial StabilityBoard andthe The BanquedeFrancecontributestotheworkbeingdoneatinternational consistent topreserve theoverallsystem’s abilitytoabsorbshocks. • spread shocksandtheirglobalimpact; liquidity inorder togainabetterappreciation ofthemechanismsthat and insurers, thendevelopmacro stress testsfocusedparticularlyon • activities toassessthembetter; • The BanquedeFrancehasidentifiedthree priorities inthisarea: maturity and/orleveragerisks. these activitiesare regulated, someofthemmanyposecredit, liquidity, assets undermanagementofoverEUR1,900billioninJune 2018.While for thissector. Itconsistsmainlyofassetmanagementactivities,whichhad inFranceaccountsfor3%oftheworldwidetotal Non-bank intermediation Non-bank intermediationandshadowbanking develop aproportionate regulatory frameworkthatisinternationally evaluate interconnections betweenshadowbanking participants,banks gather more detaileddataonshadowbanking participants andtheir Highlight de France and the ACPR to the work de FranceandtheACPRtowork contributions madebytheBanque All theseanalysesinformthe Responding totheriseofcyclical risks international organisations. in theworkanddiscussionsof de Francealsoparticipatesactively the financialsystem,Banque Lastly, as part of its supervision of de France. exercised uponproposal oftheBanque bytheGovernor 12 Eurosystem committees. in Europe, theEuropean SystemicRiskBoard (ESRB)and and theBaselCommitteeonBankingSupervision(BCBS); (FSB), theCommitteeonGlobalFinancialSystem(CGFS) 11 the financial cycle andrising debt in noting the continued acceleration of financial stabilityinFrance.In 2018, of theHCSF The regulatory powersassigned totheHCSFmaybe level:theFinancialStabilityBoardAt international 12 aimed at strengthening aimedatstrengthening LA FINANCEHORSBANQUES RSF TENDANCES ETENJEUX Avril 2018 stabilité financière Revue dela 11 FINANCIAL STABILITY the non-financial private sector, the Helping to develop prudential In accordance with the final HCSF took two decisions: standards and strengthen the agreement on the Basel III reforms European framework of December 2017, the Basel • to prevent weakness among Committee, within which the Banque the most heavily indebted large Bolstering the prudential framework de France cooperates actively with companies and to limit the while implementing and its peers, reviewed the standard on repercussions of a possible default, assessing reforms market risk, conducting a public the exposure of the main French consultation in 2018 and releasing an banks to these companies was At the European level, the amended standard in January 2019.18 capped at 5% of their core equity; supplements and amendments to The new standard reinforces internal the CRD,14 CRR15 (which implemented models and better recognises • to make the banking sector more the bulk of the Basel III Accord) and market risk. resilient and create more room for BRRD16 (which applies the resolution manoeuvre to deal with a potential principles recommended by the With regard to insurance, the crisis, the countercyclical capital Financial Stability Board – FSB) were International Association of buffer was raised to 0.25%.13 the subject of an agreement by the Insurance Supervisors (IAIS) European Council and Parliament in pursued its work on the prudential December 2018. The ACPR provided framework for insurance. Work was technical support to the French done to establish an international authorities during talks on the capital standard (ICS 2.0), which, banking package for risk reduction, once adopted, is intended to be a which includes a set of provisions to standard that can be implemented

13 Eco Notepad, “The four seasons of the financial cycle bolster the prudential framework across the different jurisdictions. and the countercyclical capital buffer”, and resolution tools.17 Other efforts concentrated on Banque de France, July.

14 Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.

15 Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms. 16 Directive 2014/59/EU establishing a framework for Key figures for 2018 the recovery and resolution of credit institutions and investment firms. 17 The reform is intended to integrate the total 5 41 loss‑absorbing capacity (TLAC) requirement applicable to international conferences seminars and scientific events, systemically important institutions within the CRR and to on financial stability including 10 in conjunction with amend accordingly the minimum requirement for own funds and eligible liabilities (MREL) component of the BRRD. and regulation the ACPR-HEC Chair, 10 in partnership with Toulouse 18 The 2018 review covered financing the economy and streamlining rules. It was completed in December 2018, for School of Economics entry into effect in early 2019. and 10 with Paris Sciences Po

43 44 FINANCIAL STABILITY financing andSMEfinancing. counter derivatives,infrastructure centralised clearing ofover-the- active part in working groups on The BanquedeFranceistaking major round of assessments in 2018. the reforms’ impactandbegana FSB steppedupitsmonitoringof the post‑crisisreform agenda,the Accordingly, after coordinating and potentialcollateraleffects. the framework’s effectiveness their attentiontoanalysing a close,authoritiesare turning in thepost-crisisperioddrawsto regulatory frameworkthatbegan As the phaseof reshaping the running untiltheendofJanuary 2019. was putouttoapublicconsultation of adraftholisticframeworkthat inthepublication November 2018 risk in insurance resulted in participants. This work onsystemic identifying systemicallyimportant BANQUE DEFRANCE– ANNUALREPORT 2018 Key figures for2018 Financial System,publishedinJulyandDecember2018 editions oftheAssessmentRiskstoFrench 2 package onriskreduction andthe onthebanking the endof 2018 (SRM). Whilethecompromise at the SingleResolutionMechanism participates inboththeSSMand below).It Banking Union(see box ofthe basis tothefirsttwo pillars The ACPR contributes on a day-to-day in theeuroarea participants risk-sharing betweenprivate MarketsUnionto promote better Capital Enhancing theBankingUnionand equity investments. on thistopic) Commission followed EIOPA’s advice debt andunlistedequities(the the prudentialtreatment ofunrated involvement inworkbyEIOPA on is playingitspartthrough its European Commission.TheACPR evaluations launchedbythe subject of a series of ex-post Likewise, SolvencyIIisnowthe 19 andonlong-term in BanquedeFrancecollections in academicjournalsand27publications studies andresearch paperspublished 11 which was presented in 2015 and which waspresented in 2015 Markets Union (CMU) action plan, European Commission’s Capital Similarly, implementation of the important totheBanquedeFrance. Union pillarsremains extremely implementation ofallthree Banking (SRF) marksignificantadvances, to theSingleResolutionFund creation ofacommonbackstop EN/COM-2018-114-F1-EN-MAIN-PART-1.PDF 21 communication-cmu-mid-term-review-june2017_en.pdf 20 EIOPA-BoS-17-280_First_set_of_Advice_on_SII_DR_Review.pdf 19 important. Building an integrated of Brexit makesthisinitiativedoubly European economy. Theprospect technology, isvitaltofinancingthe sustainable financeanddigital to encompassaspectssuchas 2017 expanded in https://eiopa.europa.eu/Publications/Consultations/ https://ec.europa.eu/transparency/regdoc/rep/1/2018/ https://ec.europa.eu/info/sites/info/files/ 20 ad 2018 and

21 21 FINANCIAL STABILITY

The Banking Union and Capital Markets Union

Following the euro area crisis, the need to strengthen and harmonise the European-level framework in which banks operate became a pressing need. Steps to strengthen the rules through the Basel III reforms were supplemented by the creation of the Banking Union, which is based on three pillars: • unified supervision with the Single Supervisory Mechanism (SSM): in operation since 4 November 2014 and led by the ECB, the SSM enables integrated prudential supervision of euro area credit institutions; • harmonised and, ultimately, shared resolution through the Single Resolution Mechanism (SRM): the aim is to ensure that the resolution of failing banks is managed as effectively as possible, with minimum cost to taxpayers and mergers) of the European financial sector is a and the real economy; priority action area. • harmonisation of deposit guarantee funds, whose In banking supervision, the Banking Union needs to depositor protection role has been bolstered; put more emphasis on supervision on a consolidated discussions are being held on setting up a European basis, in accordance with the principle of risk- deposit insurance system. based supervision. Through the Banking Union, the Economic and Outside the banking sector but in parallel with the Monetary Union gets support from a more uniform Banking Union, in 2014 the European Union initiated its banking sector that is developing at the euro area Capital Markets Union project, which seeks to increase level. Picking up the pace of European financial financial integration in Europe by promoting the integration is vital to ensuring that savings are more development of integrated, efficient and competitive effectively allocated towards investment needs and to European capital markets, with the implementation strengthening mechanisms for absorbing economic of an action plan combining regulatory and market shocks across countries. Lifting all types of regulatory initiatives on funding innovation, unlisted companies, obstacles to consolidation (combinations, acquisitions long-term financing and more.

45 46 FINANCIAL STABILITY Group thatitchairs. the frameworkofParisResilience for theParisfinancialcentre agency) to lead a cyber-crisis exercise – the French national cybersecurity des systèmes d’information the Banque deFranceteamedupwith practices. TheninOctober, the at formalising and sharing best discussion paperonITriskaimed publisheda which inMarch 2018 network ofcybersecurityexperts, In France,theACPRcoordinates a domestic levels. taking actionatEuropean and concern fortheACPR,whichis Cybersecurity hasbecomeacentral Cybersecurity and future challenges Taking accountofnewrisks CMU andtheJunckerplan. based on the Banking Union, the “Financing andInvestmentUnion”, for deeperintegrationthrough a be approved quickly. It is also calling that thelegislativeproposals can Commission’s efforts andhopes de FrancesupportstheEuropean will servetheeconomy. TheBanque creating afinancialarchitecture that capital marketinEurope iskeyto BANQUE DEFRANCE– ANNUALREPORT 2018 Agence nationale de la securité Agence nationaledelasecurité 22 (ANSSI

within within infrastructures anddevelopa sector. Theyalso takepartinwork of analysistoincludetheinsurance of theserisks,extendingtheirscope and macroeconomic assessments the ACPRcontinuedtheirmicro‑ Treasury, theBanquedeFranceand prepared jointly with the French banking sector(2017), climate change-related risksinthe releasing afirst report assessing are takingthemintoaccount.After and monitoringhowfinancialplayers deepening its analysis of these risks stability, theBanquedeFranceis climate changecouldaffect financial transition risksassociatedwith are doing,thatthephysicaland of centralbanksandsupervisors Recognising, asagrowing number and thedevelopmentofgreenfinance risks changerelated Climate tests (publishedinMay 2018). harmonised frameworkforintrusion the cyber to deviseamethodforassessing was involvedinEurosystem efforts In addition,theBanquedeFrance consultation in December 2018. which were put out to a public on managing IT and security risk, EBA todrawupnewguidelines part inworkspearheadedby Europe, theACPRtookWithin ‑ resilience of market 23 whichwas

which itprovides thesecretariat initiative inDecember 2017 andfor (NGFS), which wassetupatits Greening the Financial System developed theNetworkfor In addition,theBanquedeFrance promote sustainablefinance. Tomorrow Initiative,whichseeksto of ParisEuroplace’s Financefor in theParisfinancialcentre aspart File/433386 23 ANSSI operatedsmoothlyintheeventofamajorcybercrisis. coordinated bytheBanquedeFranceandinteractionswith were abletocheckthatthecrisismanagementmechanism exercise. Theresults were highlysatisfactory:participants departments. More than350peopletookpartintheone-day banks andmarketinfrastructures andvariousgovernment 22 to threeactivities gave rise in 2018 transformation. Thesemonitoring close watchonthesector’s digital in the financialsystem and keeps a Banque deFranceisastakeholder As asupervisorandcentralbank,the of theFrench financialsector Supporting thedigitaltransformation (see box below). The testontheParisfinancialcentre involvedthemain https://www.tresor.economie.gouv.fr/Ressources/ FINANCIAL STABILITY

The Central Banks and Supervisors Network for Greening the Financial System (NGFS)

Seeking to support governments, which have primary The Network’s participating institutions, which in responsibility for setting appropriate climate and energy late December 2018 included 24 members and five policies, the NGFS seeks to strengthen the global observers spread across five continents,1 work on a response needed to comply with the Paris Climate voluntary basis, sharing experiences and best practices Agreement. Promoting orderly and sound development to contribute to the development of climate and of green finance is one of the major challenges environmental risk management in the financial sector, facing central banks and supervisors today. It is our and to marshal the financial resources to support the “new frontier”. transition toward a sustainable economy. The NGFS is a Banque de France initiative launched Frank Elderson, member of the Governing Board of at the One Planet Summit organised in Paris on De Nederlandsche Bank, has been appointed to chair 12 December 2017. It represents a commitment that the Network. reflects two concerns. The NGFS’ work is divided into three workstreams: 1. Climate risks are a long-term threat to financial supervisory/microprudential (WS1,2 chaired by the stability. Accordingly, the NGFS’s work consists in People’s Bank of China); macrofinancial impacts (WS2,3 gaining a better understanding of how these risks chaired by the Bank of England); and scaling up green interact with the financial sector and in developing tools finance (WS3,4 chaired by the Bundesbank). to identify and prevent these risks. The Banque de France provides the secretariat for the 2. The transition to a low-carbon economy is Network and workstreams. The NGFS’ first progress both a financial challenge, requiring a profound report was published in October 2018.5 reallocation of capital, and a qualitative challenge, to prevent greenwashing.

1 https://www.banque‑france.fr/en/financial‑stability/international‑role/network‑greening‑financial‑system/about‑us

2 https://www.banque‑france.fr/sites/default/files/mandate‑ws1.pdf

3 https://www.banque‑france.fr/sites/default/files/mandate‑ws2.pdf

4 https://www.banque‑france.fr/sites/default/files/mandate‑ws3.pdf

5 https://www.banque‑france.fr/sites/default/files/media/2018/10/11/818366‑ngfs‑first‑progress‑report‑20181011.pdf

47 48 FINANCIAL STABILITY crowdfunding. on artificial intelligence and was particularlyinvolvedinwork which metthree timesin 2018, public institutions. between industryprofessionals and which offers avenuefordialogue also co-lead aFintech Forum, starting out.Thetwoauthorities to guidefintechsastheyare cooperates closelywiththeAMF the financialsector, theACPR work withinnovativefirmsfrom As partofitscommitmentto manage SEPA creditor identifiers. blockchain, known as Madre, to France hasbegunusinganinterbank hailed globalfirst,theBanquede possible applications.Inawidely such asblockchain,andtheir in distributedledgertechnologies, it deepened its expertise In 2018, tech incubators. industry gatheringsandpartnering in theseareas bytaking partin continue todialoguewiththeplayers the BanquedeFranceandACPR Acting through anetwork of experts, consultation onartificialintelligence. the digitalrevolution andapublic publications onthechallengesof BANQUE DEFRANCE– ANNUALREPORT 2018 25 24 The forum, to consumer protection and financial challenges rangingfrom AML/CFT astheyconsideredbodies in 2018, of attention for international Crypto-assets were anotherfocus banking, insuranceorfinancesector. annual award thatrecognises aninnovativeproject orinitiativeinthe In September 2018,Madre wontheRevueBanque Innovationprize,an sign upshortly. Caisse desDépôtsetConsignationsandSociétéGénéraleare expectedto blockchain inApril 2018,followedbyBNPParibasmid‑October. The Crédit Mutuel‑CM11andCrédit MutuelArkéagroups joinedthe andbanks. departments thatholdtheaccountsofcentralgovernment online afterajointproject involvingITandlegal teams,steered bythe Innovation LabandFrance’s leadingbanks,thenewsystemcame in real time.Designedoverseveral monthsbytheBanquedeFrance requests directly anddistributesnewlycreated identifiers SEPA creditor identifierssinceDecember 2017. Itletsbanksinputidentifier The Madre applicationisan interbankblockchainthathasbeenrecording run byacentralbank Madre, thefirstoperationalblockchain https://www.banque‑france.fr/file/video/madre ‑leprojet‑blockchaindelabanquefrance Madre, theBanquedeFrance’s blockchainproject Action PlanforBusinessGrowth andTransformation (PACTE). being discussedwithintheframeworkofdraftlawon crowdfunding participants.Theseproposals are currently amendments tosupportthedevelopmentandgrowth of 25 agency) andTracfin (theFrench financialintelligenceagency). 24 Among otherthings,theForumproposed legislative DG Treasury, ANSSI,CNIL(theFrench data protection

FINANCIAL STABILITY stability, as well as the potential 3 The Banque de France ensures since 2017, and supports the regulatory framework. The Banque that financial infrastructures framework mechanism proposed de France actively contributed to operate smoothly and securely by the European Commission for the work of the FSB in setting up a the activities of third-country CCPs supervisory framework for this new Smooth operation of payment serving the EU market. market. Although, as a recent FSB and market infrastructures report26 found, crypto-assets do not Promoting at present pose a major threat to the As the competent supervisory a resilient financial centre stability of the financial system, their authority for payment systems27 links to traditional finance need to and central counterparties Acting within the framework of the be supervised given how fast the (CCPs),28 the Banque de France Paris Resilience Group, the Banque situation is evolving. makes sure that financial market de France regularly leads financial infrastructures comply with the centre exercises to help enhance the requirements under European readiness of participants and improve regulations governing systemically their operational ability to manage important payment systems (SIPS), crises. This included an exercise on 26 FSB (2018), Crypto-asset markets: Potential channels for European central counterparties managing a cybersecurity incident future financial stability implications, October – http://www. fsb.org/2018/10/crypto-asset-markets-potential-channels-for- and trade repositories (EMIR) and in 2018 (see above). Also in 2018, future-financial-stability-implications/ central securities depositaries and this concern to strengthen resilience 27 As such, the Banque de France supervises the CORE(FR) and SEPA-EU retail payment systems, and Target2, in settlement systems (CSDR). It also was included in the framework of conjunction with other Eurosystem central banks. contributes to regulatory work Brexit preparations (see box on the 28 The Banque de France supervises CCP LCH SA (with the in this area, including the EMIR prospect of Brexit at the beginning AMF and the ACPR) and the ESES France settlement system (with the AMF and Belgian and Dutch authorities). review that has been underway of the chapter).

Key figures for 2018 Highlight Banque de France (2018), 24 250 Payments and market Payments and market billion euro: average daily billion euro: average daily flow of infrastructures in the infrastructures flows processed by retail large-value payments processed digital era in the digital era payment systems in France in by Target2 in France https://www.banque-france. December 2018 in December 2018 fr/en/financial-stability/ Paiements et infrastructures de marché à l’ère digitale et infrastructures de marché Paiements

www.banque-france.fr

ISSN 0000-0000

Services to the economy

network rating overindebtedness banking inclusion financial education VSEs credit mediation 52 SERVICES TO THE ECONOMY preparation of analyses, rendered includes datacollectionandthe inclusive andresponsible finance, activities, which aim to promote ofthese associations. The scope authorities, credit institutionsand the nationalgovernment, local including businesses, individuals, T In France:atrustedandoutstandingpublicserviceprovider serving allmembersofsociety The BanquedeFranceispresent throughout France, a widerangeofstakeholders, BANQUE DEFRANCE– RAPPORT ANNUEL2018 framework, thesedepartmentalactivitiesare coordinated action in thesebranches.Inlinewiththegovernmental to examinecorporatefinancingissues)are carriedout it contributes(e.g. CODEFI–departmentalcommittees departmental HouseholdDebtCommissions)ortowhich by theBank(secretariat performed servicesforthe cases asecondarylocation.Manyoftheduties administrative seatofthedepartments,andinsome network, withbranchesgenerallylocatedinthe The BanquedeFrancerelies onacountry‑wide Banque deFrancelocations economy thatconcern provides services to the he BanquedeFrance teams withhigh-performance By combiningtheexpertiseofits of theadministrativedepartments. which givesitafirmfootingineach to theBank’s country-widenetwork, These servicesare possiblethanks economic assessmentsandoutlooks. of geographicalorsector-based individuals –oraggregated aspart ratings ordebtreduction plansfor either in unitary form – company Bank’s activitiesintheirrespective regions. branch directors are responsible forsupervising allthe the departments(staff, budgets,IT, etc.).The regional and themanagementofresources madeavailableto projects carriedoutinpartnershipwithregional councils, regions, notablytheregional businesssurveys,certain In addition,someoperationalactivitiesare specifictothe 2015 onthenewterritorialorganisation oftheRepublic). divided into13regions followingtheLawofAugust and supervisedattheregional level(France iscurrently support theyneed. offer everyonetheattentionand information systems,theBankcan 1 Economic and financial

education: a key mission SERVICES TO THE ECONOMY for the Banque de France

The Banque de France, national steering body for France’s financial education strategy

As the national steering body for the financial education strategy adopted by the French government in 2016, the Banque de France works with a vast range of beneficiaries and promotes greater cooperation among actors involved in economic, budgetary and financial education. These include public authorities, persons in difficulty, professional numerous initiatives as part of the consumer advocacy groups, organisations, etc. In 2018, the national strategy, structured around associations working to protect Banque de France carried out five pillars (see diagram).

In 2018, this national strategy was extended to include small businesses and project leaders. The Banque de France plans to launch an information portal dedicated to this audience in the spring of 2019. It has also created a strategy game – #Aventure Entrepreneur – designed to help players better grasp certain concepts central to small businesses. Helping entrepreneurs enhance their economic and financial skills is a key issue for 2019 and 2020.

53 54 SERVICES TO THE ECONOMY teachers andsocialworkersona organises information sessions for financial literacyissues.Italso country toraiseawareness of The Bankworksthroughout the for externalstakeholders Awareness‑raising andinformation the site. pages were viewed on 1.3 million and practical subjects. In 2018, all audiencesunderstandtheoretical articles, videosandgamestohelp and teachers.Itoffers arangeof public, socialworkers,associations and budgetaryissuesfor thegeneral information oneconomic,financial internet portal The The Mesquestionsd’argentportal BANQUE DEFRANCE– RAPPORT ANNUEL2018 Mes questionsd’argent (MQDA) 29 selects and gathers selectsandgathers 29 aimed atchildren aged six andover education booklet,allofwhichare including a game and a financial entertaining awareness ‑raising tools, budgetary matters. It has developed resources, particularlywithregard to creation of “Eduscol” educational The Bank is involved in the for studentsandyoungpeople Economic andfinancialeducation such sessions. and socialworkersbenefitedfrom In 2018, more than 16,000 volunteers relations with banks and insurers. banking inclusion,microcredit, and resolution of overindebtedness, the general public: prevention and variety ofsubjectsinterest to https://www.mesquestionsdargent.fr Education Network(REP)schools. focus onthoseenrolled inPriority school students,withaparticular offers to secondary internships run workshopsforstudents,and with teachertrainers.Itmayalso sessions conductedtogether of presentations andtraining Its involvementtakestheform literacy trainingtoteachers. provide ongoingfinancial whereby theBankhelpsto have signedvariousagreements the French EducationMinistry The BanquedeFranceand the EducationMinistry Partnership with and are available free of charge via

the MQDA portal. The Bank also SERVICES TO THE ECONOMY publishes a series of educational documents entitled ABC de l’Économie (ABCs of Economics), targeted at teachers and students in senior‑level education (baccalaureate onwards). These resources are also intended for a wider audience of non‑experts looking to learn more about the economy.

ABC de l’économie https://abc-economie.banque-france.fr/

Projects, activities and partnerships equipment. For more information on de l’économie (Jéco) in Lyon from 7 the project,30 visit citeco.fr. to 9 November 2018, organised Cité de l’Économie around the theme “What do we Bank de France participation know about our future?”. Over The Cité de l’Économie et de la in the Journées de l’économie in Lyon three days, visitors from all walks of Monnaie (Citéco), a museum project life took advantage of more than led by the Banque de France, is set As it does every year, the Banque 60 conferences on topics related to to open in June 2019. Visitors of all de France attended the Journées current economic events. ages will be able to learn about the fundamental aspects of economics – exchange, production, actors and markets – all in a practical and entertaining way. They will come face to face with the crises and instabilities that institutions seek to regulate. They will also be able to explore numismatic treasures in the vault room: gold, ancient and modern coins, banknotes and manufacturing

30 https://www.citeco.fr/le-projet-en-2018

55 56 SERVICES TO THE ECONOMY modernisation ofFrench legislation of theeconomy, andtheLawon corruption andthemodernisation transparency, thefightagainst introduced under the Law on resolution procedure were measures simplifying the debt 2018, a number of In January individuals facingfinancialproblems. to drawupandpropose solutionsfor under thesupervisionofcourts administrative bodiesthatwork These commissionsare collegiate Household DebtCommissions. network tothedepartmental secretariat servicesviaitsbranch provides the Banquede France to itbytheFrench government, As partofthemissionentrusted Continuing decline inoverindebtedness to meetindividualneeds Support andadvice 2 BANQUE DEFRANCE– RAPPORT ANNUEL2018 protection andprevention Services forprivateindividuals: Key figures for2018 by HouseholdDebtCommissions overindebtedness caseshandled 591 177,

been reduced, with Household overindebtedness procedure has • real estate; for casesinwhichthedebtorowns repayment plan)isnowreserved with a view to establishing a debt phase” (conciliationwithcreditors • As aresult ofthesemeasures: three months. century. for the21st implement solutionsbynearly is toreduce thetimeneededto JAN

VIER 201 judicial involvement in the the “amicablesettlement 9 LE SURENDETTEMENT Highlight DONNÉES NA DES MÉNAGES TIONALES ETRÉGIONALES ENQUÊTE TYPOLOGIQUE201 of cases) which were present in14.5% in euro (excludingproperty loans average amountofpersonaldebt 29,051 8 enquete-typologique-2018-sur-le-surendettement-des-menages https://particuliers.banque-france.fr/ Le surendettement desménages –Enquêtetypologique, 2018 Banque de France(2019), 31 Te aim The effective coordination between the technology provides formore on housing,planninganddigital The ELANLawof23 November 2018 have beenextended. time limits for appeals and disputes approval ofajudge.Inreturn, the debts withoutobtaining theprior write off allorpartofaborrower’s Debt Commissions now entitled to legifrance.gouv.fr/ 31 dispute resolution procedure. overindebtedness andtherental solutions implementedtoresolve

Law No.2016-1547of18November2016:https://www. to Household DebtCommissions applications submitted in the number ofoverindebtedness decline compared with2017 – 9.5 %

These changes are designed to since 2016, reduced the number

prevent debtor evictions. Discussions of second‑time applications SERVICES TO THE ECONOMY have also been held to find ways by 8,000 in 2018 compared to 2017. of taking better account of the difficulties faced by self‑employed In 2018, 166,000 cases were submitted workers in 2019. to the secretariats of Household Debt Commissions in mainland Two‑thirds of households benefiting France, 152,000 of which were from a conservatory measure deemed admissible. The number of (moratorium, debt suspension applications filed with the secretariats agreement) experience renewed decreased by 9.5% compared with financial difficulties and reapply the previous year, and has fallen by a asked the Banque de France to for debt resolution within two total of 40% since the peak in 2014.32 implement the right to an account to three years. Half of these procedure. As of 2018, this request second‑time applications ultimately In accordance with the provisions can be made via a personal space end in a personal debt recovery of Article R. 712‑12 of the French available on the Banque de France procedure (total cancellation Consumer Code, each Household website (as well as at branches and of debt). To limit second‑time Debt Commission draws up an annual by post). applications, it makes sense to activity report setting out the number direct these cases toward personal of cases processed, the measures Revamp of the Assurance Banque recovery at an earlier stage in the taken, the type of debt involved Épargne Info Service website process if, upon examination, there and the difficulties encountered appears to be little chance of an (see Appendix 4 to this report). The ABE IS website, managed improvement while the conservatory jointly by the Autorité de contrôle measure is in place. This practice, Access to bank accounts prudentiel et de résolution implemented by the commissions (ACPR – Prudential Supervision In 2018, more than 50,000 individuals and Resolution Authority), the 32 https://particuliers.banque-france.fr/surendettement/ chiffres-cles-et-bilan-national and more than 5,000 legal entities Autorité des marchés financiers

Key figures for 2018

6,810 In 68% of cases More than 50% 55,979 average amount debtors are single of overindebted individuals basic bank accounts in euro of arrears or separated are members of households opened at the Banque on current expenses from their partners with income below de France’s request the poverty level under the right to an account procedure

57 58 SERVICES TO THE ECONOMY credit institutions, publicandprivate and anti‑exclusion associations, government, consumerprotection Jointly runbythenational (budget advicebureaus) Support forthePoints conseilbudget was visited730,000 timesin 2018. coordination withtheMQDAportal, professionals. Thesite,whichworksin the eventofdifficulties dealingwith assistance to the general public in investment products, whileproviding on banking,insuranceandfinancial ABE IS offers practical information optimised tofacilitatenavigation. and itstree structure simplifiedand home page,hasbeenrevamped search engine,accessible from the in aquestionandanswerformat.Its completely redesigned inlate 2017 was and theBanquede France, (AMF –FinancialMarketsAuthority) BANQUE DEFRANCE– RAPPORT ANNUEL2018 Key figures for2018 advertisements examined Over letters received from thepublic Over 2,300 7,000 at preventing overindebtedness populated bybanks,are aimed databases, which are These of paymentincidentregisters. by lawwithmanaginganumber istasked The Banquede France paymentincident registers Managing Risk monitoringandprevention inclusion forPCBteams. overindebtedness andbanking awareness‑raising sessions on byorganising experiment in 2018 its support for the PCB continued The Banquede France their budget. and personalisedadviceonmanging individuals can getfree, confidential are localoffices opentoall,where the creditors andtheBanquede France, Points conseilbudget(PCBs) and theACPR(witha90%servicerateforyear) by theABEIStelephoneplatform,AMF calls received 235,000

payment incidentsrelated to cheque security. The FCC centralises Cheques (FNCI)servetoenhance and theNationalRegisterofIrregular The Central Cheque Register (FCC) more secure. and makingpaymentinstruments cheques, as well as details of bank The Banque de France and financially vulnerable populations cards that have been stopped due SERVICES TO THE ECONOMY to misuse. The FNCI lists the bank Regarding banking inclusion, in 2018 the Banque de France continued its details of closed or banned accounts, efforts to develop the “specific set of services” that banking networks are as well as stopped cheques and required to offer to individuals in financial difficulty. The offering includes cheques reported lost or stolen. services that are adapted to their situation and that will limit the amount of fees This information is disseminated incurred in the event of an incident. The initiatives implemented in 2017, based to merchants and service providers on discussions with banking networks and associations, resulted in an increase to allow them to verify the validity in the number of beneficiaries. At the end of 2017, 10% of eligible individuals of cheques. had access to these specific services. Through the framework of the Observatory for Banking Inclusion, the Banque The National Register of Household de France actively participated in market discussions organised by the Credit Repayment Incidents (FICP) government with a view to strengthening the measures in place for the financially helps to prevent overindebtedness vulnerable. These discussions led to the following commitments by French banks: by enabling banks to better assess • Banking incident fees will be capped at EUR 25 per month for financially the risk when a customer applies vulnerable clients. This measure, to be implemented no later than 1 February 2019, for a loan. The FICP records will benefit more than three million people. payment incidents related to credit • Fees related to incidents of any kind are to be capped at EUR 20 per month granted to private individuals and EUR 200 per year for clients subscribing to the “specific set of services” for non‑professional purposes. set out by law for vulnerable individuals. This measure will be implemented It contains details of any measures no later than 30 June 2019. implemented to resolve cases of • The “specific set of services” for vulnerable individuals is to be expanded by household overindebtedness. at least 30% by the end of 2019.

Key figures for 2018 1.2 69 FCC 1.38 billion consultations by banks million consultations million individuals of the three payment incident and cheque of the FNCI by merchants recorded in the FCC registers: FCC, FICP, and FNCI (down 4.5% versus end-2017) FCP 2.44 1.35 million individuals recorded in the FICP million household credit repayment incidents (down 3.3% versus end-2017, with a 25% drop (down 1.1% versus end-2017, with a 30% drop in the annual number of new entries since 2011) in the annual number of incidents reported since 2011)

59 60 SERVICES TO THE ECONOMY that isitselfactiveinthefield. area, alongsideabankingsystem has madesignificantefforts inthis individuals. TheBanquede France intended forfinanciallyvulnerable of the“specificsetservices” and theinadequatedissemination the highcostsofbankingincidents Banque de France, drew attentionto chairmanship oftheGovernor and publicauthoritiesunderthe brings togetherbanks,associations Banking Inclusion(OIB),which theObservatoryfor In June 2018, Monitoring bankcharges Note: Intotal,nearly10,000referrals tovarioustypesofprofessional organisations. b) a) (%) Referral ofVSEstoprofessional networks BANQUE DEFRANCE– RAPPORT ANNUEL2018 Banque deFrance:righttoabankaccount,rating,etc. Microcredit provided byassociationssuchasInitiativeFrance,FranceActive,RéseauEntreprendre andADIE federations, surety andcredit insurancefirms,informationandprevention centres (CIP). Fédération descentres degestionagréés (FCGA–FederationofChartered ManagementCentres), employers’ Accountants, notariesandlawyers Banking andbusinessmediation Commercial anddistrictcourts Chambers ofcommerce Other organisations Traditional ﬁnancing Support networks Public authorities Credit mediation Crowdfunding Microcredit b) a) 0 company’s life. support duringthisperiodoftheir number ofentrepreneurs seeking (VSEs), hasledtoanincrease inthe particularly very small enterprises business creations inrecent years, The growing numberofnew smallenterprises very monitoring andguiding The Banquede France VSE mechanism: Support forSMEsandVSEs 3 5 expertise andsupportservices Working withbusinesses:solid 10 15 20 25 30 craftsmen, merchants, hoteliers, This free supportservicetargets and theoverseasdepartments. correspondents inmainlandFrance set up a network of VSE de France 2016theBanque September Based onthisobservation,in during theirfirstyearsofexistence. companies oftenrequire guidance professional networks,even though However, toofewofthemturnto credit insurancefirms,professional or crowdfunding), surety and financing organisations (traditional networks, chambersofcommerce, out tothevariousprofessional the Banquede France hasreached resolution ofdifficulties. To this end, and development, prevention and company: creation, financing,transfer throughout the life cycleof their best abletoanswertheirquestions them to the professional bodies needs ofentrepreneurs andrefer The VSE system aims to identify the project leaders. than ten employees, as well as of less than EUR 2 million and fewer managing structures withturnover professionals, start‑ups,etc. companies, freelancers, construction restaurateurs, managersofservice SERVICES TO THE ECONOMY

association networks and employers’ thus be quickly put in touch with a employment in France. The stakes federations. It has signed national well‑identified local representative are therefore high, with some partnership agreements with of the organisation. 3.9 million VSEs in the country, these structures (35 at the end of i.e. 96.5% of companies. December 2018) for the benefit At 31 December 2018, more than of VSEs. Entrepreneurs who 6,500 VSE managers had benefited Company ratings: request support from the VSE from this mechanism since its creation. an essential reference for banks and correspondent for their region can The system saw 81% growth in 2018. an instrument of economic development

This support is important as the The Banque de France maintains a creation and development of unique database, FIBEN. With nearly The role of VSE correspondents VSEs are vectors of growth and eight million companies on file, and

Key figures for 2018

102 6,500 36% 35 VSE correspondents VSE managers offered guidance of requests centred partnerships since the launch of the service, on financing including 3,877 in 2018

61 62 SERVICES TO THE ECONOMY an In‑HouseCredit Assessment Assessment Institution(ECAI)and dual statusasanExternalCredit Franceenjoys The Banquede of 5 April 2018). to companies (Decree No. 2018 ‑246 for thepurposeofgrantingpublicaid councils, whichhaveaccesstoFIBEN has alsobeentransmittedtoregional their rating.Since 2018, information themselves, whichare informedof supervisor (ACPR)andtocompanies also suppliesthedatato through investmentfunds).It or mutualsthatfinancecompanies companies andinsurance advisors, assetmanagement intermediaries andcrowdfunding organisations (credit insurancefirms, to banksandcorporatefinance fabric, whichitmakesavailable information onFrance’s economic network, theBankgarnersin‑depth economy. Thankstoitsbranch database shedslightontheFrench nearly 267,000 companies rated,this BANQUE DEFRANCE– RAPPORT ANNUEL2018 Key figures for2018 a BanquedeFrancerating (essentially SMEs)assigned non-financial corporations 266,730

refinancing operations; pledged ascollateralforbank assess the quality of assets • Accordingly, itsratingcanbeused: System (ICAS)withintheEurosystem. (ratings 3++to4) “eligible forrefinancing” of companiesratedas 63 nearly 267,000 companies. all thesedata,BanquedeFrancebranchesare abletoassignarating outlook,etc.).Bycollectingandanalysing position andmedium‑term profile ofeachcompany(trends initsmarketsectors, also collectsqualitativedata,allowingitsanalyststodrawupadetailed of December 2018, accountingfor15%ofallratedcompanies.The Bank the ratingprocess: 40,000 ratinginterviewswere conductedatthe end analysts maintaindirect contactwiththousandsofexecutivesduring power,(earning financialautonomy, solvency, liquidity).Itsfinancial andafinancialanalysisofeachcompany’sinformation accounts The BanquedeFranceassignsitsratingsonthebasisofqualitative the responsibility ofBanquedeFrancebranches Assigning ratings: within theEurosystem, to % EUR 50million turnover oflessthan for refinancing have of companieseligible 96 % capital requirements. and determinetheirregulatory quality oftheircredit commitments • by credit institutions,toassessthe

FIBEN consultations million 13.3 Within a regulatory framework,

and as part of its general interest SERVICES TO THE ECONOMY missions, the Banque de France assigns a management indicator to legal representatives who have been at the head of more than one company placed in judicial liquidation over the past five years, or who have been subject to legal penalties imposed by commercial courts. Decree No. 2018‑834 of 3 October 2018 made this system more flexible by getting rid of the management indicator attributed to entrepreneurs who have undergone two judicial liquidation procedures in the last five years (indicator “050”). This is intended to make it easier for these managers to set up The rating also provides business corporate social responsibility new companies. leaders with an external analysis of criteria. It rates more non‑financial their credit quality and enables them corporations on the basis of their to identify the determining factors in financial statements than any other this analysis. This improves dialogue central bank within the Eurosystem. between the bank and companies by offering the latter a shared, recognised point of reference. Highlight The Banque de France adopts an expert approach based on an 16 July 2018 The national agreement on credit mediation signed with the Ministry of the Economy and individual and in‑depth analysis of Finance, the French Banking Federation and the Association of Financial Companies, was renewed companies (mainly SMEs) or groups. until 31 December 2020, and Frédéric Visnovsky was appointed as the new national credit It examines both their financial and mediator. The agreement attaches all national credit mediation services to the Banque de non‑financial positions, taking into France with a view to simplifying the system and optimising coordination with regional mediation services, which are the responsibility of Banque de France branch directors. In cases where jobs account individual and consolidated are at risk, the agreement extends the scope of the procedure to companies operating in the accounting documents as well as social economy.

63 64 SERVICES TO THE ECONOMY using theprocedure hasremained (–17%). Thetypeofcompanies downward trend observedin 2017 the economy, isacontinuationofthe conditions andtheimprovement in which stemsfrom theeasingofcredit compared with 2017. Thisdecrease, for credit mediation,down13% applied 2,009 companies In 2018, which isnowattachedtotheBank. national credit mediationservice network, aswellthrough the is provided through its branch cash flowproblems. Thissupport businesses, facing financing or assist companies,particularlysmall continuedto Banque de France the mediation agreement, in 2018 As partofthenationalcredit financing forcorporate Credit mediation BANQUE DEFRANCE– RAPPORT ANNUEL2018 https://youtu.be/vnZ-BAOLh6U Corporate credit mediation Key figures for2018 through credit mediation companies assisted 757

is heldattheBanque de France’s The Treasury’s singlebankaccount sector wagesandcollectionoftaxes). (including thepaymentofpublic carry outallitsbankingtransactions and provides itwithanITsystemto means to manage its cash flow, accounts. ItgivestheTreasury the managestheTreasury’sde France national government, the Banque Under anagreement signedwiththe provider totheFrench government The Banquede France, financialservice and 414,139 jobs have been saved. have seentheirbusinesssecured November 2008, 23,227 companies Since the scheme was introduced in remains unchangedat65%. rate for mediation procedures largely predominant. Thesuccess and retail (25%) sectorsremaining 80% ofcases,withtheservice(40%) relatively stable:VSEsaccountfor or secured jobs saved 10,565 of the Treasury processed onbehalf million transactions 918 of thesepaymentinstruments,the For transactionsinandsettlement payment transactions. annual volumeofnearlyonebillion these transactionsincludean supply of coins and banknotes, In addition to payments in and the 6,000 transaction accounts. overseas departments,through in mainlandFranceandthe and received bypublicaccountants centralises alltransactionsinitiated head office inParis.This account ÉTAT at auction of Treasury securitiessold billion euro: totalamount 506 Banque de France represents the On behalf of Agence France Trésor Execution of the Public government in retail interbank (AFT), the Banque de France holds SERVICES TO THE ECONOMY payment systems (STET for auctions of government securities Service Contract in 2018 France and STEP2 for European on a weekly (Treasury bills) and cross‑border transactions) and monthly (OATs and OATis) basis, Pursuant to the Public Service high‑value payment systems using a specific computer system Contract signed between the (Target2), as a direct participant. to process such transactions. French government and the Banque de France, the Bank’s branch network is responsible for receiving members of the public and providing them with information on issues concerning overindebtedness, payment incident registers and the right to a bank account. It also answers more A portal for the French Treasury general questions about banking transactions and practices. The Banque de France provides public finance administrators with a In 2018, the Banque de France dedicated portal enabling them to carry out their individual transactions network responded to more and monitor their account position in real time. The portal is directly than one million such requests connected to the IT system of the Directorate General of Public from individuals, including more Finances (DGFIP) for retail payments. The Bank regularly tailors its IT than 575,000 requests received processing to the Treasury’s needs (e.g. implementation of paycheck at its branches and reception withholding), and assists the Treasury with market developments and the offices. The network also handled modernisation of its payment instruments (national cashless payment more than 310,000 telephone instrument strategy). calls and answered 130,000 letters Agence France Trésor (AFT), which manages the government’s cash and emails. In line with its balances, can thus monitor all financial flows on a daily basis, and ensure commitment to modernise and that the government has sufficient resources at all times to meet its diversify the way it communicates financial commitments. Article 123 of the Treaty on the Functioning of the with users of its services, European Union prohibits euro area central banks from granting overdrafts the Bank also responded to the or any other credit facilities to public bodies. The Treasury’s single approximately 53,000 requests account at the Banque de France must therefore be in credit at the end transmitted via personal spaces of each day. on its website.

Ambitions 2020: transformation

modernisation visibility digital banking innovation openness performance exemplarity public service The Banque de France’s transformation visibly picked up pace in 2018 AMBITIONS 2020: TRANSFORMATION AMBITIONS

n 2018, the Bank continued exemplarity and performance their targets. These efforts are to execute its Ambitions 2020 when dealing with the public. helping to transform the activities Istrategic plan, diligently and of the Banque de France and resolutely pursuing the plan’s The Bank has kept a sustained pace are contributing to the broader three major commitments, each of reform: 34 of the 59 actions objective of raising the level of of which is underpinned by public outlined in the strategic roadmap public service, which is measured service values and a duty of are now up and running and hitting by 10 key targets.

Overview of the Ambitions 2020 strategic plan

MONETARY STRATEGY FINANCIAL STABILITY SERVICES TO THE ECONOMY

We want to increase In the wake of the financial We want to work as closely confidence in the euro crisis, we want to create as possible with economic mbitions and enlighten a safer financial system agents on the ground and or all our economic debate. capable of supporting be recognised as an core missions economic growth in France exemplary public and the euro area. service provider.

mbitions We want all staff at the Banque de France, both women and men, to feel more valued and motivated. or our sta

E EE We want to deliver the best possible service at the best possible cost. mbitions to raise the rofile E VVE We want to keep pace with our rapidly changing environment. o the anue de rance E VSE We want to engage more with the community and give the general E public the full beneﬁt of our expertise.

68 BANQUE DE FRANCE – ANNUAL REPORT 2018 Ambitions 2020: 10 key targets for 2020

1 At least 1,000 new hires by end‑2020 and 500 block‑release contracts 2016‑18 achievements: 784 new hires; 408 block‑release contracts AMBITIONS 2020: TRANSFORMATION AMBITIONS

2 200 internal promotions to professional/managerial roles by end‑2020,a) with the aim of raising the proportion of staff in professional and higher categories to 35% Our staff 2016‑2018 achievements: 149 promotions (33%)

3 9,800 full‑time equivalent (FTE) staff by end‑2020 2016: 11,690; 2017: 11,021; 2018: 10,257

4 Increase in staff confidence in the Banque de France’s future to more than the 50% indicated in the 2014 BVA survey 2018 survey: 42%

5 Around EUR 1 billion in investment over five years, including nearly EUR 400 million for Ambitions 2020 and the modernisation of the network Our performance 2016‑2018 achievement: EUR 646 million invested

6 Ensure all our pension commitments are fully covered in 2020, thanks to a strong financial performance Year‑end 2016: 80% covered; Year‑end 2017: 88%; Year‑end 2018: 91%

7 10% reduction in our net operating expenses 2016‑2018 achievement: –11.5%

8 Steady increases in • the visibility of the Banque de France: 2016: 36%; 2018: 58% • customer satisfaction; Our influence 2018 (first‑time survey covering ten services): 86%

9 Number of people benefiting from economic and financial educationb) • number of teachers and social workers that received instruction or awareness raising training in 2018: 18,729 • number of pages visited on the MQDA and Citéco portals in 2018: 1,700,786

10 Ensure confidence in the euro in France is at least in line with the European average and always greater than 60%c) 2016: 68%; 2017: 71%; 2018: 72% (European average: 75% in 2018) a) Excluding the additional impact of the career reform plan. b) Measurement indicators were put in place for this target in 2018. c) Obviously, this target does not depend solely on the Banque de France and can only be regarded as a guideline. However, we believe it is important to monitor levels of confidence in our currency in France, via the half‑yearly Eurobarometer survey. As a reminder, in December 2015, 67% of French people were in favour of the euro compared with a European average of 68%.

69 The success of the plan is also With their combined effects, Setting up and implementing measured by the constant attention they are contributing to the plan’s a new HR management strategy that we pay to our environment overarching goal of making staff and by our ability to reconcile feel more valued and motivated. One of the commitments of the AMBITIONS 2020: TRANSFORMATION AMBITIONS macroeconomic challenges, relating Ambitions 2020 plan is to support to monetary strategy and financial The transformation levers applied to all the women and men working at stability, with microeconomic the three core missions of monetary the Banque de France to ensure challenges addressed through our strategy, financial stability and that they are fully invested in the services to the economy, which services to the economy help to Bank’s transformation. This goal we deliver via our firmly established make the Banque de France more coincides with calls from managers local presence. efficient, more innovative, more and staff for more responsibility, visible and more open. more autonomy and fair recognition At a time of changes to our of individual contributions. demographic structure, characterised Numerous Ambitions 2020 actions by numerous retirements, 14 of 1 Ambitions for our staff: were conducted with this in mind, in the 59 Ambitions 2020 targeted a simpler, more modern line with HR management guidelines actions cover human resources. working environment and applied through several These actions play a part in for managers and staff transformation levers: overhauling the Bank’s management model, boosting qualification This commitment forms part of the • a management model overhaul, levels, improving career prospects, Bank’s determination to guide the reflected in new tools for recognising emphasising knowledge transfer natural renewal of its workforce, staff performance; and attracting high‑calibre recruits replace only one in two retirees and with offers of engaging work. transform its core activities.

Access to training Proportion of tenured managers internally promoted to professional/managerial roles (%) (% of staff at 31 December 2018)

80 75 70 60 50 Internal promotion 40 40 43 32 30 20 Direct hires 10 57 0 OECD average France Banque de France Note: Appointed to professional/managerial roles through the internal promotion scheme or examinations.

70 BANQUE DE FRANCE – ANNUAL REPORT 2018 AMBITIONS 2020: TRANSFORMATION AMBITIONS

• career‑long enhancement of the framework of the workforce A one‑off bonus payment qualifications: the Banque de France trajectory set out at the start of the University contributes to the plan (see below). development of a diverse, multimodal As part of the law to course offering, while staff are also Simplification efforts introduce emergency economic and social encouraged to acquire professional to boost value added measures, the Banque qualifications (see chapter entitled de France paid a one‑off “Corporate Social Responsibility”); More than 430 simplification EUR 500 bonus to all measures have been introduced staff whose gross pay • more dynamic and proactive since the Ambitions 2020 plan was was less than three times mobility management; first launched. A number of low the minimum wage. value added or low impact reports, • increased internal promotion; processes and activities have either More than 9,500 Banque been streamlined or scrapped as a de France employees • career reform. result. Steps have also been taken received the bonus, as to simplify the Bank’s structure did staff at the Bank’s Another way in which the Bank and organisation and increase subsidiaries, including Europafi, IEDOM and is promoting staff skills is by the delegation of responsibilities. BDF Gestion. concentrating resources on value These measures improve the added work while simultaneously working environment for all staff simplifying processes, within and free up their creativity.

71 Creating a modern working environment to promote agility

The Bank has introduced innovative AMBITIONS 2020: TRANSFORMATION AMBITIONS changes to work spaces and working methods to improve the working environment and foster collaborative approaches. The digitalisation of processes and the move to a paperless environment have promoted and encouraged more telework and distance work, with 400 new teleworkers added in the last two years.

Visual management and agile 2 Ambitions to raise the profile A more efficient project management approaches of the Banque de France Banque de France are deployed in all areas of activity. These are redefining the The Banque de France needs to Our performance responds to scope of collaboration to foster a be more efficient, more innovative, the requirement to deliver the more dynamic, cooperative and more visible and more open to best possible service at the best cross‑cutting management style properly raise its profile in the possible cost to our fellow citizens. that suits our evolving environment. performance of each of its duties. The increased pace of retirements

Number of employees who telework Change in telework since 2010 and frequency (%) 1,600 16 14.8 1,400 14 1,200 12 1,000 10 800 8 600 6 400 4 200 2 0 0 1 day 2 days 3 days 4 days 2010 2011 2012 2013 2014 2015 2016 2017 2018 per week per week per week per week

Network Headquarters Total

72 BANQUE DE FRANCE – ANNUAL REPORT 2018 since 2015 has provided an technologies, perfectly illustrates first six months of 2017, local opportunity to boost efficiency, our ability to reconcile a strong local resolution of debt cases, where each through greater use of digitalisation presence with improved services for network unit looks after debtors and simplified working processes companies and individuals. living in its sphere of activity, is AMBITIONS 2020: TRANSFORMATION AMBITIONS and methods, while maintaining gradually being replaced by a front the quality of services provided. The network is rolling out a more office/back office system. Although The reorganisation of working efficient and more professional all Banque de France offices will methods within the Banque approach to dealing with cases continue to receive members of the de France branch network, made of overindebtedness, as provided public, just 35 centres will ultimately possible by new information for by the Ambitions 2020 handle overindebtedness cases, processing and digitalisation plan. While still the norm in the each for a given geographical area.

The reduction in net operating expenses

The Banque de France has stepped up its efforts to Change in net operating expenses between 2015 and 2018 keep reducing its operating expenses with the goal (EUR million) of saving taxpayers at least EUR 100 million a year 1,100 from 2020. To do this, the target of cutting the –2.3% Bank’s aggregate net operating expenses by 10% 10 –4.1% 1,000 102 over five years has been adopted. Combining staff 100 (–24) –11.5% costs, overheads and income directly associated (–43) 900 28 with the Bank’s activities, this aggregate indicator (–121) offers the best economic view of the Bank’s current 800 operating cost. 2015 2016 2017 2018 Since 2015 net operating expenses have been cut by EUR 121 million, putting the Bank slightly ahead of the initial target two years ahead of schedule. This by not replacing all retirees, shown moderation result can be attributed to action on three fronts, as in its remuneration policy, and kept overheads the Bank has simultaneously reduced its headcount at their 2015 level.

73 Improving performance Breakdown of headcount by steering headcount changes (% of staff at 31 December 2018) a) by broad area of activity b) by age bracket

As at 31 December 2018, the Banque Banknote manufacturing Aged under 30 AMBITIONS 2020: TRANSFORMATION AMBITIONS 7 8 de France had 10,257 full‑time Headquarters Aged 55 and over equivalent staff (FTEs), of whom 51 34 83% were tenured and 17% were on contracts.

Aged 30 In 2018, total headcount declined to 49 Network Aged 50 to 54 by 6.9%, or 764 FTEs, chiefly owing 42 42 16 to demographic changes, with Note: The Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority) employees aged 55 years and over accounts for 9% of headquarter activity. making up 34% of staff. A total of 882 employees retired in 2018 and almost 1,200 more are due to timelines and catering to users’ bringing together start‑ups, fintechs, follow suit between 2019 and 2020. operational needs. institutional players and educational By the end of 2020, the Bank aims to partners to involve them in the Bank’s have a total headcount of 9,720 FTEs, Set up in 2017, the Banque digital transformation. representing a decline of at least de France Innovation Laboratory, 20% relative to 2015. Achieving this or Lab, is at the heart of an innovative The Lab is also used to assess the figure will mean recruiting at least ecosystem. The Lab is a space for opportunities and risks presented by 1,000 new staff between 2016 experimentation, exchange and new technologies to anticipate their and 2020 to compensate for the work that is open to the outside, impact on the Bank’s business areas. increasing number of retirements. Change in total headcount A more innovative (full-time equivalent staff at 31 December 2018) Banque de France 13,009 13,025 13,012 12,828 12,746 12,746 12,682 12,438 Ambitions 2020 set the goal of 12,269

gradually digitalising all business 11,690 processes. Project ownership and project management are now 11,021 10,257 being systematically incorporated in an agile approach that is taking projects forward while shortening 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

74 BANQUE DE FRANCE – ANNUAL REPORT 2018 committee’s proposals have been approved for implementation by the AnaCredit Banque de France’s governing body.

Part of a European project 2020: TRANSFORMATION AMBITIONS In another example of innovation, adopted by the ECB Governing the Banque de France has created Council in May 2016, AnaCredit a “data lake” that will radically involves granular loan‑by‑loan overhaul its approach to data data collection on credits collection and analysis and keep it exceeding EUR 25,000 from at the forefront of digital progress. banks to legal entities such as The new data repository, which was companies, associations and government bodies. It has been set up in autumn 2018, gives the Bank operational since October 2018. Innovation also requires an ability a lead on other European central The data cover a wider range to look beyond the usual working banks and many banking groups. of attributes than those in methods, and the Lab offers a France’s central credit register, place to try out new work spaces The list of data that could benefit since each credit line is described and approaches. from the data lake is endless by numerous variables, including and includes security issues, amount, maturity, rate and Elsewhere, the Perspectives Jeunes bank transactions and financial guarantee, and then checked (“young prospects”) committee transactions. The repository will also and harnessed using data lake made up of recently hired talents integrate “views” from social media technology. A total of 8 million and set up in 2018 is viewed as sites such as Twitter and Facebook credit lines, corresponding a model within the European or websites/digital platforms, to 2.3 million counterparties, System of Central Banks (ESCB). which provide details for the were reported in the first round of data gathering. The Bank’s Executive Committee Bank’s economists to analyse and has asked the committee to come interpret from various and innovative The wealth of data provided up with proposals to accelerate angles as they monitor business will allow the Banque de France and promote the Banque conditions. Accordingly, these data and the European Central Bank de France’s transformation. to strengthen their analysis of Following an assessment carried company financing and identify out in conjunction with operational indicators to track difficulty of and cross‑cutting areas of the Bank, access to credit or risky lending several of the Perspectives Jeunes criteria. Company ratings will also benefit from the new information.

Inauguration of the Banque de France Lab’s new premises https://www.youtube.com/watch?v=DErdyYYqY_E

75 go into the virtual “lake” unfiltered, familiar with the role and activities for supervisors held in Amsterdam to ensure that they stay fresh and of the Banque de France, while over in April, and in November he relevant. Unlike aggregate data, one‑third of respondents had heard closed the Climate Finance Day which provide a useful overview to mention of the Banque de France organised in Paris. On the issue of AMBITIONS 2020: TRANSFORMATION AMBITIONS analyse trends, granular data supply in the last six months. institutions, he repeatedly stressed valuable information on the diversity the need to round out Europe’s of individual behaviours. The lake Our involvement in the economic Monetary Union with a bona fide features various tools, including debate takes multiple forms as Economic Union, conveying this special statistical procedures, we target the general public, message in Munich in February, to enable users to exit the data an informed public and expert at the “ECB and Its Watchers” jungle with useful information. audiences. The aim is to relay conference in March, and again the Bank’s messages about its at LUISS University in Rome A more visible and open core activities and to decipher in November. He has also repeatedly Banque de France economic and financial mechanisms. underlined the new challenges Although primarily conveyed likely to affect the European This goal reflects the Banque through speeches by the Governor, financial sector in the short and de France’s resolve to be more the Banque de France’s presence medium term, such as the digital open, to do a better job of sharing is additionally communicated by revolution, and also Brexit, which its expertise with the general public national and regional spokespersons. he addressed in a specific speech and to affirm its CSR commitments. The Bank also has a recognised in November as part of a conference place in the economic sphere organised by the ACPR. Finally, The Bank has densified and through its publications, research the Governor sets out his main diversified its involvement in and contacts with other central recommendations for the nation’s economic debates, as shown by the banks, national and international economic policy each year in his results of surveys on its reputation and bodies and think tanks. Introductory letter to the Banque on audience and visibility obtained de France’s Annual Report, which via various communication vectors. Speeches by the Governor is sent to the President of France. The Banque de France’s visibility and reputation have improved, Governor François Villeroy de Galhau An appropriate range of publications indicating that people now have participates actively in the economic a better understanding of our role and financial debate by speaking on The Banque de France has raised in the economy and the work we the Eurosystem’s monetary policy the profile of its publications in the do for the country. Overall, 58% of stance and also on green finance. press and on social media, reaching people surveyed in 2018, compared He gave the opening address at the out to a more diverse audience. to 36% in 2016, said that they were international climate risk conference While its Financial Stability Review

76 BANQUE DE FRANCE – ANNUAL REPORT 2018 and Assessment of Risks to the economics through the ABC de French Financial System target l’économie portion of the website financial sector specialists and (see chapter entitled “Services to nnua rer Bulletin of the Observatory for the de l a B 217 anqu /3 - MA e d Security of Payment Means e Y-J Fra international experts, the Banque the Economy”). UNE 2018 nce The main French groups returned to growth in 2017 Companies 2020: TRANSFORMATION AMBITIONS After h groups wasigh confir ly en co ura gin Capitalising med withg h a 5.3% increase in tur alf-ye which arly 7 on re an accounted their sults, 201 additional and the Bank’s inter the de France Bulletin re vi lat for n ta ed a ational lity the euro. to 1.7 5.8 of th exch percentagepercentage activities, nover duringe 80 an l ge argest This rate point these Fre effe point 2017. n imp cts increase, positivegroups ch and net incomerovem rose by almost one-third and (up 29.2%). ind ot repor ustr ent her offset contribution ial and in tu va ted Thanks rno riati by extremely comm ver on a prov s resulti negative to tur ercia 5.7% andto 2.3%,these respectively ed nover strong l to ng 2.2 robust be a from . Exter orga sou the percentage nal nic blog cater to a well‑informed but In addition to being assessed by results, rce de growth growth, o pre f pro c the fita iatio poi brought main bl n nt Marie Balard, Adrien Boileau and Olivier. Gonzalez e gr of the contribution groups ow dollar Companies Directorate th: were EBITD a A1 ga able ro ins to se t reinforce by 7.2 % yea their r-on- cash ye position ar and broader audience. The Bank’s financial targets, the Bank’s efficiency equity 5.3 by % increase in tur 29.2 nover rise in net% income JEL codes EUR 17 F23, G30, : reduction in financial debt Breakdown of the increase in turnover G32, L25 billion (out of a total of EUR 586 billion) (amounts in EUR billions, change in %, contributions reports, studies, surveys and and visibility are also gauged by 15.1 in percentage points) growth in% market capitalisation

+1.7pp +22 +5.8pp -27 -2.2pp +74 1,280

1 See deﬁnition in Appendix 2. analyses are available to anyone. measuring the quality of service 2016 tur 1,349 +5.3% nover So urc Scope Banquees de: France calculations, May 2018. Fin Exchange rate effects anc ial and other variations stat eme Organic nts of th growth e 8 2017 tur 0 larg nover est grou ps, Apri l 20 Non‑specialist members of provided to the public. This is the 18. the public, especially younger purpose of the survey of satisfaction people, can also learn more about with the Bank’s services.

The Banque de France satisfaction survey

To promote transparency and continuously improve • 86% of respondents said they were satisfied with the services that it delivers, the Banque de France has the services provided by the Banque de France; decided to regularly measure satisfaction among its • 93% said the Bank does objective and reliable work; partners and customers. This reflects the fact that the Banque de France offers a wide range of services whose • 84% said the Banque de France is able to evolve development and longevity are largely based on the and innovate to respond to the needs and demands Bank’s ability to satisfy all its partners and customers. of economic and financial participants; • 75% of respondents said the Bank is open to its The Bank therefore published its first satisfaction environment and communicates adequately. survey in May 2018.1 Individual and professional users These positive results were also used to identify an of ten services that are representative of the Banque initial area for improvement, namely to communicate de France’s activities and that relate to monetary more effectively about the range of services offered by strategy, financial stability and services to the economy the Banque de France, in view of the fact that the public were surveyed on the quality of the services offered, remains unaware of some of the institution’s activities. contacts with Banque de France staff and accessibility of information. 1 http://barometre-2018.banque-france.fr/

Corporate Social Responsibility

sponsorship commitments integration environment skill development corporate citizenship solidarity equality Corporate social responsibilty

The Banque de France rallied its teams around its four commitments, CORPORATE SOCIAL RESPONSIBILITY CORPORATE with a stronger focus on managing climate-related risks

he primary vocation of Our corporate social responsibility: the Banque de France is RSEResponsabilité sociale d’entreprise four commitments and twelve priority actions T to work for the common good. In accordance with its

general‑interest missions, it has An educational and An economic and always relied on its expertise, its cultural commitment civic commitment 1 Improve the economic 4 Prevent and resolve presence on the marketplace and its and ﬁnancial education overindebtedness network of regional offices to develop of the general public 5 Promote banking inclusion 2 Support research and microcredit corporate citizenship initiatives through sponsorship 6 Foster regional development 3 Diversify and business growth benefiting households, as well as our cultural sponsorship 7 Contribute to responsible companies and local authorities. investment 8 Support charitable initiatives Today, CSR is a fundamental value with a cross‑cutting presence in all the Bank’s activities.

2018 was marked by increasingly intense mobilisation of the financial sector in the field of climate‑related

risk management. Determined to be An environmental A commitment a player in the energy transition, the commitment towards staff 9 Take account of 11 Foster gender equality Banque de France was instrumental climate-related risks and diversity in creating the Network for Greening 10 Reduce our environmental 12 Encourage skill acquisition footprint and career development the Financial System (NGFS), which aims to strengthen the role of the financial system in risk management and mobilise capital for “green” and low‑carbon investments (see chapter entitled “Financial Stability”).

80 BANQUE DE FRANCE – ANNUAL REPORT 2018 The Banque de France stepped up in its report Transforming Supporting research its commitment to responsible our World: 2030 Agenda for through sponsorship finance with the implementation of Sustainable Development. It 33

its Responsible Investment Charter, is particularly active in six of Renewal of the partnership SOCIAL RESPONSIBILITY CORPORATE reflected in the publication of its these goals.35 with the Paris School of Economics first report on the incorporation of environmental, social and The three‑year rolling partnership governance (ESG) criteria into its 1 An educational initiated in 2009 with the Paris investment decisions.34 and cultural commitment School of Economics (PSE), one of the world’s leading academic Finally, to further strengthen its Improving the economic institutions, was renewed in 2018 action, the Banque de France and financial education with the aim of consolidating this measured its contribution to the of the general public centre of excellence in economic achievement of the Sustainable research and training, developing Development Goals (SDGs) The Banque de France, synergies between PSE and the set out by the United Nations national steering body Banque de France and helping for France’s financial education strategy strengthen economic research in

33 https://www.banque-france.fr/en/banque-de-france/ France with a view to placing both corporate-social-responsibility/strategy-and-commitments Since late 2016, the Banque institutions at the heart of economic 34 Based on Article 173 of the Energy Transition Law de France has acted as the national expertise at the international of 17 August 2015. 2018 SRI report: https://www.banque-france.fr/en/banque- steering body for France’s economic level. This partnership involves de-france/corporate-social-responsibility/economic-and-civic- commitment/contributing-responsible-investment and financial education strategy. international seminars and symposia,

35 Good health and well being (No. 3); quality It continues to roll out multiple meetings with senior managers and education (No. 4); decent work and economic growth (No. 8); actions in this field (see chapter international researchers, and grants reduced inequalities (No. 10); responsible production and consumption (No. 12); and climate action (No. 13). entitled “Services to the Economy”). to young PSE researchers.

2018 indicator Improving the economic and financial education of the general public

Mes questions d’argent portal visits Number of teachers informed Number of social workers trained (number of pages viewed)

2017 422,487 2017 2,638 2017 14,840 2018 1,344,729 2018 2,645 2018 16,084 Target for 2020 1,350,000 Target for 2020 3,000 Target for 2020 18,000

81 818374-Flyer-OpenDataRoom-03.pdf 1 22/10/2018 17:38:17

Partnership between the Banque de France Provide research economists with and the Foundation for Studies and access to data

Research on International Development You are a researcher? The Banque de France offers you

CORPORATE SOCIAL RESPONSIBILITY CORPORATE a free access to its Open Data Room The Banque de France is the first Established in 2012, the partnership central bank in Europe to provide between the Banque de France access to its monetary, financial and and the Foundation for Studies economic data: researchers can use and Research on International more than 780 million anonymised Development (FERDI) was renewed data series via “Webstat”,37 the in 2018. The partnership harnesses Banque de France’s statistical the research capacities of FERDI and portal, available in the Open Data its sister centre (CERDI) – recognised Room in Paris and, as of recently, for their excellence in the field of New York (see chapter entitled development economics – as well as “Monetary Strategy”). the Banque de France’s expertise in monetary and financial development Diversifying our cultural sponsorship issues. This sponsorship initiative helps to strengthen research For the European Heritage Days, the while informing debate on the Banque de France headquarters and main challenges of sustainable certain branches, including those development in low‑income in Lille, Digne, Pau and Périgueux, countries, and the economic and opened their doors to the public. financial policies best suited to help according to the RePEc ranking,36 rise to those challenges. and was accorded “university research school” status in 2017. 36 Research Papers in Economics, collaborative project intended to ensure the broadest possible dissemination Partnership with the Aix Marseille School A thesis grant was financed in 2018 as of economic research. of Economics part of the sponsorship agreement. 37 http://webstat.banque-france.fr/en/

In December 2017, the Banque 2018 indicator 2018 indicator de France expanded its sponsorship Supporting research through sponsorship Diversifying our cultural sponsorship

activities by entering into a Number of conferences, seminars Number of people three‑year partnership with AMSE and workshops organised admitted to (Aix Marseille School of Economics). with the Bank’s partner universities the Bank’s heritage sites AMSE stands out today as the 2017 13,962 seventh most productive economic 2018 14,585 Target for 2020 research institution in France 20,000

82 BANQUE DE FRANCE – ANNUAL REPORT 2018 for the fourth consecutive year. The Golden Gallery: 300 years of history At the same time, greater selectivity for suspended measures has led to

a substantial drop in second‑time SOCIAL RESPONSIBILITY CORPORATE applications and made it possible to offer more rapid and lasting solutions for overindebtedness (see chapter entitled “Services to the Economy”).

Banque de France branches carried out a number of initiatives with social workers: more than 1,030 awareness‑raising sessions were organised to inform more than 16,000 social workers of developments in the The Golden Gallery is a unique woodwork decorations, granted overindebtedness procedure, with heritage site to be (re)discovered historic monument status during the European Heritage Days. in 1926, have survived the a view to facilitating their task of 2018 marked the gallery’s ravages of time. The Golden supporting people in difficulty. 300th anniversary in its current Gallery is 40 metres long, layout, brought about thanks 6.5 metres wide and 8 metres Promoting banking inclusion to the extension of a wing of high. It has served as a location and microcredit the private residence ordered for several films: Tous les matins by the Count of Toulouse, the du monde (1991), Vatel (2000) Banking inclusion owner at the time. The sumptuous and Marie Antoinette (2006). Regarding banking inclusion, in 2018 the Banque de France 2 An economic and civic commitment 2018 indicator Preventing and resolving Preventing overindebtedness overindebtedness The secret of the Golden Gallery https://youtu.be/BfASOueFUWw Percentage of second-time applications The significant and sustained decline for household debt resolution

in the number of people applying for 2017 47 % https://www.banque-france.fr/la-banque-de-france/ 2018 47 patrimoine/journees-europeennes-du-patrimoine- debt resolution from local Household Target for 2020 15-et-16-septembre-2018 Debt Commissions continued in 2018 37

83 continued its efforts to develop a specific package of low‑cost Exceptional EUR 5 million allocation to the Social Cohesion services offered by banking Fund by the Banque de France

CORPORATE SOCIAL RESPONSIBILITY CORPORATE networks to individuals in financially vulnerable situations. It has actively With the consent of the Minister of the Economy and Finance, participated in market discussions the Banque de France provided EUR 5 million in financing for the Social Cohesion Fund, a mechanism designed to promote social and economic aimed at strengthening provisions integration for financially vulnerable people, thus removing an obstacle benefiting such individuals, to the development of microcredit. leading to several commitments by French banks (see chapter With this contribution, the Bank is helping achieve the Fund’s target of entitled “Services to the Economy”). EUR 2 billion in outstandings at the end of 2020, which reflects its CSR commitment in this area. Microcredit

Microcredit is a powerful tool for Observatoire de l’inclusion bancaire throughout France. These events the economic and social integration (OIB – Observatory for Banking brought together more than of financially vulnerable people. Inclusion). In 2018, the Banque 1,600 participants from a variety As such, the Banque de France de France awarded “personal” of sectors (public, non‑profit, is resolutely committed to the and “professional” microcredit banking and educational sectors) rapid development of microcredit prizes to projects exemplifying the to promote microcredit. in France. The Bank has also economic and social utility of this promoted this practice via the financing tool. Fostering business growth

Microcredit The Banque de France has established https://www.banque-france.fr/en/banque-de-france/ a network of VSE correspondents in corporate-social-responsibility/economic-and-civic- commitment/banking-inclusion-and-microcredit

The Mes questions d’argent 2018 indicator 2018 indicator (MQDA, or “My questions about Fostering regional development Promoting banking inclusion and business growth money”) web portal offers a way to and microcredit let potential microcredit recipients Number of VSEs assisted annually Total outstanding microcredit in France know about this type of financing. by VSE correspondents 2017 1.4 EUR billions 2017 2,142 2018 1.5 In 2018, the Banque de France 2018 3,877 Target for 2020 Target for 2020 2.0 organised microcredit conferences 4,000

84 BANQUE DE FRANCE – ANNUAL REPORT 2018 such a way as to make a worthwhile A strategy game on the market contribution to the energy transition and to the sustainable and balanced In October 2018, a strategy game,

development of the economy SOCIAL RESPONSIBILITY CORPORATE #Aventure Entrepreneur, was and society. It is also organising released. It offers players an its reporting disclosures with the entertaining way to learn how publication, in March 2019, of its to manage their sales force, make first report on the integration of strategic investments and gain insight into the impact of their ESG criteria into its investment decisions on the financial structure decisions, in accordance with the of their company. recommendations of Article 173 of the Energy Transition Law of 17 August 2015. metropolitan France and overseas the Functioning of the European Supporting charitable initiatives (see chapter entitled “Services to the Union. A focus on environmental, Economy”). Regional initiatives were social and governance (ESG) issues, The Banque de France has been strengthened to organise events including those related to climate involved for many years in solidarity for VSE managers throughout the change, is now an integral part of its sponsorship (in‑kind, financial and year (round tables, conferences, investment policy. The Banque de skills‑based contributions) through communication actions). France thus directs its investments in various initiatives.

Contributing to responsible investment

In 2018, the Banque de France began implementing the principles and commitments of its Responsible Investment Charter (published in March 2018) in the management of assets for which it has direct responsibility, i.e. its own funds and pension liabilities, excluding those held in connection with the missions entrusted to the European System of Central Banks by the Treaty on

85 2nd Forum for Charitable Initiatives: the 2018 awards ceremony

The second annual Forum for Charitable Initiatives Banque de France employees to a wide range recognised 25 projects led by associations in the of voluntary initiatives. CORPORATE SOCIAL RESPONSIBILITY CORPORATE fields of social action, integration and solidarity with vulnerable populations. The Governor presented In addition, volunteers collected 800 kilogrammes each winning project with a trophy and a cheque of clothing from Banque de France staff, which were for EUR 2,000, highlighting the commitment of donated to the La Cravate Solidaire association.

An historic and long‑term partnership Foundation improve the care with the Fondation Hôpitaux de Paris- of hospitalised children, their 2018 indicator Hôpitaux de France families and the elderly. Bank Supporting charitable initiatives staff participate in sorting and Number of staff projects supported Since 1989, the Banque de France, counting coin donations, which

2017 25 an official backer of the Pièces in 2018 amounted to 177 tonnes 2018 50 jaunes (small change) fund‑raising of small change, for a total of Target for 2020 60 campaign, has been helping the EUR 2.02 million.

86 BANQUE DE FRANCE – ANNUAL REPORT 2018 Launch of skills Hall 32, professional integration through apprenticeships sponsorship in 2018

More and more employees have SOCIAL RESPONSIBILITY CORPORATE become involved in charitable initiatives during working hours thanks to the two new skills sponsorship schemes launched in 2018: • for all employees throughout their careers, up to five days per year working with the association of their choice; • on a secondment basis for The Banque de France’s participation in the creation of Hall 32, late‑career employees, volunteer an innovative training centre dedicated to industry‑related jobs and assignments calling on specific located in Auvergne, gave concrete results on 28 September 2018 with professional skills with partner the unveiling of the future building set to host this unique institution. associations for 6 to 24 months. The idea, a first of its kind in France, consists in bringing together on a single site the full range of industrial trades, professional training and transfer of technological know‑how to SMEs and SMIs. Located in Clermont‑Ferrand, this project will be operational as Encouraging staff to support of September 2019. Hall 32 will accommodate 300 young people in initial public‑interest causes training programmes and 1,800 adults in continuing training programmes. To meet the challenges of the labour shortage in the industrial sector, The Banque de France supports it will offer professional training and a pilot integration scheme to assist its employees in their involvement young people who have left or dropped out of the education system. in charitable initiatives. In 2018, it established an institutional mechanism for skills sponsorship for the ninth consecutive year, taste of the professional world, (see box). gave more than 600 young and particularly occupations at the people the opportunity to attend Banque de France. Contributing to professional integration methodological support sessions, receive individual mentorship The Banque de France also participated In 2018, the partnership with from Bank staff, participate in job in the opening of the first site dedicated the Créteil Education Authority interview simulations, and attend to promoting industry‑related jobs, concluded in 2010 and renewed a job fair that gave students a known as “Hall 32” (see box).

87 3 An environmental commitment Reducing GHG emissions by energy source our environmental footprint in 2018 Taking account (%) District heating Fuel oil

CORPORATE SOCIAL RESPONSIBILITY CORPORATE of climate‑related risks In 2018, the Banque de France 16 continued its efforts to reduce its 11 Electricity The Banque de France is committed greenhouse gas (GHG) emissions, 5 to keeping global warming pursuing its strategic objective below 2°C by 2100 by stepping of a 9% reduction in emissions up investments geared towards a between 2014 and 2020. To this “low‑carbon” economy. end, it has monitored its carbon footprint every year since 2008.

In 2018 the Bank set up an Gas Environmental Footprint Steering 68 Committee covering all departments to enhance the management of its environmental policy. it is responsible for more than Monitoring of GHG emissions38 two‑thirds of GHG emissions due to 2018 indicator its high emission factor. Conversely, Taking account GHG emissions electricity has a very low emission of climate-related risks linked to energy consumption factor: the electricity supply Share of banks contracts, renewed in late 2018, and insurance companies made aware In 2018, the Banque de France’s are 100% certified from renewable of climate‑related risk net GHG emissions39 related to sources for all volumes consumed 100 91.3 energy consumption amounted by the Banque de France.40 86.7 90.0%

80 80.0 to 20,186 tonnes of CO2 equivalent 71.0 70.0% 73.0 (tCO2eq), down 1.9% from 2017. GHG emissions 68.0 60 This decrease is mainly due to linked to business travel and commuting reduced energy consumption 40 for heating. In 2018, estimated GHG emissions

20 linked to travel decreased by 1% The most heavily consumed energy 0 38 Estimate based on provisional figures for 2018. 2016 2017 2018 Target for sources remain electricity (53% 2020 of the total) and gas (32% of the 39 Provisional data. Banks 40 Life insurance companies total). While gas accounts for less Supply of 100% renewable electricity guaranteed by certificates of origin (excluding Directorate General Non-life insurance and reinsurance companies than one‑third of consumption, of Banknote Manufacturing).

88 BANQUE DE FRANCE – ANNUAL REPORT 2018 Change in commuting since 2015 is increasing (it stood at 40.6% (in millions of km and %) in 2016) and car use is declining. 120

GHG emissions linked to SOCIAL RESPONSIBILITY CORPORATE 100 business travel in 2018 amounted 80 to 7,666 tCO2eq and the total 60 number of kilometres travelled was down by 1.7%. Distances 40 travelled break down as follows: 20 41% by plane, 28% by train and

0 27% by car. However, in terms 2015 2016 2017 2018 of GHG emissions, air travel and Car Bicycle cars account for 71% and 28% of Public transport Public transport and bicycle (%) CO2 emissions, respectively.

The Bank also continued to renew Change in business travel since 2015 its fleet of vehicles, favouring (in millions of km) low‑emission vehicles with the 45 purchase of three electric vehicles 40 and 32 hybrid vehicles. 35 30 25 Main actions 20 15 Completion of 10 the Banque de France’s 2017 GHG 5 emissions assessment (BEGES) 0 2015 2016 2017 2018 Car Pursuant to the legal obligation for Train legal entities governed by public law Public transport Plane employing more than 250 people to carry out a GHG emissions compared to 2017. Commuting and 42.9% by public transport and assessment every three years, the generated 14,536 tCO2eq cycling. The number of commuting Banque de France drew up its (down 4.5% compared to 2017) kilometres travelled has decreased Bilan carbone© (carbon footprint and represented 98 million continuously since 2016, while the report) for the 2014‑17 period. kilometres: 57% by private car share of public transport and cycling Net GHG emissions amounted

89 2017 Banque de France GHG emissions assessment A real estate policy (tonnes of CO equivalent) 2 that remains focused on energy efficiency and environmental quality Waste Direct fugitive CORPORATE SOCIAL RESPONSIBILITY CORPORATE 1,998 emissions 177 In 2018, the Banque de France Freight continued to enhance the energy 6,173 Energy (before efficiency of its assets, with the taking into account renewable energies) replacement of 20 boiler rooms Fixed assets 26,846 throughout the network and 16,049 1,422 windows (out of 1,476) at Bank headquarters. Alongside this vast project, which was launched in 2012, Travel Purchases of goods (business trips, and services the Bank is also insulating façades commuting, 26,322 visitors) and installing smart lighting systems. 26,178 In Vic‑Le‑Comte, the Europafi paper mill has also benefitted from major renovations and investments in high‑performance, energy‑efficient equipment: thermal insulation of buildings, replacement of windows,

to 97,479 tCO2eq in 2017, down To meet the Bank’s strategic installation of LEDs equipped 2.4% compared to 2014. Energy objective of reducing GHG with motion detectors and generates the most emissions (26% emissions by 9% by 2020, a carbon implementation of water recycling of the total), followed by purchases footprint reduction plan was facilities. Today, almost all waste is (25%) and travel (25%) (see graph). developed in late 2018. It includes recycled and water consumption has several measures aimed at energy been reduced by 40% per tonne of consumption and travel, notably paper produced. 2018 indicator including the continuation of the Reducing Bank’s real estate policy focused Recycling bins have been installed our environmental footprint on energy efficiency, development at the Paris‑La Courneuve site Net GHG emissions of videoconferencing meetings, to optimise office waste sorting by the Banque de France increased teleworking, a policy and recycling. 2017 97,479 to optimise building surfaces and 2018 93,490 rationalisation of IT equipment Target for 2020 90,900 tCO eq 2 (computers, screens and printers).

90 BANQUE DE FRANCE – ANNUAL REPORT 2018 Of the more than 300,000 balance 133 block‑release training contracts Reduction in office sheets handled in 2018, just 6% were were concluded and the Bank paper consumption: processed manually. welcomed 311 contractual interns.42 profit‑sharing CORPORATE SOCIAL RESPONSIBILITY CORPORATE target achieved Promoting gender equality in the workplace 4 A commitment The profit‑sharing agreement towards Bank staff The Banque de France reaffirmed its for 2016‑18 set the goal of commitment to career‑long equality halving paper consumption Fostering gender equality and a healthy work/life balance, between 2015 and 2018, with and diversity particularly through the sharp rise the number of pages printed in teleworking. by Banque de France staff as Getting different generations an indicator. At the end of 2018, printing was down 56% on 2015. working together While women account for 25% of The 2018 target was therefore management positions, Talentu’elles, met and even exceeded. Several part‑time work schemes were a collaborative network focusing The dematerialisation of certain put in place for senior employees on professional equality that has business processes has also in 2018 to help staff anticipate their helped reduce printing. departure and ease the transition to 41 Provisional figures. retirement. For young employees, 42 According to the most recent social assessment.

Dematerialised collection of balance sheets41

Just over 220,000 balance sheets were electronically transmitted in 2018 to the FIBEN company database. Implementation of the balance sheet digitisation programme, initiated in 2016, resulted in the dematerialisation in Banque de France branches, through a third‑party provider, of more than 62,000 balance sheets in 2018. This figure represents an increase of nearly 3.5% compared to 2017. Successful candidates in the 2018 managerial-level entrance exam

91 more than 650 members, 30% of commitment to the integration of whom are men, stepped up its people with disabilities. awareness‑raising and informational

CORPORATE SOCIAL RESPONSIBILITY CORPORATE activities, both internally with the Encouraging skill acquisition implementation of mentoring, and career development and externally with “afterwork” sessions and its participation in Professional training, which is crucial a seminar in Rome run by the to the transmission of the skills Associazione Donne della Banca specific to central banking, is one of d’Italia. Three conferences were the focuses of the Ambitions 2020 also organised on topics related to strategic plan. The Banque professional equality and diversity. de France ranked among the top companies in terms of resources Promoting the integration of people devoted to professional training with disabilities in 2018, with 7.6% of its wage bill going to such initiatives. As 6.16% of positions in the Bank were filled by people with disabilities The Banque de France University in 2018, the Banque de France was facilitates access to training among the 18% of private sector opportunities, simplifies registration employers and the 40% of public and groups together professional sector employers who exceeded the training programmes via specialised mandatory rate for companies with schools (see box). 890 staff members more than 20 employees. This figure attended a certification‑based reflects the Bank’s continuing training programme in 2018.

2018 indicator 2018 indicator Fostering gender equality Encouraging skill acquisition and diversity and career development

Percentage of women Rate of employment Number of employees who received a qualification in top management positions of people with disabilities through the Banque de France University

2017 21.9 % 2017 6.16 % 2017 750 2018 25.0 2018 6.16 2018 890 Target for 2020 30.0 Target for 2020 6.00 Target for 2020 (cumulative) 1,200

92 BANQUE DE FRANCE – ANNUAL REPORT 2018 Banque de France University

The in‑house Banque de France University is a At the end of December 2018, 10 schools were operational: flagship project of the Ambitions 2020 strategic plan. SOCIAL RESPONSIBILITY CORPORATE • Six schools focusing on specific professions: Inaugurated by the Governor in November 2017, the Schools of Supervision, Businesses, it aims to grant all staff access to the educational Private Individuals, Cash Industry, Data, and Finance resources and training they require, whether digital and Operations; or face‑to‑face. • Four cross‑disciplinary schools: the Schools In 2018, 90% of Bank staff members logged on to of Management, Digital Technologies, Languages the University platform at least once. and Personal Skills.

93 CSR dashboard Priority actions Indicators 2018 INDICATOR Targets for 2020 EDUCATIONAL AND CULTURAL COMMITMENT

CORPORATE SOCIAL RESPONSIBILITY CORPORATE 1. Improving the economic Composite indicator and financial education * Portal visits (number of pages viewed) 1,344,729 * 1,350,000 pages of the general public * Number of teachers informed 2,645 * 3,000 teachers * Number of social workers trained 16,084 * 18,000 social workers Baseline: zero portal visits in 2016 1,147 teachers informed in 2016 no social workers trained in 2016

2. Supporting research Number of conferences, seminars and workshops organised with 95 100 events organised through sponsorship all the partner universities of the Bank as defined in the partnership agreements, including those organised within the framework of the Banque de France Foundation Baseline: 83 events organised in 2016

3. Diversifying Number of persons admitted to the Bank’s heritage sites at headquarters 14,585 Between 15,000 our cultural sponsorship and in the regions and 20,000 visitors Baseline: 15,000 visitors in 2015

ECONOMIC AND CIVIC COMMITMENT

4. Preventing and resolving Percentage of second-time applications for household debt resolutiona) 47% 37% overindebtedness Baseline: 45% of files in 2016 were second-time applications

5. Promoting banking inclusion Total outstanding microcredit in France EUR 1.5 billion at end‑2017 EUR 2 billion in outstandings and microcredit Baseline: EUR 1.2 billion at the end of 2015 (indicator at end-2018 will of “assisted” microcredit be available in May 2019)

Banking inclusion: indicator under review Under review

6. Fostering regional development Number of VSEs assisted annually by VSE correspondents 3,877 4,000 VSEs and business growth Baseline: 560 VSEs assisted in 2016

7. Contributing to The indicator will be defined in 2019 responsible investment

8. Supporting charitable initiatives Number of staff projects supported per year (financial support and 50 At least 60 projects skills sponsorship) Baseline: no funding projects supported in 2016

94 BANQUE DE FRANCE – ANNUAL REPORT 2018 CSR dashboard (continued) Priority actions Indicators 2018 INDICATOR Targets for 2020 ENVIRONMENTAL COMMITMENT

9. Taking account of Share of banks (by percentage of bank assets) and insurance companies Banks: 86.7% Banks: at least 90% of assets SOCIAL RESPONSIBILITY CORPORATE climate‑related risks (percentage of technical reserves) made aware of climate risk Life insurance Insurance companies: at least (within the framework of the monitoring committee set up in 2017 and companies: 80% 70% of technical reserves the conference scheduled for 2018) Non‑life insurance and Baseline: 0% at the end of 2016 reinsurance companies: 73%

10. Reducing our Annual CO2 emissions 93,490 tCO2eq 90,900 tCO2eq

environmental footprint Baseline: 99,890 tCO2eq in 2014 COMMITMENT TOWARDS STAFF

11. Fostering gender equality Share of women in a position of director general or deputy, director or 25% 30% and diversity deputy, at Bank headquarters and in the network Baseline: 23.25% at the end of November 2016

Rate of employment of disabled workers 6.24% Maintain rate of employment Baseline: 5.94% in 2016 at 6%

12. Encouraging skill acquisition Number of employees who have obtained a certified qualification via 890 1,200 certified employees and career development the Banque de France University (cumulative total) Baseline: 605 employees certified in 2016 (end-Nov. 2016) a) Cases where a household has already applied for debt resolution once, but has had to apply a second time due to a deterioration in its financial position.

Governance

regions general council risk management executive bodies executive committee audit committee control bodies GOUVERNANCE

Governance

1 Executive bodies

Governor and Deputy Governors

The Banque de France is managed by its Governor and two Deputy Governors. The Governor chairs the General Council and prepares and implements its decisions. Both the Governor and Deputy Governors are appointed by decree by the Council of Ministers for a six-year term that is renewable once. François Villeroy de Galhau was appointed Governor of the Banque de France on 1 November 2015. He is supported by two Deputy Governors: Denis Beau, who was appointed on 28 July 2017, and Sylvie Goulard François Villeroy de Galhau Denis Beau Sylvie Goulard, who was appointed Second Deputy Governor Governor First Deputy Governor on 17 January 2018.

The Governor is also Chairman of Payment Means), the Observatoire The Executive Committee the Autorité de contrôle prudentiel de l’épargne réglementée et de résolution (ACPR – Prudential (Observatory for Regulated Savings) The Executive Committee is the Supervision and Resolution and the Observatoire de l’inclusion Banque de France’s main organ of Authority), the Comité de médiation bancaire (Observatory for Banking operational governance. Chaired bancaire (Banking Mediation Inclusion). He is also a member by the Governor, it is composed of Committee), the Observatoire de of the Haut Conseil de stabilité the Deputy Governors, the Directors la sécurité des moyens de paiement financière (HCSF – High Council for General and a Director General (Observatory for the Security of Financial Stability). Delegate. The Chairman of the

98 BANQUE DE FRANCE – ANNUAL REPORT 2018 GOUVERNANCE

The Governor, Deputy Governors and members of the Executive Committee (as at 1 March 2019) From left to right Front Marie-Anne Sylvie Goulard Denis Beau Audrey Metzger Poussin-Delmas Second First Secretary of the Chair of the IEDOM Deputy Governor Deputy Governor Executive Committee and Director General of the IEOM

Back Gilles Vaysset Olivier Garnier Érick Lacourrège Vincent Bonnier François Villeroy Secretary General Director General Director General Director General de Galhau Statistics, Economics and Services to the Economy Banknote Manufacturing Governor International Relations and Branch Network Activities Hervé Gonsard Nathalie Aufauvre Édouard Alain Duchâteau Didier Elbaum Director General Director General Fernandez-Bollo Director General Comptroller General Human Resources Financial Stability and Secretary General ACPR Delegate Statistics, Operations Economics and International

99 GOUVERNANCE

Institut d’émission des départements The branch network and 2 Decision-making d’outre-mer (IEDOM – the Note- the network’s executive committee and control bodies issuing bank for the French overseas departments) and of the Institut The Banque de France branch The General Council d’émission d’outre-mer (IEOM – the network is organised into 13 regional French overseas note-issuing bank) directorates. It currently comprises The General Council performs is also a member. 95 departmental branches (including the main functions of a board of the 13 regional directorates), to directors. It decides on issues Operational management bodies which are attached 19 economic relating to the management of centres and 2 household debt activities that do not fall within the Three bodies play a central role centres. Services related to currency remit of the European System of in the conduct of investment management are carried out at Central Banks (ESCB). policies and market operations: the 40 of these establishments and at Assets-Liabilities Committee, the 2 specialised centres (see map of As at 19 January 2018, the Risk Committee and the Pension the Banque de France network in General Council was made up Plan Strategic Committee (CS2R). Appendix 1). To make it easier to of the Governor, the Deputy The Assets-Liabilities Committee, access its public services (household Governors, Agnès Benassy‑Quéré, which is chaired by the Governor, debt resolution, access to payment Catherine Barthélémy, examines the Bank’s investment incident databases, right to a bank François Calvarin, Jean‑Roger Davin, strategy for all its portfolios (both euro account procedure), the Bank has Bernard Delas, the Vice-Chairman and foreign currency denominated), set up 73 customer service and of the ACPR, Anne‑Laure Delatte, with the exception of the Employee information offices and 2 local Élizabeth Ducottet and Reserve Fund investment portfolios centres in towns where it does not Yannick Guillemaud, the Banque which are monitored by the have a permanent branch. de France staff representative. CSR2 (set up in April 2018). The Risk Committee, which is chaired by one The regional managers and directors Meetings of the General Council of the Deputy Governors, defines the of the network business lines and are attended by the censor, risk management framework for the projects (cash activities, services for Sébastien Raspiller, who was Bank’s market operations. companies and individuals, etc.) are appointed by the Minister for answerable to the Director General the Economy, or by his alternate, The Bank has three other operational Services to the Economy and Branch Jérôme Reboul. management committees, placed Network Activities. Together they under the authority of the Secretary make up the Network Executive In 2018, the General Council met General: the IT Strategy Group, the Committee, which is responsible for eight times. Real Estate Strategy Group and the the network’s strategic management. Procurement Strategy Group.

100 BANQUE DE FRANCE – ANNUAL REPORT 2018 GOUVERNANCE

The General Council and the Audit Committee GENERAL COUNCIL

François Villeroy de Galhau Governor

Denis Beau Sylvie Goulard First Deputy Governor Second Deputy Governor

Sébastien Raspiller Censor Jérôme Reboul Bernard Delas Alternate censor Vice-Chairman of the ACPR

Yannick Guillemaud Staff Representative Jean-Roger Davin Member of the Audit Committee

Élizabeth Ducottet François Calvarin Chairman of the AUDIT COMMITTEE Audit Committee Anne-Laure Delatte Audrey Metzger Catherine Barthélemy Didier Elbaum Secretary of the Member of the Secretary of the General Council Audit Committee Audit Committee Agnès Benassy-Quéré

The Audit Committee The Committee also examined: 3 Internal audit and operational risk management The Audit Committee reports to the • the main conclusions of internal General Council on issues relating audits and the progress report on The Internal Audit to financial reporting, external and the action plans drawn up by the internal auditing, internal control audited units; The Internal Audit is managed by and risk management. It was thus the Comptroller General and is informed of the conclusions of the • the audit programme for 2019; the Banque de France’s third line external auditors' work related to of control. It has responsibility the 2018 financial year. • developments in the field over all the Bank’s units, processes of permanent control and and activities, including over risk management. its subsidiaries.

101 GOUVERNANCE

The Internal Audit conducts its aegis of the IAC. The IAC submits its has implemented a three-pronged inspections using a risk-based findings to the ECB Audit Committee internal control system (comprised of approach, and reports its findings and Governing Council; those operational staff and their managers, to the Audit Committee, the related to the Single Supervisory professional risk management and Bank’s governance bodies and the Mechanism (SSM) are also reported permanent control officers, and the Directors General. In doing so, it to the ECB Supervisory Board. Internal Audit). The system assesses provides independent and objective all operational risks as well as the assurance of: With regard to both the organisation methods and action plans in place and conduct of audit missions, the to mitigate them, and checks that • the achievement of the Bank’s Banque de France’s Internal Audit existing controls are relevant and strategic objectives; complies with the international efficient, using industry best practices standards for the professional as a benchmark. • the integrity and reliability of all practice of internal auditing as financial and operational information; defined by the Institute of Internal In 2018, the Bank took the following Auditors (IIA). This compliance was steps to improve the calibre of its • the effectiveness and efficiency confirmed in 2018 by an external internal control: of all operations; audit, which underlined the audit team’s “effective commitment • It reinforced the functional • the protection of the Bank’s assets, to providing the Institution links between the Risk Prevention image and reputation; with advanced assurance and Division, which manages the overall advisory services”. system, and local participants in the • compliance with all laws, directorates general and network regulations, procedures, contracts In 2018, the Internal Audit carried branches (risk and permanent control and compliance rules. out some 40 inspections, paying managers, business line heads of particular attention to the piloting of security), notably by setting annual The Internal Audit also operates the Bank’s activities, its organisational targets for 2019. within the framework of the ESCB. efficiency, the implementation of The Comptroller General and the permanent controls, cyber-security • It awarded certified qualifications Director of Head Office Audit are and information system security. to its first “Risk management and permanent members of the ESCB permanent control” officers. Internal Auditors Committee (IAC). Risk management Together with their counterparts • It began production of a new at the other national central banks In line with the model proposed software application for the and the ECB, they draw up the by the Committee of Sponsoring management of risks, controls, Eurosystem’s audit programme and Organizations of the Treadway incidents and action plans, which oversee audits conducted under the Commission, the Banque de France will be based on a simplified process

102 BANQUE DE FRANCE – ANNUAL REPORT 2018 GOUVERNANCE mapping and used by all risk function staff.

The Bank also continued to roll out its framework for managing cyber- risk (see box). It notably checked levels of security in its most sensitive applications, and reinforced them by applying the rules and best practices recommended by the French national cyber-security agency, Anssi.

The Banque de France continued its work linked to the entry into force of the EU general data protection regulation (GDPR) on 25 May 2018. These tasks, which have been organised into a project, involve personal data are used in its in-house date on the new rules. The Bank also identifying and describing how systems, and ensuring staff are up to appointed a data protection officer.

Cyber-risks

Data leaks, fraud using stolen data, information system place a permanent procedure for keeping staff alert to sabotage... the potential fall-out of a cyber-attack is one the risks. of the most important operational risks facing the Banque Alongside its preventive systems, the Banque de de France and indeed all financial sector participants. France has also set up an internationally certified To tackle the multifaceted and ever-changing nature computer emergency response team (CERT), tasked of cyber-crime, the Banque de France has updated its with detecting and responding to cyber-attacks. It is also cyber-security strategy, made further improvements to involved in numerous cyber-security working groups at its information system protection devices, and put in national, European and international level.

103

Financial management and accounts

shares transactions capital performance portfolios net worth liabilities reserves balance sheet 1 Report on assets, liabilities in the Banque de France’s liabilities After taking account of retained and performance continued to grow year-on-year, by earnings, the Bank’s General EUR 11 billion. Council decided on the following The Banque de France General appropriation of distributable profit: Council approved the financial Breakdown of profit

FINANCIAL MANAGEMENT AND ACCOUNTS statements for the year ended • allocation to the general reserve 31 December 2018 at its meeting Net income from activities rose of EUR 231 million, i.e. 5% of of 12 March 2019. to EUR 9,212 million in 2018, up net profit; EUR 1,025 million due to the increase Assets and liabilities in income derived from securities • dividend payment to the state of held for monetary policy purposes, in EUR 3,222 million; The Banque de France’s balance line with the growth in the holdings sheet grew from EUR 1,054 billion of these securities and the rise in • allocation to the Employee at 31 December 2017 to the US dollar interest rate. After Reserve Fund of EUR 160 million, EUR 1,088 billion at 31 December operating expenses, profit before equivalent to the 2018 net current 2018. This EUR 34 billion increase is tax came in at EUR 7,019 million, service cost; the result of the Banque de France’s up EUR 1,001 million compared active participation in the continued with 2017. Net profit was up • to the provision for investment of implementation of the quantitative EUR 1,296 million year-on-year at EUR 21 million; easing monetary policy decided EUR 4,624 million. by the Governing Council of the • allocation to the special pension European Central Bank. The public reserve fund of EUR 990 million. sector purchase programme (PSPP), covered bonds purchase programme (CBPP3), and corporate sector purchase programme (CSPP) led to a EUR 57 billion year-on-year increase in euro-denominated securities held for monetary policy purposes in the Banque de France balance sheet. An increase in loans to credit institutions related to monetary policy operations was observed in counterpart to these purchase programmes, while euro banknotes in circulation recorded

106 BANQUE DE FRANCE – ANNUAL REPORT 2018 2 Individual financial statements of the Banque de France

The balance sheet and profit and loss account

Balance sheet at 31 December 2018

(EUR millions) FINANCIAL MANAGEMENT AND ACCOUNTS Notes ASSETS At At Notes LIABILITIES At At to the 31 Dec. 31 Dec. to the 31 Dec. 31 Dec. balance 2018 2017 balance 2018 2017 sheet sheet 1 A1 Gold 87,794 84,733 12 P1 Banknotes in circulation 228,154 216,957 2 A2 Foreign currency assets (excl. relations with the IMF) 49,373 47,815 4 P2 Euro-denominated liabilities 2.1 Foreign currency assets held to euro area credit institutions with non‑euro area residents 42,248 31,472 related to monetary policy operations 504,445 488,750 2.2 Foreign currency assets held 2.1 Current accounts 207,098 227,307 with euro area residents 7,125 16,343 2.2 Other liabilities 297,347 261,443 3 A3 Relations with the IMF 15,384 14,227 13 P3 Other euro-denominated liabilities 3.1 Financing provided to the IMF 4,110 3,260 to euro area credit institutions 8,949 14,609 3.2 Acquisitions of SDRs 11,274 10,967 14 P4 Euro-denominated liabilities 5 A4 Euro-denominated claims to non-euro area residents 50,560 53,424 on non-euro area residents 1,030 1,335 2 P5 Foreign currency liabilities 248 1,398 4 A5 Euro-denominated loans to euro area 3 P6 Counterpart to SDR allocations 12,339 12,050 credit institutions related 15 P7 Relations within the Eurosystem 2,844 509 to monetary policy operations 110,918 113,709 16 P8 Euro-denominated liabilities 5 A6 Other euro-denominated loans to other euro area residents 65,260 66,947 to euro area credit institutions 12,828 13,513 8.1 Liabilities vis-à-vis the state 6 A7 Euro-denominated securities issued and government agencies 35,399 25,212 by euro area residents 602,857 553,614 8.2 Other liabilities 29,861 41,735 7.1 Securities held for monetary policy purposes 543,141 486,463 17 P9 Items in the course of settlement 135 150 7.2 Other securities 59,716 67,151 18 P10 Banking transactions 82,819 76,078 A8 Relations within the Eurosystem 99,469 127,953 20 P11 Other items 9,245 6,159 11 8.1 Participating interest in the ECB 1,545 1,545 20 P12 Provisions for liabilities and charges 936 912 8.2 Claims arising on the transfer 21 P13 Revaluation accounts 77,223 72,526 of reserve assets to the ECB 8,217 8,217 22 P14 Fund for general risks 8 8.3 Claims on the Eurosystem for euro and tax-regulated provisions 8,089 8,094 banknotes in circulation 89,466 87,949 23 P15 Revaluation reserve for state gold 7 8.4 Other claims on the Eurosystem 240 30,241 and foreign exchange reserves 22,285 22,377 8 A9 Advance to the IEDOM 5,718 5,462 24 P17 Capital, reserves and retained earnings 10,090 9,252 A10 Claims on the French Treasury 0 0 P18 Net profit 4,624 3,328 9 A11 Other euro and foreign currency denominated financial assets 91,239 83,976 10 A12 Other items 9,685 5,289 11 A13 Fixed assets 1,950 1,893 13.1 Tangible and intangible fixed assets 1,264 1,207 13.2 Participating interests other than the ECB 686 686 TOTAL ASSETS 1,088,245 1,053,520 TOTAL LIABILITIES 1,088,245 1,053,520

NB: Each item of the individual balance sheet and profit and loss account is rounded up or down to the nearest one million euro. For this reason, discrepancies between totals or sub-totals and their components may arise.

107 Profit and loss account for 2018 the European System of Central (EUR millions) Banks (ESCB) and its diverse range Notes to 2018 2017 the P&L of activities. The financial statements 1 Net income from Banque de France activities 9,212 8,187 are expressed in millions of euro. 29 1.1 Net interest income 8,710 7,632 1.1.1 Interest and related income 10,309 8,478 1.1.2 Interest and related expenses -1,599 -846

FINANCIAL MANAGEMENT AND ACCOUNTS The accounting and valuation 30 1.2 Net income from financial transactions -49 62 1.2.1 Net realised gains/losses and unrealised losses on foreign exchange -92 37 methods applied by the Banque de 1.2.2 Net allocations to/reversals from the foreign currency revaluation reserve 92 -37 France are defined in Article R. 144-6 1.2.3 Other income and expenses on financial transactions, net -49 62 of the French Monetary and 1.3 Commission 6 2 1.3.1 Commission income 43 40 Financial Code, which specifies the 1.3.2 Commission expenses -37 -38 following provisions. 31 1.4 Income from equity securities and participating interests 336 290 32 1.5 Net result of pooling of monetary income -566 -521 33 1.6 Other income and expenses, net 774 722 • For all activities carried out within 2 Operating expenses -2,194 -2,169 the framework of the European 34 2.1 Staff costs and related expenses -930 -949 2.2 Pensions and related expenses -486 -475 System of Central Banks (ESCB), 2.3 Taxes other than income tax -43 -49 the Banque de France must 2.4 Provisions, depreciation and amortisation -148 -148 2.5 Other operating income and expenses, net -586 -548 comply with the accounting and Profit before tax and exceptional items (1 + 2) 7,019 6,018 valuation methods laid down by 3 Net additions to fund for general risks and tax-regulated provisions 5 -1 4 Exceptional items 0 0 the European Central Bank (ECB) 4.1 Exceptional income 0 0 in its Guideline of 11 November 4.2 Exceptional expenses 0 0 201043 on the legal framework for 35 5 Corporate income tax -2,400 -2,690 Net profit for the year (1 + 2 + 3 + 4 + 5) 4,624 3,328 accounting and financial reporting in the ESCB (ECB/2010/20), amended by the Guidelines of 24 January 2012 (ECB/2011/27), 22 December 2012 (ECB/2012/29), Notes to the individual financial in accordance with a format decided 15 December 2014 (ECB/2014/57), statements by the Bank’s General Council and 13 March 2015 (ECB/2014/54), with the provisions of the Order 21 July 2015 (ECB/2015/24)44 Accounting principles of the Minister of the Economy, and 3 November 2016 and valuation methods Finance and Industry of 7 February (ECB/2016/34). This Guideline 2000, which was amended on Legal framework 16 November 2010. Their structure is designed to reflect the specific 43 Official Journal of the European Union of 9 February 2011, L35, page 31. The annual financial statements of nature of the tasks carried out by 44 An unofficial consolidated version was published in the the Banque de France are presented the Banque de France as part of Official Journal of the European Union on 21 July 2015.

108 BANQUE DE FRANCE – ANNUAL REPORT 2018 establishes in particular the Valuation methods average outflow price and (ii) the net accounting rules applicable to outflows of the day valued at the refinancing operations for the Foreign currency gains and losses average price of the day’s opening banking sector, securities, foreign position. Where inflows exceed currency transactions carried out Spot and forward purchases and outflows, the net inflow is added to

in the course of foreign exchange sales of foreign currencies are assets held at the beginning of the FINANCIAL MANAGEMENT AND ACCOUNTS reserve management, and the recorded as off-balance sheet day, thereby changing the average issue of banknotes. commitments at the trade date. They price of the position. are recognised in the balance sheet • The accounting rules established at the settlement date. Gold and foreign currency positions by the Autorité des normes are valued at year-end on the basis comptables (ANC – the French Foreign currency gains and losses on gold of the prevailing rates and prices accounting standards authority) and foreign exchange reserves on the last business day of the year. apply to all the Banque de Unrealised gains are recorded as France’s other activities. However, Realised gains and losses are liabilities in the revaluation accounts the Bank’s General Council calculated for each currency. (item L13). Unrealised losses are may also decide to apply the A weighted average price is calculated recorded in the profit and loss accounting and valuation methods every day, firstly on inflows (spot or account as financial transaction recommended by the ECB to forward purchases on the trade date expenses (item 1.2.1). Unrealised these other activities. and income in foreign currencies, gains and losses are not offset. in particular daily accrued interest), With effect from 1 January 2003, the and secondly on outflows (spot or Revaluation reserve for state gold Bank’s General Council extended the forward sales on the trade date and foreign exchange reserves (RRRODE) accounting methods laid down by and foreign currency denominated the Governing Council of the ECB expenses, in particular accrued The agreement between the state to securities portfolios recorded interest on foreign currencies). The and the Banque de France dated in asset item A11. Since 1 January realised gain or loss is calculated 2 February 2011 neutralises the 2018 and by decision of the Bank’s by applying the difference between impact on the Bank’s profit and loss General Council, this provision has these average prices to the lower of account of realised gold and foreign also applied to securities portfolios the day’s inflows or outflows. currency gains and losses (including held in the Banque de France’s currency option premiums) and Employee Reserve Fund recorded When outflows exceed inflows, unrealised losses at year-end, in asset item A12. a second realised gain or loss is thanks to a mechanism whereby calculated, which equates to the the counterpart in the profit and difference between (i) the net loss account is symmetrically offset outflows of the day valued at the against the RRRODE. The amount

109 of net foreign currency gains taken recorded in profit and loss item 1.2.3, • A4 or A7.2 for other euro- to the RRRODE is limited to the net “Other income and expenses on denominated securities profit for the year before transfers financial transactions, net”. Accrued depending on whether they to the reserves. income and expenses are converted are issued by non-residents or into euro at the rate prevailing on residents.

FINANCIAL MANAGEMENT AND ACCOUNTS The agreement also stipulates that: the day the transaction is recorded. Forward foreign currency hedges Since the 2015 reporting period, • the amount of the RRRODE must are valued at the closing date securities held for monetary policy be equal to at least 12% of the exchange rate. purposes (item A7.1) have been gold and foreign currency position recognised at amortised cost, and must also be sufficient to Securities portfolios irrespective of their intended holding cover the losses that would arise period.46 They may therefore be sold from prices falling to their worst Fixed-income securities and before maturity if the Governing level of the past ten years; variable-yield securities are recorded Council so recommends. They are in the following balance sheet items: tested for impairment annually. The • if the RRRODE falls below its Accounting Guideline was amended minimum amount as defined • A2 for foreign currency on 15 December 2014 to reflect this above, it is replenished by way denominated securities held in new accounting framework. of a deduction from profit for the connection with foreign exchange financial year (not exceeding 20% reserve management; Other fixed-income securities are of net profit). recognised as follows. • A7.1 for securities held for Foreign currency gains and losses other than monetary policy purposes; • Fixed-income securities that the on gold and foreign exchange reserves Banque de France has decided to • A11 for euro-denominated The Banque de France applies securities earmarked against the ANC Regulation 2014-03 to foreign Bank’s own funds, provisions and

currency transactions that are not customer deposits recorded in 45 The General Council of the Banque de France connected to its main responsibilities L4 or L10; decided to transfer the portfolio earmarked for the Bank’s special pension reserve fund to the assets of the Banque as a central bank. Foreign currency de France’s Employee Reserve Fund as from 1 January 2018. Consequently, the portfolio was recognised in asset deposits and investments are marked • A12 for securities held in the item A11 of the Banque de France’s balance sheet prior to to market on the last business day Banque de France’s Employee 31 December 2017 but was reclassified to item A12 from 1 January 2018. of the year. Realised and unrealised Reserve Fund (see below and 46 The Accounting Guideline was amended on foreign currency gains and losses are Note 28);45 15 December 2014 to reflect this new accounting framework.

110 BANQUE DE FRANCE – ANNUAL REPORT 2018 hold to maturity are recognised Lastly, any implicit options that may • the recognition of unrealised in the financial statements at be included in these securities are gains by increasing the value of amortised cost. They are tested not valued separately. the related assets and recording for impairment annually and may a corresponding liability in the be written down if there is a risk Change of valuation method of the securities revaluation account (item L13);

of non-recovery. portfolios of the Banque de France’s Employee FINANCIAL MANAGEMENT AND ACCOUNTS Reserve Fund • the recognition of unrealised • Fixed-income securities that losses by decreasing the value may be sold before maturity At its meeting held on 20 December of the related assets and recording and variable-yield securities are 2017, the General Council of the a loss at the end of the reporting marked to market on a line-by- Banque de France decided that the period transferred to CRE capital; line basis on the last business valuation rules established in the until the end of the 2017 reporting day of the year. Unrealised gains Accounting Guideline would apply period, provisions were recorded are recorded as liabilities in the to securities portfolios held in the for these unrealised losses. revaluation accounts (item L13). Caisse de réserve des employés Unrealised losses are recorded (CRE – the Banque de France’s This change in accounting method in the profit and loss account as Employee Reserve Fund) from has no impact on the profit and financial transaction expenses 1 January 2018. loss account. The impact on the (item 1.2.3). Unrealised gains and Banque de France’s balance sheet losses are not offset. Gains and The resulting change in accounting as at 31 December 2017 is as follows: losses arising from sales carried method led to: out during the year are calculated • a EUR 906 million increase in on the basis of the weighted • the line-by-line revaluation of the book value of portfolios average price of each line of CRE securities (fixed-income of available‑for‑sale securities securities and are recorded in securities that may be sold before (item A12); profit and loss item 1.2.3, “Other maturity, as well as variable-yield income and expenses on financial securities), marked to market on • a EUR 906 million increase in the transactions, net”. the last business day of the year revaluation adjustment accounts with no offset between unrealised (item L13). For all fixed-income securities, gains and losses (the portfolio was differences between the acquisition recorded at amortised cost until Furthermore, gains and losses price and the redemption price are 31 December 2017); arising on securities sales are now spread over their remaining lives on calculated on a weighted average a discounted basis. cost (WAC) basis and no longer in

111 accordance with the first in, first out the currency purchased. If the option payments are allocated to Target2 (FIFO) method. is not exercised, at its expiry date – the Trans-European Automated the premium is recorded in profit Real-time Gross settlement Express Financial futures and loss item 1.2.1, “Net realised Transfer system – and give rise to gains/losses and unrealised losses bilateral balances in the Target2

FINANCIAL MANAGEMENT AND ACCOUNTS Interest rate financial futures traded on foreign exchange”. At year-end, accounts of the ESCB central banks. on organised markets are recorded the premium amounts booked to All these bilateral claims and liabilities off-balance sheet at the notional the profit and loss account during are netted out on a daily basis within amount, while daily margin calls paid the year are transferred to the the Target2 system so that each or received are recognised in profit state gold and foreign exchange national central bank (NCB) has a and loss item 1.2.3. revaluation reserve (RRRODE) in single net bilateral position vis-à-vis the same way as realised foreign the ECB. The Banque de France’s Interest rate swaps are marked to currency gains and losses. net position in Target2 along with market at 31 December. Unrealised other euro-denominated liabilities gains are recorded as liabilities in Open positions on currency to the Eurosystem are carried on the revaluation accounts (item L13). options are marked to market at the Bank’s balance sheet either as Unrealised losses are recorded in the the balance sheet date. Unrealised a net liability to the Eurosystem in profit and loss account as financial gains are recorded as liabilities in item L7 (see Note 15) if it is a creditor transaction expenses (item 1.2.3). the revaluation accounts (item L13). or as a net claim on the Eurosystem Unrealised gains and losses are Unrealised losses are recorded in in item A8 if it is a debtor. not offset. Unrealised losses are profit and loss item 1.2.3. Unrealised amortised over the remaining life gains and losses are not offset. The Banque de France’s claim on the of the contract. The interest is Eurosystem due to its participating recorded in profit and loss item 1.1 Forward foreign currency transactions interest in the ECB is recorded in on an accrual basis. with customers (see Note 26) are item A8.1 (see Note 11); the claim marked to market at 31 December. resulting from the transfer of a part Currency option premiums are of reserve assets is recorded in recorded on the asset side of the Eurosystem claims and liabilities item A8.2; the claim resulting from balance sheet if they relate to interim dividends and accrued purchases and on the liabilities side Eurosystem claims and liabilities income receivable from the ECB if they relate to sales. In the event arise on cross-border euro payments in respect of the allocation of that the option is exercised, the made within the European Union and the balance of monetary income premium is included in the price of settled in central bank money. These (see Note 7) is recorded in item A8.4;

112 BANQUE DE FRANCE – ANNUAL REPORT 2018 and finally the claim resulting from depreciated over 50, 33, 20 or Banknotes in circulation the shared responsibility for issuing 10 years, depending on the asset euro banknotes among NCBs and type. Computer equipment is The ECB and the 19 euro area the ECB is recorded in item A8.3. depreciated over 2 to 10 years and NCBs that together make up the other equipment is depreciated over Eurosystem issue euro banknotes.

Tangible and intangible fixed assets periods ranging from 3 to 12 years. The total value of euro banknotes FINANCIAL MANAGEMENT AND ACCOUNTS Purchased software is amortised over in circulation in the Eurosystem is Tangible and intangible fixed assets 3 or 6 years. Most fixed assets are allocated on the last business day are accounted for and valued in depreciated using the straight-line of each month in accordance with accordance with French reporting method. In accordance with ANC the banknote allocation key.47 The standards. Regulation 2014-03, the useful life of ECB has been allocated an 8% share fixed assets are reviewed regularly of euro banknotes in circulation, Land is carried at acquisition cost. and modified as required. with the remaining 92% allocated Buildings and equipment are carried to euro area NCBs according at historical cost, less depreciation External expenses relating to the to their key for subscription of or provisions for impairment booked development and integration of the ECB’s capital. The share of since they were brought into service. computer software are capitalised. banknotes in circulation allocated to each NCB is disclosed in liability In accordance with Article 322-1 Projects developed by one or more item L1, “Banknotes in circulation”. of the plan comptable général Eurosystem NCBs are capitalised (French General Chart of Accounts), in accordance with the full cost The difference between the value of the depreciation period for each accounting methodology set down banknotes in circulation allocated to asset is determined on the basis of by the Eurosystem. The Banque each NCB in accordance with the its probable useful life. The Bank’s de France recognises any share banknote allocation key and the property assets are therefore in those projects – as defined at value of banknotes actually put into the Eurosystem level – in the total circulation by the NCB gives rise to amount to be capitalised. an interest-bearing intra-Eurosystem position (see asset item A8.3, Accelerated tax depreciation “Claims on the Eurosystem for is applied for fixed assets that euro banknotes in circulation”) can be depreciated more remunerated at the main refinancing 47 ECB decision of 6 December 2001 on the issue of rapidly for tax purposes than for operation rate. Interest income and euro banknotes (ECB/2001/15) amended by ECB decision ECB/2010/29 of 13 December 2010. accounting purposes. expenses on these balances are

113 cleared through the accounts of The amount distributed to NCBs is Post-balance sheet events the ECB and included in profit and recorded in profit and loss item 1.4, loss item 1.1, “Net interest income”. “Income from equity securities and None. participating interests”. A mechanism to smooth any Balance Sheet

FINANCIAL MANAGEMENT AND ACCOUNTS adjustments that may arise during Fund for general risks the first five years following a Note 1: Gold country’s entry into the euro area has The fonds pour risques généraux been implemented, which in 2018 (FRG – fund for general risks) is At 31 December 2018, the Banque concerned only Latvia and Lithuania.48 intended to cover all possible risks to de France held 78 million ounces which the Bank is exposed through of fine gold (corresponding to Interim dividend paid by the ECB its activities, except for the exchange 2,436 tonnes). The increase in the rate risk on gold and foreign equivalent euro value of these The ECB’s seigniorage income exchange reserves, which is covered reserves is due to the rise in the arising from the 8% share of euro by the relevant revaluation accounts market price of gold. banknotes in circulation,49 as well as and by the RRRODE (see above). the income generated on its holdings Its amount is determined on a under the SMP, CBPP3, ABSPP and discretionary basis of the volume PSPP programmes,50 are distributed of outstanding operations at the in January of the following year in balance sheet closing date and an the form of an interim dividend analysis of the attendant risks. 48 For a five-year period from the year of adoption of the euro, intra-Eurosystem balances resulting from euro unless the Governing Council of banknote allocation are adjusted to avoid significant changes the ECB decides otherwise. This It is booked as a liability in item L14; in the NCBs’ profit positions compared to previous years. These adjustments are made by taking into account the income is distributed in full unless charges to and reversals from the differences between, on the one hand, the average value of banknotes in circulation of each NCB during a reference it exceeds the ECB’s profit. Lastly, fund are recorded through item 3 period commencing 30 months before the introduction of the Governing Council may decide of the profit and loss account. the euro in the country concerned and, on the other hand, the value of banknotes that would have been allocated to to transfer all or part of this income them during that period under the ECB’s banknote allocation key. These adjustment amounts are reduced each year to a provision for risks associated Pension scheme until the first day of the sixth year following adoption of the with foreign exchange rates, interest euro, after which income on banknotes is allocated fully between the NCBs in proportion to their subscribed share of rates and gold prices. It can also See Note 28 the ECB’s capital. decide to deduct the total expenses 49 ECB decision of 17 November 2005 on the distribution of the income of the ECB on euro banknotes in circulation to paid by the ECB for the issuing and Key events in 2018 the NCBs of the participating Member States (ECB/2005/11).

handling of euro banknotes from the 50 SMP: securities markets programme; CBPP: covered total income from euro banknotes There were no significant events bond purchase programme; ABSPP: asset-backed securities purchase programme; PSPP: public sector in circulation in January. during the 2018 reporting period. purchase programme.

114 BANQUE DE FRANCE – ANNUAL REPORT 2018 Foreign currency assets and liabilities (excluding relations with the IMF) Foreign exchange reserves are Asset item A2 and liability item L5 invested in overnight deposits, (EUR millions) 2018 2017 fixed-term deposits, reverse repo ASSETS – Foreign currency assets transactions with received securities, Overnight deposits 14 50 and securities. The Bank may also Fixed-term deposits 6,424 9,393

borrow foreign currencies in the FINANCIAL MANAGEMENT AND ACCOUNTS Foreign currency liquidity provision to Eurosystem counterparties 0 0 form of repurchase agreements Securities received under repurchase agreements 2,345 6,125 Fixed-income securities 40,332 32,051 with delivered securities, recorded o/w recognised at amortised cost 23,587 21,444 in liability item L5. o/w marked to market line-by-line 16,745 10,607 Accrued interest receivable 258 195 Note 3: Relations with the IMF TOTAL 49,373 47,815

LIABILITIES – Foreign currency liabilities The last entry in liability item L6, Securities delivered under repurchase agreements 247 1,394 “Counterpart to SDR allocations”, Accrued interest payable 1 4 was made in 2009 with a general TOTAL 248 1,398 allocation and a special allocation of SDRs by the IMF totalling SDR 9 billion. The change in The item results from movements in the SDR/euro exchange rate. Note 2: Foreign currency assets and liabilities

Foreign currency assets are mainly Relations with the IMF US dollar holdings. Holdings in other Asset item A3 and liability item L6 currencies are mainly intended to (EUR millions) 2018 2017 diversify risks. A breakdown of ASSETS holdings by main currencies is Receivables from the IMF provided below. Reserve tranche position 3,194 2,011 Loans as part of the NAB 910 1,245 SDR holdings 9,861 9,495 A breakdown of holdings by main currency Loans as part of the PRGT 1,393 1,459 (%) Accrued interest receivable 26 17 TOTAL 15,384 14,227 US dollar (USD) 77 Australian dollar (AUD) 8 LIABILITIES Canadian dollar (CAD) 6 Counterpart to SDR allocations 12,317 12,035 Net assets vis-à-vis the IMF (SDR) 6 Accrued interest payable 22 14 Other 3 TOTAL 12,339 12,050

115 In accordance with the agreement of 20 December • loans granted to the IMF within the framework of the 2010 between the state and the Banque de France on New Arrangements to Borrow (NAB) and the Poverty the management of and accounting for state foreign Reduction and Growth Trust (PRGT) set up under exchange reserves, International Monetary Fund (IMF) the auspices of the IMF for low income countries, or receivables and liabilities are recognised in the Banque drawdowns on the quota. de France’s balance sheet. FINANCIAL MANAGEMENT AND ACCOUNTS The cumulative SDR allocations by the IMF to France are On the asset side: recorded in liabilities. • the reserve tranche position is equal to the proportion The increase in the reserve tranche position in 2018 is of the IMF quota (France’s share in the IMF’s capital) the result of the utilisation of France’s quota in euro with settled in gold and foreign currencies plus or minus a total of implementations net of reimbursements of the net utilisation of the quota in euro. Since 2016, EUR 1,138 million. Net repayments of loans granted as France’s quota has been SDR 20.2 billion; part of the agreement of 2 December 2009 amounted to SDR 299 million (or EUR 246 million). Other changes • special drawing rights (SDRs) allocated to IMF are mainly due to SDR exchange rate fluctuations. member countries in proportion to their quota; they can also be acquired under voluntary swap agreements with IMF-designated member countries;

Note 4: Loans to and deposits the framework of the Eurosystem on Loans to credit institutions cover: from credit institutions the basis of the “Eurosystem key”, related to monetary policy operations which is calculated for each NCB as • main financing operations, which the proportion of its subscription are short-term open market Transactions carried out by the of the ECB’s capital (capital key) operations conducted by the Banque de France with credit compared to all euro area NCBs’ Eurosystem. They play a key role in institutions within the framework of capital keys (see Note 11). The steering interest rates, managing the Eurosystem’s monetary policy Banque de France thus bears the bank liquidity and signalling are recorded in asset item A5 and risks related to 20.14% of loans to monetary policy stances. They liability item L2.2. credit institutions granted by the are conducted through weekly Eurosystem NCBs, which amounted tenders in the form of temporary On the asset side, item A5 includes to EUR 734 billion at 31 December sales of assets (repurchase loans granted to credit institutions of 2018. Loans to credit institutions are agreements) with a one-week EUR 112 billion. The risks related to secured by collateral. maturity. Since October 2008, these transactions are shared within these operations have been

116 BANQUE DE FRANCE – ANNUAL REPORT 2018 conducted as fixed-rate Euro-denominated loans and liabilities to euro area credit institutions tender procedures. related to monetary policy operations Asset item A5 and liability item L2 (EUR millions) • longer-term refinancing operations 2018 2017 (LTROs) and targeted longer-term Loans Main refinancing operations 50 40

refinancing operations (TLTROs) Longer-term refinancing operations 111,835 114,188 FINANCIAL MANAGEMENT AND ACCOUNTS with maturities of up to 48 months. Fine-tuning operations (a) 0 0 Structural operations 0 0 It should be noted that bids Marginal lending facilities (b) 0 0 for both longer-term financing Margin calls paid 0 0 operations and main financing Accrued interest receivable -967 -518 TOTAL 110,918 113,709 operations, are allotted without any amount limitation at the Liabilities Current accounts 207,119 227,307 minimum bid rate. In March 2016, Other liabilities 297,347 261,443 the Governing Council decided to Deposit facilities 297,347 261,443 launch new TLTRO II operations Collection of fixed-term deposits (a) 0 0 Repurchase agreements 0 0 with a maturity of 48 months for Margin calls received 0 0 which the rate was only definitively Accrued interest payable -21 0 TOTAL 504,445 488,750 fixed in 2018, as the rate depends (a) Fine-tuning operations/collection of fixed-term deposits are executed on an ad-hoc basis with the aim of managing market liquidity and steering interest rates. Fine-tuning operations take the form of reverse transactions, outright on the increase in the loans that foreign currency swaps or the collection of fixed-term deposits, generally executed by means of quick tenders or bilateral procedures. borrowing institutions actually (b) Marginal lending facilities are overnight facilities granted in the form of reverse transactions to Banque de France granted to the real economy. counterparties at their request. Interest is paid on these facilities at a rate fixed by the Eurosystem. In the meantime, interest was calculated at the deposit facility rate (–0.40%) for the 2016 and 2017 reporting periods. Loans to credit institutions related to of the reserve base51 since January monetary policy operations held by 2012) and sums in excess of the Banque de France are recorded minimum reserve requirements. in liability item L2, which includes: Minimum reserve requirement 51 The reserve base includes liabilities corresponding holdings bear interest at the to “deposits”, “debt securities” and “money market paper” (denominated in euro and/or foreign currencies, • credit institutions’ current accounts average MRO rate over the period with regard to residents and/or non-residents) as defined held by the Banque de France during which the reserves are built within the framework of the ECB provision on the collection of monetary and banking statistics. However it excludes and recorded in liability item L2.1. up. Deposits in excess of minimum interbank liabilities between institutions that are themselves subject to the minimum reserve system and liabilities vis‑à-vis Current account amounts are reserve requirements bear interest other participating national banks and the European Central made up of minimum reserve at the deposit facility rate, which Bank (ECB). https://www.banque-france.fr/politique‑monetaire/ requirements (calculated as 1% is negative;

117 • deposit facilities (profit and loss whether the counterparty is located public sector purchase programme item 2.2), which enable Banque within or outside the euro area. (PSPP)54 and the corporate sector de France counterparties to make purchase programme (CSPP).55 overnight deposits, remunerated Note 6: Item A7, “Euro-denominated The ECB is responsible for the at a rate set by the Governing securities issued by euro area residents” asset-backed securities purchase 56

FINANCIAL MANAGEMENT AND ACCOUNTS Council (–0.40% since March 2016). programme (ABSPP). A7.1, “Securities held for monetary policy purposes” Note 5: Items A4, “Euro-denominated The monthly pace of net purchases claims on non-euro area residents”, and A6, Since 2009, the Eurosystem for the Eurosystem under the asset “Other euro-denominated loans to euro has organised a series of asset purchase programmes (CBPP3, area credit institutions” purchase programmes as part of ABSPP, PSPP and CSPP, combined) its non-standard monetary policy amounted to an average of These items include euro‑ stance. Securities purchased by denominated investments earmarked the Banque de France as part of against euro‑denominated these programmes are recorded 52 ECB decision No. 2009/16 of 2 July 2009 deposits recorded in liability in item A7.1. They include bonds and No. 2014/40 of 15 October 2014. item L4 (see Note 14). These purchased within the scope of 53 ECB decision No. 2010/5 of 14 May 2010. amounts, unrelated to monetary the three covered bond purchase 54 ECB decision No. 2015/10 of 4 March 2015. policy operations, are split between programmes (CBPPs),52 the securities 55 ECB decision No. 2016/16 of 1 June 2016. items A4 and A6 on the basis of markets programme (SMP),53 the 56 ECB decision No. 2014/45 of 19 November 2014.

Programme Programme Programme Risk-sharing between NCB and the Eurosystem start date end date Euro-denominated claims CBPP1 June June No risk-sharing on non-euro area residents 2009 2010 Asset items A4 and A6 CBPP2 October October No risk-sharing (EUR millions) 2011 2012 2018 2017 SMP May September Risk-sharing based on the key for subscription of the ECB’s capital Securities held to maturity 902 900 2010 2012 Other claims 109 415 ABSPP October December Risk-sharing based on the key for subscription of the ECB’s capital Accrued interest receivable 19 19 2014 2018 (a) Purchases borne by ECB Total euro-denominated claims CBPP3 October December Risk-sharing based on the key for subscription of the ECB’s capital on non-euro area residents 1,030 1,335 2014 2018 (a) PSPP January December Risk-sharing based on the key for subscription of the ECB’s capital Securities received under 2015 2018 (a) on securities issued by supranational bodies repurchase agreements 10,051 12,008 No risk-sharing on government bonds acquired by NCBs Other including loans 2,777 1,505 CSPP January December Risk-sharing based on the key for subscription of the ECB’s capital Total other loans to euro area 2016 2018 (a) credit institutions 12,828 13,513 (a) Phase out of asset purchase programmes and automatic reinvestment of income from 1 January 2019.

118 BANQUE DE FRANCE – ANNUAL REPORT 2018 Securities held for monetary policy purposes Asset item A7.1 (EUR millions) 2018 2017 Variation Amortised Market Amortised Market Amortised Market cost price cost price cost price Securities held under the securities markets programme (SMP) 15,520 16,761 18,122 20,341 -2,602 -3,580

Securities held under the first covered bond purchase programme (CBPP1) 1,080 1,112 1,417 1,497 -337 -385 FINANCIAL MANAGEMENT AND ACCOUNTS Securities held under the second covered bond purchase programme (CBPP2) 1,193 1,307 1,401 1,560 -208 -253 Securities held under the third covered bond purchase programme (CBPP3) 50,042 50,425 45,509 46,037 4,533 4,388 Securities held under the public sector purchase programme (PSPP) 417,420 421,064 376,718 379,698 40,702 41,366 Securities held under the corporate sector purchase programme (CSPP) 53,427 52,809 39,122 39,122 14,305 13,687 Accrued interest receivable 4,460 4,174 286 TOTAL 543,141 486,463

EUR 30 billion until September 2018 Based on the impairment testing for the Employee Reserve Fund, or and EUR 15 billion from October carried out on the five other those that are specifically earmarked 2018 until the end of the year. programmes, no impairment loss against the Bank’s own funds or in respect of the portfolios held by against customer deposits that are All fixed-income securities held within the Eurosystem for monetary policy recorded in asset items A7.1, A11 the framework of the asset purchase purposes was recognised in the and A12 (see Notes 6, 9, 10 and 26). programmes are recognised in the financial statements. financial statements at amortised Just as for portfolios of securities cost (see the section on the valuation A7.2, “Other securities” held for monetary policy purposes, methods used for securities impairment tests were also carried portfolios above). This item includes euro-denominated out on the Banque de France’s other securities issued by euro area portfolios. Based on these tests, it These securities are tested for residents, other than those held was concluded that no impairment impairment at the Eurosystem level for monetary policy purposes or was needed. on the basis of available information and an estimate of recoverable Euro-denominated securities Note 7: Other claims on the Eurosystem amounts at the balance sheet date issued by euro area residents (see Note 20). Asset item A7.2 In 2017, item A8.4 was mainly (EUR millions) made up of the net claim on the 2018 2017 Following impairment tests carried Securities held to maturity (a) 55,949 62,721 Eurosystem arising on transfers out on the CSPP portfolio in 2017, Other fixed-income securities 2,952 3,455 via Target with other NCBs in the Accrued interest receivable 815 974 it was decided that one of the TOTAL 59,716 67,151 ESCB. At 31 December 2018, the securities held by an NCB should (a) In 2018, securities held to maturity amounting to debt generated by these transfers EUR 120.5 million were sold as a result of exceeding the be written down. holding limits established by the ECB. was recognised in liability item L7.

119 Other claims on the Eurosystem To this end, the Banque de France Note 9: Other euro and foreign currency Asset item A8.4 grants the IEDOM a non-interest- denominated financial assets (EUR millions) 2018 2017 bearing advance for an amount Claims on the Eurosystem (Target2) 0 30,040 equivalent to a percentage of France’s Asset item A11 notably includes ECB interim dividends 240 199 euro banknote allocation, which, since securities and other assets linked to Other claims 0 2

FINANCIAL MANAGEMENT AND ACCOUNTS TOTAL 240 30,241 1 July 2007, has been calculated the Bank’s own funds, to provisions according to the allocation mechanism and to customer deposits recorded in force within the Eurosystem. in liability items L4 and L10.

Therefore, at end-2018 only the Securities portfolios claim on the interim dividend paid by Extract from asset item A11 (EUR millions) the ECB was recorded in item A8.4. 2018 2017 Fixed-income securities Other Total Total Based on 2018 earnings, the ECB held to maturity securities Fixed-income securities and government securities 56,389 56,389 52,724 Governing Council decided to Securities issued by public bodies 6 6 6 distribute an interim dividend Other issuers 0 0 0 Accrued interest -14 -14 -19 of EUR 1,191.4 million to the Net balance sheet value 56,381 56,381 52,711 Eurosystem NCBs. The Banque de Equities and other variable-yield securities French and foreign mutual funds 1,170 1,170 1,515 France received EUR 240 million. Capitalisation mutual funds 4,159 4,159 7,015 Other variable-yield securities 29 29 29 Note 8: Advance to the IEDOM Net balance sheet value 5,358 5,358 8,559 Other euro and foreign currency The circulation of banknotes in the denominated financial assets Note 10: Other items French overseas departments and Asset item A11 the French overseas collectivities (EUR millions) The “Miscellaneous” category 2018 2017 of Saint Pierre and Miquelon, Saint Fixed-income securities of asset item A12 includes all the Barthélemy and Saint Martin is held to maturity (a) (b) 56,395 52,730 securities portfolios held in the Other fixed-income securities managed by the Institut d’émission and variable-yield securities 7,387 11,706 Caisse de réserve des employés des départements d’outre-mer Other transactions 27,469 19,549 (CRE – the Banque de France’s (IEDOM – the French overseas Accrued interest -12 -10 Employee Reserve Fund). The year- TOTAL 91,239 83,976 departments’ note-issuing bank) (a) In 2018, none of these securities were transferred to on-year change is mainly due to: another portfolio and none of these securities were sold in the name of, on behalf of and before maturity. (b) Collateralised securities earmarked against under the authority of the Banque customer deposits: EUR 56,390 million (see Note 26) • the revaluation of CRE securities of which EUR 51,251 million of foreign currency de France. denominated securities. portfolios (available-for-sale

120 BANQUE DE FRANCE – ANNUAL REPORT 2018 Other items Note 11: Fixed assets held solely by the NCBs of the Asset item A12 ESCB. The proportion of each (EUR millions) Participating interest in the ECB 2018 2017 NCB’s subscription of the ECB’s Miscellaneous capital (capital key) is defined in including CRE portfolios 9,149 4,616 At 31 December 2018, the capital of Article 29.3 of the ESCB Statute, Accruals and deferred expenses 536 673

Accrued income 504 627 the ECB stood at EUR 10,825 million. based on the various countries’ FINANCIAL MANAGEMENT AND ACCOUNTS Prepaid expenses 24 23 share in the total population Other adjustment accounts 8 22 TOTAL 9,685 5,289 Pursuant to Article 28 of the ESCB and gross domestic product of Statute, the capital of the ECB is the European Union. These two

Fixed assets Asset items A8.1 and A13 securities) as from the 2018 (EUR millions) At Increase Decrease At reporting period following the 31 (a) (a) 31 decision of the General Council Dec. Dec. of the Banque de France on the 2018 2017 Participating interest in the ECB (balance sheet value) 1 545 1 545 application of the Accounting Participating interests other than the ECB (gross value) 686 686 Guideline valuation rules to Intangible fixed assets (gross value) 701 157 89 633 Amortisation and impairment 416 71 2 347 CRE portfolios (see “Change Net value of intangible fixed assets 285 86 87 285 of valuation method of the Tangible fixed assets (gross value) 2 602 235 170 2 537 securities portfolios of the Depreciation and provisions 1 623 79 72 1 616 Net value of tangible fixed assets 979 156 98 920 Banque de France’s Employee Total tangible and intangible fixed assets (net balance sheet value) 1 264 242 185 1 206 Reserve Fund”, above). As a (a) Increases and decreases also include transfers between fixed asset accounts. result of this revaluation, the Banque de France recorded an Information relating to subsidiaries and participating interests at 31 December 2018 unrealised gain of EUR 653 million Asset items A8.1 and A13.2 at 31 December 2018. (EUR millions) Asset Listed Share of 2018 2018 net 2018 book item capital share- profit value • the EUR 3,166 million held (%) holders’ equity reclassification from item A11 to European Central Bank (a) A 8.1 No 20.14 40,325 1,575 1,545 item A12 as a result of the General IEDOM A 13.2 No 100.00 155 2 149 Council of the Banque de France’s Bank for International Settlements A 13.2 No 8.96 22,852 600 405 Europafi A 13.2 No 98.75 144 8 131 decision to hold the portfolio La Prévoyance immobilière A 13.2 No 98.20 na na ns earmarked for the Bank’s special Banque de France Gestion A 13.2 No 99.99 na na ns ns: not significant. pension reserve fund within the na: not available. (a) The interest in the capital is the Bank’s share in all of the NCBs that are members of the euro area. Dividends are allocated CRE as from 1 January 2018. on the basis of this “key”.

121 The Banque de France’s key for subscription of the ECB’s capital (%) Until From 1 May 2004 From 1 Jan. 2007 From 1 Jan. 2009 From 1 July 2013 From 1 Jan. 2014 From 31 Dec. 2003 to 31 Dec. 2006 to 31 Dec. 2008 to 30 June 2013 to 31 Dec. 2013 to 31 Dec. 2018 1 Jan. 2019 16.8337 14.8712 14.3875 14.2212 14.1342 14.1792 14.2061

FINANCIAL MANAGEMENT AND ACCOUNTS determinants have equal weighting. Participating interest in Europafi Liability item L3 is made up of It is adjusted every five years. The securities purchased for monetary most recent adjustment was agreed In 2015, the Banque de France spun policy purposes delivered under on 1 January 2019. off its paper business. During the repurchase agreements. second half of 2017, the Banca d’Italia, The share in the capital of the ECB the Oesterreichische Nationalbank, Note 14: Euro-denominated liabilities to recorded in assets corresponds to the the Central Bank of Ireland and non-euro area residents net amount of the subscribed capital. the Banco de Portugal acquired stakes of 0.50%, 0.25%, 0.25% and This item comprises euro credit Monetary income, ECB dividends 0.25% respectively in Europafi. balances and fixed-term deposits and seigniorage income are The Banque de France retained (excluding Target) with non-euro allocated using a different key that its majority holding with 98.75%. area central banks, commercial is determined solely on the basis of banks and non-financial customers in the participating interests of NCBs Note 12: Banknotes in circulation non-Eurosystem member countries. that have adopted the euro. After In most cases the assets matching Lithuania’s entry into the euro area Banknotes in circulation increased these liabilities are included in on 1 January 2015, the Banque de by 5% from 2017 to 2018. asset items A4 or A6 (see Note 5) France’s share came to 20.1433% or in asset item A11 (see Note 9), at end-2018. As a result of the Note 13: Euro-denominated liabilities depending on whether they are recent five-yearly adjustment, this to euro area residents invested in the same currency or share increased to 20.4059% on are covered by cross-currency swaps 1 January 2019. (see Note 26).

Participating interest in the IEDOM Euro-denominated liabilities Euro-denominated liabilities Since 1 January 2017, the Banque to euro area residents to non-euro area residents Liability item L3 Liability item L4 de France has held 100% of the (EUR millions) (EUR millions) capital of the Institut d’émission des 2018 2017 2018 2017 départements d’outre-mer (IEDOM Euro-denominated liabilities Euro-denominated liabilities to euro area residents 8,949 14,609 to non-euro area residents 50,560 53,424 – the French overseas departments’ Accrued interest payable 0 0 Accrued interest payable 0 0 note-issuing bank). TOTAL 8,949 14,609 TOTAL 50,560 53,424

122 BANQUE DE FRANCE – ANNUAL REPORT 2018 Note 15: Euro-denominated liabilities Euro-denominated liabilities a credit institution’s account, and to the Eurosystem to other euro area residents vice versa. Liability item L8 (EUR millions) In 2018, euro-denominated liabilities 2018 2017 Note 18: Banking transactions to the Eurosystem corresponded to: Liabilities vis-à-vis the state and government agencies 35,399 25,215

Other liabilities 29,861 41,735 This item mainly comprises overnight FINANCIAL MANAGEMENT AND ACCOUNTS • the net debt to the Eurosystem Accrued interest payable 0 -3 and fixed-term foreign currency generated by transfers via TOTAL 65,260 66,947 denominated deposits from French theTarget2 payment system or foreign public bodies, or foreign with other NCBs in the ESCB. At central banks. The management of 31 December 2017, these transfers these foreign currency transactions had generated a net claim that the Eonia rate up to a balance is totally separate from the was recognised in asset item A8.4 of EUR 613.8 million. Above this management of foreign exchange (see Note 7). amount, interest is charged at the reserves. The assets offsetting these deposit facility rate, which has liabilities, which may be hedged by • expenses payable in respect of been negative since 13 June 2014. cross-currency swaps, are included pooling of monetary income of Interest is credited (or debited) to either in asset item A11 (see Note 9), EUR 547 million. the Treasury’s account on the last or in items A4 or A6 (see Note 5), business day of the month. depending on whether they are Euro-denominated liabilities invested in a foreign currency or to the Eurosystem • the accounts of other government in euro. Liability item L7 agencies. (EUR millions) 2018 2017 Euro-denominated deposits made Euro-denominated liabilities Liability item L8.2, “Other liabilities” by institutional customers (other than to the Eurosystem (Target2) 2,297 0 Accrued interest payable 0 0 includes the euro-denominated monetary and financial institutions) Accrued expenses in respect current accounts of resident and private customers are recorded of monetary income 547 509 institutional customers other than in liability item L8.2. TOTAL 2,844 509 the state and government agencies.

Note 16: Euro-denominated liabilities Note 17: Items in the course of settlement Banking transactions to other euro area residents Liability item L10 (EUR millions) Balance sheet item L9, “Items in 2018 2017 Liability item L8.1 consists of: the course of settlement”, includes Customer deposits 1,805 1,829 items (primarily cheques) debited or Other banking transactions o/w fixed-term deposits 80,693 74,017 • the Treasury’s account, which as credited to a customer’s account, Accrued interest payable 320 232 of 1 July 2018, bears interest at but not yet credited or debited to TOTAL 82,819 76,078

123 Other items and plans to adapt the Banque • provisions for various social Liability item L11 de France’s branch network, liabilities for working employees (EUR millions) 2018 2017 to discontinue retail banking (death benefits, long-service CRE capital 6,377 5,758 activities, and to modernise cash medals, end-of-career leave, Accrued expenses 297 273 services. They mainly correspond extended sick leave, pensions Other adjustment accounts 0 0

FINANCIAL MANAGEMENT AND ACCOUNTS Miscellaneous 2,571 128 to the full coverage of pensionable for industrial injuries and TOTAL 9,245 6,159 service credited under early unemployment benefits); retirement schemes; • provisions to cover various social • provisions for changing the age obligations granted to retired Note 19: Other items pyramid, relating to an early employees (death benefits, etc.); retirement incentive scheme for This item mainly includes: employees reaching the end of • other provisions, particularly for their working life; major repairs (such as façade • the capital of the Banque de repairs, renovations, etc.). France Employee Reserve Fund • provisions for retirement benefits; (see Note 28); It should be noted that the • a provision covering the Bank’s calculation bases for social security • miscellaneous creditors and the commitment to fund part of provisions remained unchanged, impact of off-balance sheet foreign retirees’ supplementary health with a discount rate of 2.75% and exchange positions in relation to insurance contributions with the revaluation assumptions based on retail banking operations. change in the provision due to long-term inflation of 1.75% with fee increases; effect from 2020. Note 20: Provisions for liabilities and charges Provisions for liabilities and charges Liability item L12 (EUR millions) Provisions for liabilities and 2018 Increase Decrease 2017 charges mainly include Provisions for restructuring and changing the age pyramid 139 4 7 142 Provisions for retirement benefits 154 13 18 159 employee-related provisions: Provisions for supplementary health insurance 321 35 11 297 Other miscellaneous provisions – current employees 100 17 22 106 • provisions for restructuring, Other miscellaneous provisions – retirees 158 5 6 159 Provision related to monetary policy operations 32 32 14 14 relating to the “cash activities” and Other 31 7 11 35 “banknote manufacturing” plans, TOTAL 936 113 89 912

124 BANQUE DE FRANCE – ANNUAL REPORT 2018 Following impairment testing • EUR 36,040 per kilogram of fine Accounting Guideline valuation rules carried out on the CSPP portfolios gold (compared with EUR 34,783 to these portfolios (see “Change of in December 2018, the Governing per kilogram at end-2017); valuation method of the securities Council deemed it appropriate to set portfolios of the Banque de France’s aside a provision of EUR 161 million • EUR 1 = USD 1.1450 (compared Employee Reserve Fund”, below).

for 2018 for credit risk on monetary with USD 1.1993 at end-2017); FINANCIAL MANAGEMENT AND ACCOUNTS policy transactions. In accordance Note 22: Fund for general risks with Article 32.4 of the ESCB • EUR 1 = SDR 0.8228 (compared Statute, this provision is shared in with SDR 0.8420 at end-2017); No allocation was made to the fund full by the national central banks for general risks in 2018. of the participating member states • EUR 1 = AUD 1.622 (compared in proportion to their key for with AUD 1.535 at end-2017); Note 23: Revaluation reserve for state subscription of the ECB’s capital gold and foreign exchange reserves in 2018. Consequently, in 2018 • EUR 1 = CAD 1.561 (compared the Banque de France recorded with CAD 1.504 at end-2017). See the comments on the RRRODE a provision for EUR 32.4 million, in the section on valuation methods. or 20.14% of the total provision. For the first time the revaluation The provision for EUR 13.9 million accounts include the impact of Note 24: Capital, reserves recorded in 2017 in respect of the the revaluation of available-for- and retained earnings risk related to one of the securities sale securities held in the Banque Capital, reserves and retained earnings held in the CSPP portfolio has been de France’s Employee Reserve Liability item L17 fully reversed following its sale Fund portfolios (amounting to (EUR millions) 2018 2017 in January 2018. EUR 653 million at 31 December Capital 1,000 1,000 2018), following the decision of Reserves 9,090 8,252 Note 21: Revaluation accounts the General Council of the Banque Statutory reserve (a) 1,043 877 Long-term capital gains 100 100 de France to apply the ECB’s Special pension reserve fund Gold and foreign currency assets (see Note 28) 4,719 4,060 Other reserves (b) 3,228 3,215 and liabilities were revalued at Revaluation accounts Retained earnings 0 0 the reference prices indicated by Liability item L13 TOTAL 10,090 9,252 (EUR millions) (a) In accordance with Article R. 114-4 of the French the ECB on 31 December 2018. Monetary and Financial Code, 5% of the net profit for the 2018 2017 year is allocated to a special reserve that ceases to be Revaluation accounts – gold 68,428 65,367 funded when it reaches an amount equal to double the Banque de France’s capital. The revaluation rates used at Revaluation accounts (b) Other reserves include the investment reserve and – foreign currency 6,213 4,614 the insurance fund to cover claims against the Bank. 31 December 2018 for gold and In accordance with Article R. 144-2, the Banque de Revaluation accounts – securities France must maintain reserves to finance its investments. the main currencies held were and financial futures 2,581 2,545 The Bank is also its own insurer with respect to civil liability risks, claims on property it owns and damages to this the following: TOTAL 77,223 72,526 property by third parties.

125 Off-balance sheet These euro or foreign currency Foreign currency receivables denominated deposits are and deliverables (EUR millions) Note 25: Interest rate financial futures invested either in the same 2018 2017 currency or in a different currency Euro to be received against (euro‑denominated investments are foreign currency to be delivered Notional amount of financial futures Euro receivable 18,108 13,258

FINANCIAL MANAGEMENT AND ACCOUNTS (EUR millions) recorded in asset items A4 or A6 Foreign currency deliverable 18,378 11,406 2018 2017 depending on the counterparty’s Foreign currency to be received against euro to be delivered Outright transactions area of residence, while foreign on organised markets Foreign currency receivable 20,624 24,563 Foreign currency denominated currency investments are recorded Euro deliverable 20,517 24,961 interest rate contracts in item A11). When appropriate, Foreign currency to be received Purchases 46,618 35,719 against foreign currency Sales 48,543 23,201 foreign currency risk is neutralised to be delivered 70,990 54,382 Euro-denominated interest by cross-currency swaps of the Foreign currency to be delivered rate contracts against foreign currency Purchases 1,272 same amount and maturity as the to be received 72,247 52,700 Sales 2,652 1,374 deposits. These foreign currency Over-the-counter deposits and investments, and the market operations Foreign currency denominated related spot and forward foreign Note 27: Off-balance sheet commitments interest rate swaps 169 246 currency transactions, form part given or received in respect of operations Euro-denominated interest rate swaps of an activity that is separate and with the IMF independent from the management of foreign exchange reserves. Commitments given by the Banque de France Note 26: Forward foreign currency Consequently, they are recorded transactions with customers in dedicated accounts separate from The commitment in respect of those used for the management of France’s quota in the IMF’s capital As part of its forward foreign foreign exchange reserves, and amounts to SDR 20.2 billion. The currency transactions with are valued in accordance with reserve tranche position stood at customers, the Banque de France the standards issued by the ANC SDR 2.6 billion at 31 December collects euro-denominated deposits (see the valuation methods section 2018, meaning that additional from non-euro area residents, in above, “Foreign currency gains drawing rights of SDR 17.5 billion particular foreign central banks and losses other than on gold and are still available. and international bodies, which foreign exchange reserves”). are recorded in liability item L4. The credit line granted to the IMF The Banque de France also collects Amounts of foreign currency within the framework of the New foreign currency denominated receivables and deliverables in Arrangements to Borrow (NAB) deposits, mainly from non-resident respect of transactions carried out amounts to SDR 9.5 billion, institutions, which are recorded in with customers are detailed in the SDR 0.7 billion of which was drawn liability item L10. table above. down at 31 December 2018.

126 BANQUE DE FRANCE – ANNUAL REPORT 2018 Additional drawdowns of up to SDR Note 28: Pension liabilities Consequently, the CRE is subject 8.7 billion can still be made. to separate accounting treatment Banque de France employees but its assets, liabilities, income and A bilateral loan agreement between benefit from a pension scheme, expenses form an integral part of the France and the IMF was signed which is currently governed by Bank’s financial statements.

in October 2012 and has since been Decree 2007-262 of 27 February FINANCIAL MANAGEMENT AND ACCOUNTS renewed. Under this agreement, 2007, which entered into force on The securities posted in assets France undertakes to provide further 1 April 2007, amended by Decrees on the CRE’s balance sheet are financing of EUR 31.4 billion. This 2008-1514, 2012-701, 2012-847 recorded in asset item A12 of the credit line has not been used. and 2014-1702, which aligned the Banque de France’s balance sheet Banque de France’s pension scheme and are recognised in accordance In addition, the Bank grants loans with that of the civil service. with the rules set out in the section to the Poverty Reduction and on the valuation methods used for Growth Trust (PRGT) under the IMF’s The Employee Reserve Fund securities portfolios. They come for “Poverty Reduction and Growth the most part from the portfolio Facility” and “Exogenous Shocks The Banque de France has a pension earmarked against the special Facility” (PRGF-ESF). The first loan fund known as the Caisse de réserve pension reserve fund (see below). made available for an amount of des employés de la Banque de SDR 1,328 million formed part of France (CRE – the Banque de CRE capital is shown in liability a commitment made by France France Employee Reserve Fund), item L11, “Other items”. Realised at the annual general meeting of which is designed to service the gains and losses, unrealised losses the IMF on 4 October 2009. The loan pensions of the Bank’s statutory and contributions paid recognised package was expanded in February employees. The CRE does not have in the profit and loss account 2018 to SDR 2 billion. At end-2018, a legal personality distinct from that require a matching allocation to the total amount due from PRGT of the Bank; it constitutes, as the or reversal from CRE capital. On came to SDR 1.1 billion. French Council of State set out in the liabilities side, item L15 also its decisions of 5 November 1965 includes revaluation differences Commitments received and 28 April 1975, “a means for the for CRE securities that have by the Banque de France Bank to manage itself assets that are been revalued. assigned to a special purpose and In the 2008 supplementary budget whose separate financial identity Pension expenses are included in act, the state extended its guarantee has been recognised with the sole profit and loss item 2.2, “Pensions to the loans granted by the Banque purpose of showing the results of this and related expenses”. Income from de France to the PRGT. management in a special account”. the CRE’s securities portfolios is

127 recorded in profit and loss item 1.6, Pension liabilities and funding “Other income and expenses, net”. (EUR millions) Liabilities Funding 2018 2017 2018 2017 Other sources of pension financing Special pension scheme liabilities 13,553 13,303 Funding 11,096 9,775 o/w to Employee Reserve Fund 6,377 5,715 o/w to special pension reserve fund 4,719 4,060 FINANCIAL MANAGEMENT AND ACCOUNTS In order to ensure the progressive financing of the unfunded portion o/w to current employees 4,767 4,926 of liabilities in respect of pension o/w to retirees 8,786 8,377 Liabilities in respect of the additional rights vested before the entry seniority granted as part of into force of Decree 2007-262 of restructuring plans 138 140 Provision 138 140 27 February 2007, the General Revaluation accounts 1,230 * Total gross liabilities 13,691 13,443 Total funding 12,464 9,915 Council set up a special pension Net liabilities 1,227 3,528 * Revaluation differences not recorded in 2017 reserve fund in 2007, in accordance with Article R. 144-4, paragraph 3 of the French Monetary and as part of restructuring plans to calculate pension liabilities at Financial Code. This reserve fund (see Note 20) are provided for 31 December 2018. is regularly replenished, within the in full. limits permitted by the Banque de Calculations of pension liabilities France’s gross profit, the majority Actuarial assumptions and the underlying assumptions of which is paid to the state. The used are validated and monitored special pension reserve fund is Total pension liabilities have been by the Banque de France’s actuaries. recorded in liability item L17, calculated in accordance with The discount rate remained stable “Capital, reserves and retained actuarial standards (using the at 2.75% in 2018. Pension and salary earnings”. The special pension projected unit credit method), revaluation assumptions based on reserve fund was invested in a taking into account all current long-term inflation will rise to 1.75% securities portfolio until end-2017, employees, retirees and their with effect from 2020 (see Note 20). which was recorded in asset dependants. Liabilities to current item A11. Following the transfer employees were determined Profit and loss account of this portfolio within the CRE using a prospective method with in accordance with the General assumptions concerning future Note 29: Net interest income Council decision of 20 December career and salary developments. 2017, it is now recorded in item A12. Net interest income was up year- The TGH-TGF 2005 statutory on-year from EUR 7.6 billion at In addition, liabilities in respect of mortality tables applicable to life end-2017 to EUR 8.7 billion at the additional seniority granted insurance contracts were used 31 December 2018.

128 BANQUE DE FRANCE – ANNUAL REPORT 2018 Net interest income programme, and a general Profit and loss item 1.1 increase in the rates of return for (EUR millions) all portfolios; 2018 2017 Interest on foreign currency assets 1,233 974 o/w interest on held-to-maturity securities 527 415 • the negative interest rate on Interest on receivables from the IMF 132 77

deposit facilities (–0.40%) applied FINANCIAL MANAGEMENT AND ACCOUNTS Interest on euro-denominated claims on non-residents Net income from monetary policy operations (excluding securities) (b) 1,335 1,112 to institutional customer deposits, Interest on euro-denominated securities 5,517 4,891 Treasury account deposits, and o/w interest on held-to-maturity securities 1,806 2,096 other non-general government o/w interest on securities held for monetary policy purposes 3,711 2,795 Interest on claims arising on the transfer of reserve assets to the ECB 0 0 customer deposits, which on Interest on net claims on the Eurosystem (a) 0 0 average were greater than Interest on the net euro banknote position 0 0 Interest on other euro and foreign currency denominated financial assets 2,092 1,425 in 2017. o/w interest on available-for-sale securities 12 0 o/w interest on held-to-maturity securities -105 -139 Note 30: Net income o/w other interest 2,185 1,564 Total interest and related income (A) 10,309 8,478 from financial transactions Interest on non-monetary policy euro-denominated liabilities to monetary financial institutions in the euro area (c) 10 21 This profit and loss item shows the Interest on euro-denominated liabilities to non-euro area residents -1,502 -854 Interest on foreign currency liabilities -62 -42 net balance resulting from sales Interest on counterpart to SDR allocations -114 -65 transactions and gold and foreign Interest on net debt to the Eurosystem (a) 0 0 currency revaluations on the one Interest on the Treasury’s account 154 147 Other interest -84 -52 hand, and financial instrument Total interest and related expenses (B) -1,599 -846 transactions that are unrelated to Net interest income (C = A + B) 8,710 7,632 (a) Interest on the Banque de France’s net position within the Target system (see Notes 7 and 15). monetary policy operations on (b) Net income from monetary financial institution (MFI) current accounts, deposit facilities and TLTRO II (negative interest). (c) Interest on pensions. the other.

This growth can be explained Other income and expenses on financial transactions, net by significant interest income Profit and loss item 1.2.3 (EUR millions) resulting from: 2018 2017 Net gain/loss on foreign currency denominated securities (a) (b) (c) -71 2 • interest on securities held for Net gain/loss on euro-denominated securities recorded in item A7.2 (b) (c) -1 17 monetary policy purposes due Net gain/loss on available-for-sale securities recorded in item A11 (b) 12 22 Net foreign currency gains and losses (excluding foreign exchange reserve management) 11 21 to larger holdings, continuing TOTAL -49 62 net asset purchases within the (a) Excluding the impact of foreign exchange fluctuations, recorded in profit and loss item 1.2.1. (b) These items include realised gains and losses, and unrealised losses at year-end. framework of the asset purchase (c) These items also include margin calls on interest rate financial futures, and profits and losses on synthetic instruments.

129 In 2018, the net of realised gold and PSPP securities to the national facility rate of –0.40%. The item is and foreign currency gains and central banks. The Banque de France also made up of: losses (EUR 27 million) and received EUR 240 million of the ECB’s unrealised foreign currency losses EUR 1,191.4 million interim dividend, • the reversal of a provision for losses (EUR 119 million) represented and a further EUR 58 million from on monetary policy operations

FINANCIAL MANAGEMENT AND ACCOUNTS total income of EUR 92 million. In an additional dividend in respect recorded in 2017 for an amount accordance with the agreement of of 2017. of EUR 13.9 million (see Note 20); 2 February 2011 between the state and the Banque de France on the Note 32: Net result of pooling • the Banque de France’s share of management of and accounting for of monetary income the provision for credit risk on state foreign exchange reserves, this monetary policy transactions, net balance was allocated to the This item comprises the annual net related to a security held in a RRRODE, with the corresponding result of the pooling of monetary Eurosystem NCB’s CSPP portfolio, entry taken to the profit and loss income (see the box below) recorded for an amount of EUR 32.4 million. account (item 1.2.2). in profit and loss item 1.5. In 2018, this corresponded to a EUR 614 million Note 33: Other income and expenses, net Note 31: Income from equity securities expense. It also includes prior-year and participating interests adjustments, mainly resulting from This balance includes income and the TLTRO II rate being fixed in 2018. expenses generated by service For 2018 the Governing Council Prior to this decision, interest income activities carried out on behalf of decided to distribute the ECB’s had been accrued in accordance third parties. These activities mainly share of seigniorage income and with the prudence concept at the relate to public service activities income from SMP, CBPP3, ABS lowest possible rate, i.e. the deposit entrusted to the Banque de France

Income from equity securities and participating interests Pooling of monetary income Profit and loss item 1.4 Profit and loss item 1.5 (EUR millions) (EUR millions) 2018 2017 2018 2017 ECB dividend 298 245 Monetary income pooled by the Banque de France -3,073 -2,682 Dividends Monetary income allocated to the Banque de France 2,459 2,173 from other participating interests 24 32 Net result of pooling of monetary income in 2018 -614 -509 Dividends Adjustments for prior years 67 2 from available-for-sale securities 14 14 Sub-total -547 -507 Other income 0 0 Net provisions/reversals related to monetary policy operations -19 -14 TOTAL 336 290 TOTAL -566 -521

130 BANQUE DE FRANCE – ANNUAL REPORT 2018 The monetary income pooled by the Eurosystem is Earmarkable assets include euro-denominated lending allocated between national central banks (NCBs) in to euro area credit institutions related to monetary proportion to their subscription of the ECB’s capital. policy operations, securities held for monetary policy purposes, claims arising on the transfer of foreign The monetary income of each NCB reflects the income reserve assets to the ECB, net intra-Eurosystem claims derived from the earmarkable assets held against its resulting from Target transactions, net intra-Eurosystem liability base. FINANCIAL MANAGEMENT AND ACCOUNTS claims arising on euro banknotes in circulation within the The liability base includes banknotes in circulation, Eurosystem and a limited amount of gold in proportion euro‑denominated liabilities to euro area credit to each NCB’s subscription of the ECB’s capital (capital institutions related to monetary policy operations, key). Where the value of an NCB’s earmarkable assets intra‑Eurosystem liabilities resulting from Target exceeds or falls short of the value of its liability base, transactions, and net intra-Eurosystem liabilities on euro the amount of monetary income is determined by banknotes in circulation within the Eurosystem. Any multiplying the difference by the marginal rate applied interest accruing on liabilities included in the liability to main refinancing operations. base is deducted from pooled monetary income.

by law or by agreements signed with without legal personality, chaired Services provided by the Banque the state and, to a lesser extent, by the Governor of the Banque de de France to the state – particularly activities carried out in support of France and as such its budget is a the operation of the departmental the economy, for which the cost sub-budget of the Banque de France. commissions for handling cases of is re-invoiced. The expenses and income of the household overindebtedness, and ACPR are recognised in the financial Income includes the contribution statements of the Banque de France. Other income and expenses, net for the cost of supervision by the Expenses are booked as operating Profit and loss item 1.6 Autorité de contrôle prudentiel expenses according to their nature (EUR millions) et de résolution (ACPR – the and income consists of levies raised 2018 2017 Remuneration for services French Prudential Supervisory and from the organisations under ACPR provided to the state 244 249 Resolution Authority), which was supervision. In 2018, levies for Payments for ACPR established by Order 2010-76 of supervisory expenses generated supervisory expenses 198 192 Miscellaneous income (a) 367 361 21 January 2010 merging the licensing EUR 198 million (EUR 192 million in Total other income (A) 809 802 and supervisory authorities of the 2017), recorded in profit and loss Total other expenses (B) -35 -80 Other income and expenses, net banking and insurance sectors. The account item 1.6, “Other income (C = A + B) 774 722 ACPR is a financially autonomous, and expenses, net”. (a) This item mainly includes fees charged for use of the databases managed by the Banque de France (FNCI, independent administrative authority FICP, FCC and FIBEN).

131 the management of the Treasury’s to them; they all receive a gross the agreement in Article L. 141-2 of account – are remunerated on a housing allowance of EUR 5,712 the said Code. full-cost basis. per month, which is subject to tax. These provisions are governed In 2017, this item included: Note 34: Staff costs and related expenses by Article R. 142-19 of the French

FINANCIAL MANAGEMENT AND ACCOUNTS Monetary and Financial Code. • the expected reimbursement of The Governor’s total gross the 3% contribution on amounts remuneration for 2018 was Note 35: Corporate income tax distributed for 2015 to 2017, EUR 288,098.57 The First and plus interest, after the French Second Deputy Governors received According to Article 8 of Law Constitutional Council ruled EUR 231,398 and EUR 210,251, 2007-212 of 20 February 2007 on that this was unconstitutional at respectively.58 No employee various measures concerning the end-2017; accommodation is made available Banque de France, the taxable profit of the Banque de France • two new exceptional contributions is calculated using accounting to finance the reimbursement of Staff costs and related expenses rules defined in accordance with the 3% contribution that was ruled Profit and loss item 2.1 Article L. 144-4 of the French unconstitutional, for an amount of (EUR millions) 2018 2017 Monetary and Financial Code and EUR 621 million. Salaries and wages 614 622 Taxes on salaries and wages 104 107 Social security contributions 181 185 Profit-sharing and incentive plans 31 35 Total staff costs and related expenses 930 949 Corporate income tax Profit and loss item 5 Profit and loss item 2.2 (EUR millions) (EUR millions) 2018 2017 Income tax expense for the year 2,400 2,690 57 The only increases compared with 2017 related to 2018 2017 On profit before exceptional items 2,400 2,243 compensation for the rise in the CSG (general social security Pensions and related expenses 486 475 contribution) and the expanded health care subsidy, as was Exceptional contribution 0 621 the case for all Banque de France employees. Total pensions Expected refund and related expenses 486 475 of 3% contribution 0 -174 58 Sylvie Goulard took up office on 22 January 2018.

132 BANQUE DE FRANCE – ANNUAL REPORT 2018 Statutory Auditors’ report on the annual financial statements

KPMG Audit MAZARS 2 avenue Gambetta 61 rue Henri Regnault 92066 Paris-La Défense Cedex 92075 Paris-La Défense Cedex FINANCIAL MANAGEMENT AND ACCOUNTS STATUTORY AUDITORS’ REPORT ON THE ANNUAL FINANCIAL STATEMENTS Year ended 31 December 2018

Opinion In compliance with the engagement entrusted to us by the General Council, we have audited the accompanying annual financial statements of the Banque de France for the year ended 31 December 2018. In our opinion, the annual financial statements give a true and fair view of the assets and liabilities and of the financial position of the Banque de France as at 31 December 2018 and of the results of its operations for the year then ended in accordance with accounting principles from Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier).

Basis for opinion Audit Framework We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Statutory Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. Independence We conducted our audit engagement in compliance with independence rules applicable to us, for the period from 1 January 2018 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in the French Code of Ethics (Code de déontologie) for Statutory Auditors. Emphasis of matter We draw attention to the following matters: • The introduction to the Notes to the annual financial statements describes the accounting principles and valuation methods applicable to the Banque de France, some of which are specific to the European System of Central Banks. • A change to the accounting principles related to the securities portfolios of the “Caisse de Réserve des Employés” is described in the Note “Change of valuation method of the securities portfolios of the Banque de France’s Employee Reserve Fund” to the annual financial statements. …/…

133 • The General Council has determined the level of detail of the published financial information in accordance with its right provided for in Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier). Our opinion is not modified in respect of these matters.

Justification of assessments

FINANCIAL MANAGEMENT AND ACCOUNTS In accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the following matters that, in our professional judgement, were of most significance in our audit of the annual financial statements of the current period. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the annual financial statements. Valuation of securities at amortised cost Your Institution holds securities portfolios that are recognised at amortised cost. An impairment loss is recorded in the event of risk of non-recovery, in accordance with the methods described in the Note “Valuation methods – Securities Portfolios” to the annual financial statements. Our work consisted in reviewing the impairment tests put in place by the Banque de France to assess the risk of non- recovery, in order to evaluate the assumptions used and to examine the management procedures in place to approve these estimates. Assessment of social obligations Your Institution calculates its social obligations in accordance with the methods described in Note 28 to the annual financial statements. These obligations were assessed by an actuary. Our work consisted in examining the data used and the assumptions applied when making these estimates.

Responsibilities of management and those charged with governance for the annual financial statements Management is responsible for the preparation and fair presentation of the annual financial statements in accordance with accounting principles from Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, management is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the entity or to cease operations. The annual financial statements were approved by the Governor.

Statutory auditors’ responsibilities for the audit of the annual financial statements Our role is to issue a report on the annual financial statements. Our objective is to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement. Reasonable assurance is a

…/…

134 BANQUE DE FRANCE – ANNUAL REPORT 2018 high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements. As specified in Article L. 823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance on the viability of the entity or the quality of management of the affairs of the entity. FINANCIAL MANAGEMENT AND ACCOUNTS As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditor exercises professional judgement throughout the audit and furthermore: • Identifies and assesses the risks of material misstatement of the annual financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. • Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the annual financial statements. • Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of this audit report. However, future events or conditions may cause the entity to cease to continue as a going concern. If the Statutory Auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the annual financial statements or, if such disclosures are not provided or are inadequate, to modify the opinion expressed therein. • Evaluates the overall presentation of the annual financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation. Paris-La Défense, on 12 March 2019 The Statutory Auditors

KPMG Audit MAZARS A division of KPMG S.A. Marie-Christine Jolys Hervé Hélias Emmanuel Dooseman Partner Partner Partner

135 3 Consolidated financial statements

The consolidated balance sheet and profit and loss account

Consolidated balance sheet at 31 December 2018 (EUR millions)

FINANCIAL MANAGEMENT AND ACCOUNTS Notes ASSETS At 31 At 31 Notes LIABILITIES At 31 At 31 to the Dec. Dec. to the Dec. Dec. balance 2018 2017 balance 2018 2017 sheet sheet A1 Gold 87,794 84,733 P1 Banknotes in circulation 228,154 216,957 A2 Foreign currency assets P2 Euro-denominated liabilities (excl. relations with the IMF) 49,373 47,815 to euro area credit institutions 2.1 Foreign currency assets related to monetary policy operations 504,445 488,750 held with non-euro area residents 42,248 31,472 2.1 Current accounts 207,098 227,307 2.2 Foreign currency assets 2.2 Other liabilities 297,347 261,443 held with euro area residents 7,125 16,343 P3 Other euro-denominated liabilities A3 Relations with the IMF 15,384 14,227 to euro area credit institutions 8,949 14,609 3.1 Financing provided to the IMF 4,110 3,260 P4 Euro-denominated liabilities 3.2 Acquisitions of SDRs 11,274 10,967 to non-euro area residents 50,560 53,424 A4 Euro-denominated claims P5 Foreign currency liabilities 248 1,398 on non-euro area residents 1,030 1,335 P6 Counterpart to SDR allocations 12,339 12,050 A5 Euro-denominated loans P7 Relations within the Eurosystem 2,844 509 to euro area credit institutions P8 Euro-denominated liabilities related to monetary policy operations 110,918 113,709 to other euro area residents 61,500 63,606 A6 Other euro-denominated 8.1 Liabilities vis-à-vis the state loans to euro area credit institutions 12,828 13,513 and government agencies 35,399 25,212 A7 Euro-denominated securities issued 2 8.2 Other liabilities 26,101 38,394 by euro area residents 602,857 553,614 P9 Items in the course of settlement 135 150 7.1 Securities held for monetary policy purposes 543,141 486,463 P10 Banking transactions 82,819 76,078 7.2 Other securities 59,716 67,151 P11 Other items 9,255 6,172 A8 Relations within the Eurosystem 99,469 127,953 P12 Provisions for liabilities and charges 959 938 8.1 Participating interest in the ECB 1,545 1,545 P13 Revaluation accounts 77,223 72,526 8.2 Claims arising on the transfer P14 Fund for general risks 8,000 8,000 of reserve assets to the ECB 8,217 8,217 P15 Revaluation reserve for state gold and 8.3 Claims on the Eurosystem foreign exchange reserves 22,285 22,377 for euro banknotes in circulation 89,466 87,949 1 P17 Capital, reserves and retained earnings 10,984 10,145 8.4 Other claims on the Eurosystem 240 30,241 17.1 Minority interests, reserves and IEDOM 2 A9 Claims on the French Treasury in respect of coins 0 0 retained earnings 2 2 A10 Other euro and foreign currency 17.2 Capital, reserves and Banque de France denominated financial assets 91,239 83,976 retained earnings 10,982 10,143 1 A11 Other items 12,403 8,390 P18 Net profit 4,402 3,329 A12 Fixed assets 1,807 1,753 12.1 Tangible and intangible fixed assets 1,402 1,348 12.2 Participating interests other than the ECB 405 405 TOTAL ASSETS 1,085,102 1,051,018 TOTAL LIABILITIES 1,085,102 1,051,018

136 BANQUE DE FRANCE – ANNUAL REPORT 2018 2018 consolidated profit and loss account Europafi (EUR millions) Notes to 2018 2017 the P&L Europafi was created on 27 October 1 Net income from activities 9,293 8,238 2015 as a simplified joint stock 1.1 Net interest income 8,753 7,678 1.1.1 Interest and related income 10,352 8,524 company and was initially a wholly 2 1.1.2 Interest and related expenses -1,599 -846

owned subsidiary of the Banque FINANCIAL MANAGEMENT AND ACCOUNTS 1.2 Net income from financial transactions -49 62 de France. 1.2.1 Net realised gains/losses and unrealised losses on foreign exchange -92 37 1.2.2 Net allocations to/reversals from the foreign currency revaluation reserve 92 -37 1.2.3 Other income and expenses on financial transactions, net -49 62 During the 2017 reporting period, the 1.3 Commission 6 2 1.3.1 Commission income 43 40 Banca d’Italia, the Oesterreichische 1.3.2 Commission expenses -37 -38 Nationalbank, the Central Bank of 2 1.4 Income from equity securities and participating interests 336 285 1.5 Net result of pooling of monetary income -566 -521 Ireland and the Banco de Portugal 1.6 Other income and expenses, net 812 732 acquired stakes that amounted to 2 Operating expenses -2,261 -2,216 1.25% of Europafi’s EUR 133 million 2.1 Staff costs and related expenses -955 -971 2.2 Pensions and related expenses -486 -475 equity capital. 2.3 Taxes other than income tax -46 -51 2.4 Provisions, depreciation and amortisation -161 -158 2.5 Other operating expenses -613 -561 Europafi is fully consolidated. Profit before tax and exceptional items (1 + 2) 7,032 6,022 3 Net additions to fund for general risks European Central Bank 4 Exceptional items 4.1 Exceptional income 4.2 Exceptional expenses Under the Statutes of the ESCB 1 5 Corporate income tax -2,630 -2,693 Net profit for the year (1 + 2 + 3 + 4 + 5) 4,402 3,329 and the ECB, the ECB Governing Council functions in such a way that NB: Each item of the individual balance sheet and profit and loss account is rounded up or down to the nearest one million euro. For this reason, discrepancies between totals or sub-totals and their components may arise. the Banque de France does not exert control or significant influence over the ECB. Monetary policy is Notes to the consolidated in six undertakings (see Note 11 defined by the Governing Council, financial statements to the individual balance sheet). composed of 19 members since The Banque de France holds 2015 on the basis of the “one man, Scope of consolidation an interest of over 20% in five of one vote” principle, in compliance these undertakings. with Article 10.2 of these Statutes. Consolidation of Banque de France subsidiaries and participating interests The interests held in Banque de France IEDOM Gestion and La Prévoyance immobilière At 31 December 2018, the Banque de are excluded from the scope of In compliance with Order France held participating interests consolidation as they are not material. No. 2000-347 of 19 April 2000,

137 amending Order No. 59-74 of interbank registers (the FICOM Accounting principles and valuation 7 January 1959 reforming issuance overseas territories accounts methods applied in the consolidated arrangements in the French overseas register, the FCC central cheque financial statements departments of Guadeloupe, French register, and the FICP register Guiana, Martinique, Mayotte and of household credit repayment The same accounting principles and

FINANCIAL MANAGEMENT AND ACCOUNTS Réunion, the Institut d’émission des incidents); providing information valuation methods apply to both the départements d’outre-mer (IEDOM to the public on rights of access to consolidated financial statements – the French note-issuing bank for these registers or rights of access and the individual financial the overseas departments) came to banking services; monitoring statements of the Banque de under the control of the Banque de banking fees; France, except in the computation France as from 1 July 2000, without of corporate income tax which, in the the Bank holding a participating • the provision of services of general consolidated financial statements, interest in the IEDOM. interest to public or private takes into account all temporary bodies: monitoring economic timing differences arising for The role of the IEDOM can be split and financial activities; providing tax purposes. into three categories: credit mediation for businesses; managing information on Information on individual items • central banking tasks: issuing businesses; producing information in the consolidated balance sheet and managing the circulation of for the banking community. and profit and loss account banknotes; rating companies so that private loans can be mobilised In accordance with Article 711-9 of Note 1: Deferred taxes as part of Eurosystem refinancing the French Monetary and Financial Deferred tax assets and liabilities operations; supervising payment Code the financial statements of the (EUR millions) systems and means; acting as an IEDOM are consolidated with those Deferred Deferred tax tax intermediary between national of the Banque de France. assets liabilities authorities (ACPR, AMF – The Income temporarily exempted from taxation 3 Financial Markets Authority) and At the beginning of 2017, the IEDOM Tax on mutual fund European authorities (ECB); became a wholly owned subsidiary unrealised gains and losses 306 Other deferred tax of the Banque de France as part of relating to securities 0 • the provision of public services its transformation into a simplified Provisions not deductible in accordance with its statutory joint stock company. Since this date, for tax purposes 276 Other recurring timing differences 5 powers: putting coins into the IEDOM is fully consolidated. Deductions for tax purposes circulation; providing the not yet recognised in the financial statements 29 secretariat for the Household Debt TOTAL 587 32 Commissions; managing local NET RECEIVABLE 555

138 BANQUE DE FRANCE – ANNUAL REPORT 2018 A net deferred tax asset of Note 2: Elimination • provision of services between EUR 555 million is included in of inter-institutional transactions the Banque de France and item A11, “Other items”, in the the IEDOM; consolidated balance sheet. It Apart from recognition of deferred arises solely on temporary timing taxes, the principal consolidation • related ongoing management

differences between the recognition adjustments are (i) the elimination expenses and income. FINANCIAL MANAGEMENT AND ACCOUNTS of expenses and income for of inter-institutional transactions accounting purposes and their with Europafi and the IEDOM and Europafi recognition for tax purposes. This (ii) the elimination of tax-regulated asset is made up of the items shown provisions from the balance sheet Elimination of inter-institutional in the table above. and of the corresponding entries in transactions relates to: the profit and loss account. The corresponding entry for this • sales of paper to the Banque deferred tax asset is split between: IEDOM de France’s Directorate General Banknote Manufacturing; • the tax expense for the year, which Elimination of inter-institutional in 2018 was EUR 227 million higher transactions relates to: • provision of Banque de France than in the individual financial staff to Europafi; statements; • the advance to the IEDOM (asset item A9 in the Banque de France’s • provision of services between the • liability item L17, “Capital, individual balance sheet); Banque de France and Europafi. reserves and retained earnings”, which includes a balance of • the IEDOM’s current account with EUR 782 million representing the the Banque de France (included in net deferred tax asset at the start liability item L8.2 in the individual of the financial year. balance sheet);

139 Statutory Auditors’ report on the consolidated financial statements

KPMG Audit MAZARS 2 avenue Gambetta 61 rue Henri Regnault 92066 Paris-La Défense Cedex 92075 Paris-La Défense Cedex FINANCIAL MANAGEMENT AND ACCOUNTS STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2018

Opinion In compliance with the engagement entrusted to us by the General Council, we have audited the accompanying consolidated financial statements of the Banque de France for the year ended 31 Decembre 2018. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 December 2018 and of the results of its operations for the year then ended in accordance with accounting principles from Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier).

Emphasis of matter We draw attention to the following matters: • For the accounting principles and valuation methods, the Notes to the consolidated financial statements refer to the Notes to the individual annual financial statements. The introduction to the Notes to the annual financial statements describes the accounting principles and valuation methods applicable to the Banque de France, some of which are specific to the European System of Central Banks. • A change to the accounting principles related to the securities portfolios of the “Caisse de Réserve des Employés” is described in the Note “Change of valuation method of the securities portfolios of the Banque de France’s Employee Reserve Fund” to the annual financial statements.

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140 BANQUE DE FRANCE – ANNUAL REPORT 2018 • The General Council has determined the level of detail of the published financial information in accordance with its right provided for in Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier). Our opinion is not modified in respect of these matters.

Justification of assessments In accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the following matters that, in our professional FINANCIAL MANAGEMENT AND ACCOUNTS judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the consolidated financial statements. Valuation of securities at amortised cost Your Institution holds securities portfolios that are recognised at amortised cost. An impairment loss is recorded in the event of a risk of non-recovery in accordance with the methods described in the Note “Valuation methods – Securities Portfolios” to the annual financial statements. Our work consisted in reviewing the impairment tests put in place by the Banque de France to assess the risk of non- recovery, in order to evaluate the assumptions used and to examine the management procedures in place to approve these estimates. Assessment of social obligations Your Institution calculates its social obligations in accordance with the methods described in Note 28 to the annual financial statements. These obligations were assessed by an actuary. Our work consisted in examining the data used and the assumptions applied when making these estimates. Recognition of deferred tax As indicated in Note 1 to the consolidated financial statements, the Banque de France recognised deferred tax assets. We reviewed the main estimates and assumptions resulting in the recognition of these deferred taxes.

Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles from Article R. 144-6 of the French Monetary and Financial Code (Code monétaire et financier) and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the entity or to cease operations. The consolidated financial statements were approved by the Governor.

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141 Statutory auditors’ responsibilities for the audit of the consolidated financial statements Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

FINANCIAL MANAGEMENT AND ACCOUNTS decisions of users taken on the basis of these consolidated financial statements. As specified in Article L. 823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance on the viability of the entity or the quality of management of the affairs of the entity. As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditor exercises professional judgement throughout the audit and furthermore: • Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. • Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the consolidated financial statements. • Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of this audit report. However, future events or conditions may cause the entity to cease to continue as a going concern. If the Statutory Auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or are inadequate, to modify the opinion expressed therein. • Evaluates the overall presentation of the consolidated financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The Statutory Auditor is responsible for the direction, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements. Paris-La Défense, on 12 march 2019 The Statutory Auditors KPMG Audit MAZARS A division of KPMG S.A. Marie-Christine Jolys Hervé Hélias Emmanuel Dooseman Partner Partner Partner

142 BANQUE DE FRANCE – ANNUAL REPORT 2018 FINANCIAL MANAGEMENT AND ACCOUNTS

143

Appendices

organisation chart recirculation of banknotes and coins branch network supervision household debt commisions PRUDENTIAL SUPERVISION AND RESOLUTION AUTHORITY GENERAL COUNCIL Governor’s Private Ofﬁce Chief of Staff, Guillaume Richet-Bourbousse

APPENDICES Adviser, Christian Pfister Chair: François Villeroy de Galhau François Villeroy de Galhau Parliamentary Adviser, Véronique Bensaïd-Cohen Vice-Chair: Bernard Delas Governor Press Adviser, Mark Deen Adviser on the Bank’s Heritage, History and Patronage, François de Coustin Technical Advisers, Chahinez Benmissi, Bérangère Rudelle General Secretariat Denis Beau First Deputy Governor Head of Protocol, Catherine Fiquet eretr eerl Édouard Fernandez-Bollo Sylvie Goulard Second Deputy Governor Chief Data Officer, Engineering and Statistics Project Management Director: Renaud Lacroix Appendix 1 Firt et eretr eerl Patrick Montagner Deputy: Dominique Durant et eretrie eerl Catherine Barthélemy Bertrand Peyret Agnès Bénassy-Quéré CSR and Asia Representation Project: Florence Screve-Szeles Frédéric Visnovsky François Calvarin Jean-Roger Davin Organisation Bernard Delas Chief Ethics Of cer : Pascal Cescon Anne-Laure Delatte of the Banque de France Insurance Supervision – Directorate 1 Legal Affairs Élizabeth Ducottet Mediator: Nicolas de Sèze Bruno Longet, Director Henry de Ganay, Director Yannick Guillemaud, Staff Representative Claire Bourdon, Deputy Barbara Souverain-Dez, Deputy Sébastien Raspiller, Censor as at 1 June 2019 Jérôme Reboul, Alternate Chief Representative for the Americas (in New York): François Haas Insurance Supervision – Directorate 2 Supervision of Business Practices Audit Committee Violaine Clerc, Director Nathalie Beaudemoulin, Director François Calvarin, Chair Éric Molina, Deputy Flor Gabriel, Deputy Didier Elbaum, Secretary General Control omtroller eerl Didier Elbaum Cross-Functional International Affairs and Specialised Supervision Frédéric Hervo, Director Assets-Liabilities Committee Émilie Quema, Director Emmanuel Rocher, Deputy General Secretariat of the Consultative Committee François Villeroy de Galhau, Chair General Inspectorate Olivier Meilland, Deputy Mary-Cécile Duchon, Deputy for the Financial Sector Chair: Corinne Dromer Head Office Audit Ivy-Stevan Guiho, Director Bank Supervision – Directorate 1 Research and Risk Analysis Pension Plan Strategic Committee Bruno Saadia, Deputy Évelyne Masse, Director Laurent Clerc, Director General Secretariat of the Consultative Committee Denis Beau, Chair Ludovic Lebrun, Deputy Bertrand Couillault, Deputy on Financial Legislation and Regulations Philippe Billard, Deputy Secretary General: Frédéric Visnovsky Branch Network Audit, Regional Inspectors Bank Supervision – Directorate 2 Risk Committee2 Thierry Bangratz, Jean-Christophe Krebs, Philippe Bertho, Director Human Resources and Support Functions Sylvie Goulard, Chair Claudine Lefevre-Longuet, Didier Regnard Jean-Gaspard d’Ailhaud de Brisis, Deputy Anne-Sophie Martenot, Director Delegation Charged with the On-Site Inspection of Credit Institutions Jean-Marc Serrot, Deputy 1 Observatory for the Security of Payment Means and Investment Firms at the Prudential Supervision and Resolution Authority Delegation Charged with the On-Site Fabienne Lasserre, Deputy 1 Observatory for Regulated Savings Jérôme Schmidt, Representative Inspection of Credit Institutions 1 and Investment Firms Resolution Observatory for Banking Inclusion Thierry Frigout, Deputy Jérôme Schmidt, Representative Frédéric Visnovsky, Director Thierry Frigout, Deputy Marie-Lorraine Vallat, Deputy Senior Inspectors at the Prudential Supervision and Resolution Authority

Authorisation , Licensing and Regulation Risk Prevention Jean-Claude Huyssen, Director Paul Coulomb, Director Geoffroy Gofﬁnet, Deputy Loeiz Rapinel, Deputy

Security Adviser Thierry Couture

General Secretariat Directorate General Services Directorate General Statistics, Economics and International Directorate General Directorate General to the Economy Financial Stability iretor eerl Banknote Manufacturing Human Resources eretr eerl and Branch Network Activities and Operations Olivier Garnier iretor eerl iretor eerl Gilles Vaysset iretor eerl iretor eerl iretor eerl elegte Vincent Bonnier Hervé Gonsard Érick Lacourrège Nathalie Aufauvre Alain Duchâteau etie et et etie etie Alexandre Gautier et Christine Sampic Claude Piot Emmanuelle Assouan Bruno Cabrillac Michel Spiri Jean-Yves Haussaire Ivan Odonnat Gilbert Cette

Digital Transformation Property and General Services Branch Network Operations Risk and Compliance Balance of Payments Economic Affairs Chamalières Site Industrial Relations Thierry Bedoin, Director Pierre Poulain, Director Jean-Yves Haussaire, Director Jean-Michel Boucarut, Director2 Marc-Alain Bahuchet, Director and International Cooperation Dominique Lewandowski, Director Claudie Le Gall, Director Marc Fasquelle, Deputy Patrick Laforest, Deputy Hassiba Kaabeche, Deputy Marc Baran, Deputy Charles Françoise, Deputy Olivier de Bandt, Director Laura Dufay-Krulik, Deputy Solange Darbes-Picca, Deputy Jean-Charles Bricongne, Deputy Printing IT Projects Cash Management Markets Surveys and Sectoral Statistics Pierre-Yves Boissinot, Director Recruitment and Careers Isabelle Thouzery, Director Security Christophe Baud-Berthier, Director Imène Rahmouni-Rousseau, Director Hélène Tanguy, Director Monetary and Financial Analysis Christine Bardinet, Director Vincent Crommelynck, Deputy François Barnier, Director Thierry de la Bretèche, Deputy Elie Lewi, Deputy François Brunet, Deputy Matthieu Bussière, Director Industrialisation, Research Vincent Teurcq, Deputy François Lefort, Deputy Michel Pozzo di Borgo, Deputy Bertrand Pluyaud, Deputy Hervé Le Bihan, Deputy and Scientiﬁc Affairs Companies Monetary Policy Implementation Olivier Martin, Director Personnel Administration Data Processing Legal Affairs Alain Gerbier, Director Olivier Cousseran, Director Monetary and Financial Statistics Microeconomic and Structural Analysis Martine Hampartzoumian, and Telecommunications Christophe Arnaud, Director Jean Stranjakovitch, Deputy Pierre-François Weber, Deputy François Mouriaux, Director Françoise Drumetz, Director Finance and Management Control Director TBA, Director Delphine Moreau, Deputy Jean-Stéphane Mésonnier, Deputy Arnaud de Bronac, Director Xavier Ducreux, Deputy Daniel Cukier, Deputy Administrative Centres Consumer Affairs European Market Infrastructure Franck Sedillot, Deputy Pascal Desgranges, Deputy and Sustainable Development Stéphane Tourte, Director Alain Busac, Director European and Multilateral Policies Safety and Risks Training and University Philippe Jeannel, Director Marie-Agnès de Cherade Bertrand Manoury, Deputy Macroeconomic Analysis Édouard Vidon, Director Ronan Daniel, Director Patrick Haas, Director Finance and Management Control de Montbron, Deputy and Forecasting Directorate Rémy Lecat, Deputy Anne-Marie Laurent, Deputy Philippe Mongars, Director Press and Communication Laurent Drouin, Deputy Payment Systems and Market Infrastructure Guy Lévy-Rueff, Director Institutional Client Relations Marc Jacob, Deputy Fabrice Hermel, Director Valérie Fasquelle, Director Yannick Kalantzis, Deputy Emmanuel Devaux, Director Dominique Rougès, Deputy Large Projects - Companies and Individuals Nicolas Péligry, Deputy Accounts Martine Rigault, Director Didier Peny, Director Strategy Banking Services Jean-Luc Duras, Deputy Delphine Lescarcelle-Evin, Director Financial Education Philippe Leblanc, Director Audrey Metzger, Deputy Mark Beguery, Director Stéphane Kunesch, Deputy Procurement Olivier Jaudoin, Director CSR and SD Unit National credit mediation Financial Stability Claudine Marzuoli, Deputy Marie-Laure Hie Frédéric Visnovsky, National mediator David Adam, Director Vichett Oung, Deputy

95 departmental branches, including 13 regional directorates 19 economic centres, 2 household debt centres and 2 cash centres

1 The Governor chairs the Observatory for the Security of Payment Means, the Observatory for Regulated Savings and the Observatory for Banking Inclusion. 2 The Director of Operations Risk and Compliance reports to both the Chair of the Risk Committee and the Director General Financial Stability and Operations.

146 BANQUE DE FRANCE – ANNUAL REPORT 2018 PRUDENTIAL SUPERVISION AND RESOLUTION AUTHORITY GENERAL COUNCIL Governor’s Private Ofﬁce Chief of Staff, Guillaume Richet-Bourbousse

Adviser, Christian Pfister APPENDICES Chair: François Villeroy de Galhau François Villeroy de Galhau Parliamentary Adviser, Véronique Bensaïd-Cohen Vice-Chair: Bernard Delas Governor Press Adviser, Mark Deen Adviser on the Bank’s Heritage, History and Patronage, François de Coustin Technical Advisers, Chahinez Benmissi, Bérangère Rudelle General Secretariat Denis Beau First Deputy Governor Head of Protocol, Catherine Fiquet eretr eerl Édouard Fernandez-Bollo Sylvie Goulard Second Deputy Governor Chief Data Officer, Engineering and Statistics Project Management Director: Renaud Lacroix Firt et eretr eerl Patrick Montagner Deputy: Dominique Durant et eretrie eerl Catherine Barthélemy Bertrand Peyret Agnès Bénassy-Quéré CSR and Asia Representation Project: Florence Screve-Szeles Frédéric Visnovsky François Calvarin Jean-Roger Davin Bernard Delas Chief Ethics Of cer : Pascal Cescon Anne-Laure Delatte Insurance Supervision – Directorate 1 Legal Affairs Élizabeth Ducottet Mediator: Nicolas de Sèze Bruno Longet, Director Henry de Ganay, Director Yannick Guillemaud, Staff Representative Claire Bourdon, Deputy Barbara Souverain-Dez, Deputy Sébastien Raspiller, Censor Jérôme Reboul, Alternate Chief Representative for the Americas (in New York): François Haas Insurance Supervision – Directorate 2 Supervision of Business Practices Audit Committee Violaine Clerc, Director Nathalie Beaudemoulin, Director François Calvarin, Chair Éric Molina, Deputy Flor Gabriel, Deputy Didier Elbaum, Secretary General Control omtroller eerl Didier Elbaum Cross-Functional International Affairs and Specialised Supervision Frédéric Hervo, Director Assets-Liabilities Committee Émilie Quema, Director Emmanuel Rocher, Deputy General Secretariat of the Consultative Committee François Villeroy de Galhau, Chair General Inspectorate Olivier Meilland, Deputy Mary-Cécile Duchon, Deputy for the Financial Sector Chair: Corinne Dromer Head Office Audit Ivy-Stevan Guiho, Director Bank Supervision – Directorate 1 Research and Risk Analysis Pension Plan Strategic Committee Bruno Saadia, Deputy Évelyne Masse, Director Laurent Clerc, Director General Secretariat of the Consultative Committee Denis Beau, Chair Ludovic Lebrun, Deputy Bertrand Couillault, Deputy on Financial Legislation and Regulations Philippe Billard, Deputy Secretary General: Frédéric Visnovsky Branch Network Audit, Regional Inspectors Bank Supervision – Directorate 2 Risk Committee2 Thierry Bangratz, Jean-Christophe Krebs, Philippe Bertho, Director Human Resources and Support Functions Sylvie Goulard, Chair Claudine Lefevre-Longuet, Didier Regnard Jean-Gaspard d’Ailhaud de Brisis, Deputy Anne-Sophie Martenot, Director Delegation Charged with the On-Site Inspection of Credit Institutions Jean-Marc Serrot, Deputy 1 Observatory for the Security of Payment Means and Investment Firms at the Prudential Supervision and Resolution Authority Delegation Charged with the On-Site Fabienne Lasserre, Deputy 1 Observatory for Regulated Savings Jérôme Schmidt, Representative Inspection of Credit Institutions 1 and Investment Firms Resolution Observatory for Banking Inclusion Thierry Frigout, Deputy Jérôme Schmidt, Representative Frédéric Visnovsky, Director Thierry Frigout, Deputy Marie-Lorraine Vallat, Deputy Senior Inspectors at the Prudential Supervision and Resolution Authority

Authorisation , Licensing and Regulation Risk Prevention Jean-Claude Huyssen, Director Paul Coulomb, Director Geoffroy Gofﬁnet, Deputy Loeiz Rapinel, Deputy

Security Adviser Thierry Couture

95 departmental branches, including 13 regional directorates 19 economic centres, 2 household debt centres and 2 cash centres

147 APPENDICES

The Banque de France branch network as at 1 January 2019

Saint-Denis

PARIS LA DÉFENSE Pantin Dunkerque Paris-Bastille Nord Boulogne-sur-Mer LILLE

Arras - Lens Valenciennes Créteil

Amiens Saint-Quentin

Laon Charleville- Beauvais Mézières Le Havre ROUEN Metz Caen Compiègne Reims Saint-Lô Sarreguemines Évreux Bar-le-Duc Cergy-Pontoise Châlons- Nancy Versailles en-Champagne Marne- STRASBOURG la-Vallée Alençon Chartres Évry Épinal Brest Melun Troyes Saint-Brieuc RENNES Remiremont Colmar Quimper Laval Le Mans Chaumont Auxerre Mulhouse ORLÉANS Belfort Vannes Blois Vesoul Tours DIJON Besançon NANTES Angers Bourges Nevers Châteauroux Chalon-sur-Saône Lons-le-Saunier Mâcon La Roche-sur-Yon Cluses Poitiers Moulins Bourg-en-Bresse Niort Guéret Annecy Gerland La Rochelle Limoges Roanne LYON Chambéry Angoulême Clermont-Ferrand Vienne St Étienne Tulle Grenoble Le Puy-en-Velay Valence Périgueux Aurillac Gap BORDEAUX Privas Cahors Rodez Mende Digne Agen Avignon Montauban Nice Mont-de-Marsan Albi Nîmes Montpellier Auch TOULOUSE Castres Béziers Toulon Pau Bayonne MARSEILLE Foix Carcassonne Tarbes

Perpignan Branch Bastia Branch carrying out cash operations Economic centre Economic centre carrying out cash operations AJACCIO Household debt centre (HDC) Cash centre The regional branches are indicated in capitals (e.g. LILLE). Departmental branches are in roman type (e.g. Tours). Economic centres are in italics (e.g. Bayonne).

148 BANQUE DE FRANCE – ANNUAL REPORT 2018 APPENDICES

Appendix 2 The scope of the Banque de France

The Law of 8 November 2016 on transparency, the fight against corruption and the modernisation of the economy transformed Victoires Paiements was created on 22 May 2012 and is the Institut d’émission des an economic interest grouping combining the Banque départements d’outre-mer (IEDOM – the note-issuing de France and the Caisse des Dépôts et Consignations bank for the French overseas departments) into a wholly- (CDC). Its mission is to process retail payments owned subsidiary of the Banque de France, with effect (i.e. large volumes of small payments). The structure as of 1 January 2017. Prior to this decision, the IEDOM consists of a shared transaction processing platform, was a state-owned body and, for historical reasons, which allows the Banque de France and CDC to pool was still largely controlled by the Agence française de their investments and reduce costs. Flows between développement (AFD – French Development Agency). the two banks are also processed via the intrabank However, following the introduction of the euro, the channel, outside the usual exchange systems. IEDOM began merging its operations with the Banque de France. Its missions remain unchanged and consist primarily in the provision of central bank functions to the French overseas departments and collectivities, under the aegis of the Banque de France.

Europafi was created on 27 October 2015 to set Created on 27 December 1995, BDF Gestion is the up a public paper manufacturing unit within the Banque de France’s asset management subsidiary. Eurosystem. The aim is to make the paper mill in It manages 30 collective investment schemes Vic-le-Comte the leading publicly-owned producer of (dedicated, open to the public, employee savings), banknote paper in the euro area. Four central banks as well as a number of individual mandates for are shareholders alongside the Banque de France. institutional investors.

149 APPENDICES

Appendix 3 The recirculation of euro banknotes and coins by private operators in 2018

Under Article L. 141-5 of the French Agreements signed with private operators in 2018

Monetary and Financial Code, the Type of agreement Type of operator Number of Total number Banque de France is tasked with agreements signed signed as at in 2018 31 December 2018 maintaining the quality of the Coins 27 banknotes and coins in issuance and Professional operators 0 13 ensuring their effective circulation Non-professional operators 0 14 within French national territory. Banknotes 261 Distribution agreements Credit institutions 0 88 Article R. 122-8 of the Code requires Processing agreements Credit institutions 2 55 operators (credit institutions, Cash-in-transit companies 0 8 Retailers providing recirculation services 1 109 cash‑in‑transit companies, retail Other professional cash-handlers 0 1 sector service providers) contributing to the processing and recirculation of banknotes that have not come signed an agreement authorising known figures) were processed by from a Eurosystem central bank to them to process coins. private operators, representing a sign an agreement with the Banque rise of 5.4% compared with 2017. de France before undertaking The most common logistical set-up Of these, 47.3% were recirculated such activities. for distributing banknotes in 2018 by cash-in-transit firms, up from was via bank ATMs located in bank 37% in 2017. At the end of 2018, 88 credit branches and replenished with institutions had signed agreements banknotes recirculated by cash-in- with the Banque de France transit firms. In 2018, ATMs accounted Banque de France inspections authorising them to recirculate for 54% of all machines replenished of operators banknotes to the public via customer with recirculated banknotes (9,507 operated machines; 173 operators out of a total of 16,666 machines). All operators processing banknotes had signed processing agreements that have not come from a central setting out criteria for sorting In the first half of 2018, 29.7 % of all bank and recirculating them via cash banknotes; and 27 operators had banknotes put into circulation (last machines are subject to inspections

150 BANQUE DE FRANCE – ANNUAL REPORT 2018 APPENDICES

The cash cycle and recirculation of banknotes

GENERAL PUBLIC

Payment Return of change Bank account transaction (manual delivery, deposit/withdrawal cashback) RETAILERS BANK BRANCHES

arge retailers ther retailers

Receipt Till Receipt Till of cash ﬂoat of cash ﬂoat epositwithdrawal Grouping and preparation ATM, (accounts department, Recirculation banknote combined processing machine) cash-in machines

Branch Recirculation Deposit counter of cash takings Storage of retailer cash takings ATM Back ofﬁce

Replenishment Collection Collection Delivery of orders

CASH-IN-TRANSIT COMPANY Lodgement BANQUE of collected cash DE FRANCE Counting, valuation Recirculation and sorting of banknotes Withdrawal of orders Banknote sorting

by the Banque de France. In 2018, of 68% relative to 2017). Following Four temporary suspensions were the Bank carried out 489 on-site the lowering of the acceptable issued – one for a bank branch and inspections of bank branches and tolerance level for fitness checks the others for retailers providing workshops processing banknotes for from 10% to 5%, 5% of banknote recirculation services. Document customer-operated machines, of which handling machines were found to be checks also led to one operator being 156 were conducted entirely by staff non-compliant in 2018 and required asked to explain why it had failed to from the cash centre network (increase intervention by the manufacturer. meet its contractual obligations.

151 APPENDICES

Banque de France inspections recirculation activities of firms based Banknote of coin-processing sites in the overseas departments and authentication training collectivities. At the end of 2018, for bank employees In 2018, the Banque de France 13 agreements had been signed with performed 30 on-site inspections private operators for the processing of In accordance with the provisions of coin-processing sites. banknotes, and 13 for the recirculation of Article R. 122-6 of the Monetary of banknotes via customer-operated and Financial Code, the Banque machines. The IEDOM conducted de France assists banks in Banknote recirculation inspections at 15 of the 86 sites training their staff in the manual and coin processing concerned. Moreover, 7 agreements distribution of banknotes. As part in the overseas departments on automatic coin processing had of this task, in 2018 it provided been signed, covering a total of banknote authentication training to The Banque de France has tasked 9 production sites. 8 of these sites 20,921 credit institution employees. the IEDOM with managing the were inspected.

152 BANQUE DE FRANCE – ANNUAL REPORT 2018 APPENDICES

Appendix 4 Summary of the Household Debt Commissions’ activity reports for the year 2018

In accordance with the provisions Key data on the commissions’ activity of Article R. 712-12 of the French (in number of applications) 2018 2017 Consumer Code, each Household Applications filed 162,936 181,123 Debt Commission draws up an annual o/w second-time applications (%) 46.4 47.1 activity report setting out the number Admissible applications 146,353 166,939 Directed towards a debt restructuring programme 79,719 94,564 of cases processed, the measures Directed towards a personal recovery procedure without judicial liquidation 65,956 75,578 taken, the type of debt involved Non-admissible applications (A) 8,508 13,441 and the difficulties encountered. Recommended for personal recovery without judicial liquidation 77,287 63,952 Agreement by the debtor to a personal recovery procedure with judicial liquidation (C) 1,995 1,861 These reports are submitted to Agreement on a debt repayment plan (D) 14,312 20,171 the Banque de France, which is Measures imposed or recommended by the commissions 71,685 63,901 responsible for summarising and Cases closed (F) 12,312 16,155 disclosing them in its annual report. Cases handled (A+B+C+D+E+F+G) 186,099 179,481

New cases declined for the sixth consecutive year, falling back in line with 1990’s level The effectiveness of the procedure simplify the procedure and allow remains a priority for commissions to impose resolution In 2018, the Household Debt public authorities measures more rapidly (Law Commissions received a total No. 2016-1691 of 9 December 2016, of 162,936 overindebtedness In line with the target set by public known as the Sapin 2 Law, and Law applications, representing a decline authorities, the commissions’ No. 2016-1547 of 18 November 2016 of 10% relative to 2017 and of 27% priority, wherever possible, is to on the modernisation of French relative to 2014. The number of find a permanent solution to the legislation for the 21st century). new cases (first-time applications) overindebtedness cases they handle. fell by 4.4% versus 2017 to a total A higher number of cases were of 91,989, which is in line with the Two important measures came handled in 2018 (186,099) than in the level observed in 1990. into effect in January 2018 that previous year as some applications

153 APPENDICES

Breakdown of commissions’ decisions in 2017 and 2018 them – a situation that, unfortunately, (% of total applications processed) the debt commissions can do little Cases closed Applications deemed non-admissible to resolve. It highlights the need to improve the quality of support for overindebted consumers, and to put in place appropriate structures where they can seek advice and Cases recommended 2 Cases where measures 8 for a personal budgeting help. were imposed recovery procedure or recommended without judicial liquidation 11 1 The majority of reports noted 8 1 that departmental councils and family benefits offices had failed Cases resulting Cases where the debtor agreed to a personal in an agreed debt repayment plan recovery procedure with judicial liquidation to appoint an overindebtedness correspondent, even though this 2018 2017 is a specific requirement of the legislation. Clearly, this stipulation had been put on hold at the end of two new legal measures: the Law has not been followed up in practice. of 2017 pending the entry into force of on the modernisation of French Yet departmental councils and the legal changes on 1 January 2018. legislation for the 21st century, benefits offices both play a key role which reduces the legal aspects of in detecting vulnerable populations In 41.5% of cases, the applicant’s the overindebtedness procedure; and coordinating the different actors debts were completely written off. and the Sapin 2 Law on transparency, in the overindebtedness procedure. The share of cases directed towards the fight against corruption If they were represented on the a personal recovery procedure (PRP) and the modernisation of the Household Debt Commissions it has been rising steadily since the economy, which got rid of the would be easier to implement the option was introduced in 2003, conciliation phase between the debt measures cited earlier. underscoring the extent of the commission, creditors and debtors personal and social difficulties that in cases where no real estate is Efforts to improve economic applicants often face. involved. These measures appear and financial literacy to have reduced handling times for among the general public A cut in processing times overindebtedness cases. thanks to the legal and regulatory The commissions stepped up their changes introduced in 2018 Insufficient recourse to welfare benefits economic and financial literacy campaigns throughout France The commissions’ reports highlighted This refers to individuals who are in 2018. Social workers were the entry into force on 1 January 2018 entitled to benefits but fail to claim given access to new resources

154 BANQUE DE FRANCE – ANNUAL REPORT 2018 APPENDICES

to help support the financially Law No. 2018-1021 of 23 November Regular communication vulnerable and stop consumers 2018 (known as the ELAN Law on with magistrates getting into too much debt. housing, planning and digital In total, the commissions met more technology), which came into effect In 2018, all commissions held at least than 15,000 social workers and on 1 March 2019, contains provisions one meeting with the district court representatives of welfare groups, relating to landlords who have judges and/or registrars in their social action centres, family benefits obtained a court order rescheduling region with a view to harmonising offices, consumer associations and a tenant’s rent arrears. practices and finding appropriate charities in 2018, to advise them on solutions for the overindebted. how to better guide individuals with As of 1 March 2019, these debt their overindebtedness applications repayments are no longer The commissions noted that they and throughout the procedure. suspended if the tenant submits still encountered difficulties in an admissible overindebtedness implementing a PRP with a judicial In 46% of cases submitted in 2018, application. On top of his/her usual liquidation. The procedure is long the applicant was being supported rent payments and current expenses, and does not really provide a solution by a social worker. the tenant has to continue paying for the debtor over the medium term. the rescheduled arrears until the Certain commissions said they were The need for coordination between Household Debt Commission has reluctant to use it because of the the overindebtedness procedure put in place measures to resolve length of the court proceedings, and and housing‑related measures their financial situation. that they preferred rescheduling a portion of the borrower’s debts over By maintaining regular dialogue with Once the tenant and landlord have the maximum allowed seven year the Commissions de coordination been notified of the solution, they period. At the end of this period, des actions de prévention des have thirty days in which to contest the commissions then declare expulsions locatives (CCAPEX it, after which it cancels and replaces themselves no longer competent – Coordination Commissions for all debt repayments ordered by to handle the case, even though the Prevention of Evictions), the the court. the individual is still overindebted. commissions are now better able to identify individuals in particularly The commissions’ 2018 activity Due to their professional status, vulnerable situations. However, reports again referred to the lack some heavily indebted individuals there are still some difficulties of coordination between the are considered ineligible for the linked to the lack of coordination court debt rescheduling decision individual overindebtedness between the overindebtedness and the decision to accept the procedure and have to file for procedure and the procedure for overindebtedness application. 2019 commercial bankruptcy even rental evictions. should reveal the extent to which the though they only have personal legal changes have made a difference. debts. Unfortunately, the courts

155 APPENDICES

frequently refuse to open Some commissions noted that judges The need to ensure the procedure commercial bankruptcy proceedings in charge of overindebtedness is balanced or a professional recovery procedure proceedings were increasingly in these cases, as the individual in ruling applications admissible Some commissions indicated they question has no professional debts. even though the commissions were increasingly encountering This can also occur in the case themselves had deemed them foreign groups specialising in of individuals who have ceased ineligible. The commissions said debt recovery among households’ their business activity but have they would like to see legislative creditors. This can upset the balance outstanding social security debts or practical changes introduced, of the overindebtedness procedure (to the social security scheme for so that individuals who currently as the groups often fail to reply to self‑employed workers): the debts have no solution for their financial letters. They may also refuse to apply are deemed to be professional under difficulties can be given access to the commissions’ debt resolution the overindebtedness procedure the overindebtedness procedure. measures as they do not consider but are classified as personal by the A number of proposals for them legally enforceable. courts for the purposes of commercial improving the process are currently bankruptcy proceedings. being examined.

156 BANQUE DE FRANCE – ANNUAL REPORT 2018 List of illustrations LIST OF ILLUSTRATIONS

Tables

Ambitions 2020: 10 key targets for 2020 69 CSR dashboard 94 Balance sheet at 31 December 2018 107 Profit and loss account for 2018 108 Foreign currency assets and liabilities (excluding relations with the IMF) 115 A breakdown of holdings by main currency 115 Relations with the IMF 115 Euro-denominated loans and liabilities to euro area credit institutions related to monetary policy operations 117 Euro-denominated claims on non-euro area residents 118 Securities held for monetary policy purposes 119 Euro-denominated securities issued by euro area residents 119 Other claims on the Eurosystem 120 Securities portfolios 120 Other euro and foreign currency denominated financial assets 120 Other items 121 Fixed assets 121 Information relating to subsidiaries and participating interests at 31 December 2018 121 The Banque de France’s key for subscription of the ECB’s capital 122 Euro-denominated liabilities to euro area residents 122 Euro-denominated liabilities to non-euro area residents 122 Euro-denominated liabilities to the Eurosystem 123 Euro-denominated liabilities to other euro area residents 123 Banking transactions 123 Other items 124 Provisions for liabilities and charges 124

157 LIST OF ILLUSTRATIONS Revaluation accounts 125 Capital, reserves and retained earnings 125 Notional amount of financial futures 126 Foreign currency receivables and deliverables 126 Pension liabilities and funding 128 Net interest income 129 Other income and expenses on financial transactions, net 129 Income from equity securities and participating interests 130 Pooling of monetary income 130 Other income and expenses, net 131 Staff costs and related expenses 132 Corporate income tax 132 Consolidated balance sheet at 31 December 2018 136 2018 consolidated profit and loss account 137 Deferred tax assets and liabilities 138 Agreements signed with private operators in 2018 150 Key data on the commissions’ activity 153

Charts

Eurosystem assets 19 ECB key rates 20 Debt of non-financial corporations at 3rd quarter 2018 24 Debt of households at 3rd quarter 2018 24 Opinion on trends in industrial production 25 Growth in net banknote issuance 31 Flow of banknotes at Banque de France and IEDOM counters 31 Breakdown of prudential and business practice inspections conducted on-site by the ACPR in 2018 in the banking and insurance industries 37 Referral of VSEs to professional networks 60

158 BANQUE DE FRANCE – ANNUAL REPORT 2018 Access to training 70 LIST OF ILLUSTRATIONS Proportion of tenured managers internally promoted to professional/managerial roles 70 Number of employees who telework and frequency 72 Change in telework since 2010 72 Change in net operating expenses between 2015 and 2018 73 Breakdown of headcount by broad area of activity 74 Breakdown of headcount by age bracket 74 Change in total headcount 74 GHG emissions by energy source in 2018 88 Change in commuting since 2015 89 Change in business travel since 2015 89 2017 Banque de France GHG emissions assessment 90 Breakdown of commissions’ decisions in 2017 and 2018 154

Schémas

Overview of the Ambitions 2020 strategic plan 68 Our corporate social responsibility: four commitments and twelve priority actions 80 The General Council and the Audit Committee 101 Organisation of the Banque de France as at 1 June 2019 146 The Banque de France branch network as at 1 January 2019 148 The cash cycle and recirculation of banknotes 151

159 LIST OF BOXES

List of boxes Monetary policy decisions 19 Benchmark indices on money markets 21 A deeply changing foreign exchange market 27 Algorithmic trading 28 Training in banknote authentication 32 The national payments strategy 33 Supervision within the framework of the Banking Union 37 The prospect of Brexit 39 Resolution plans 40 Non-bank intermediation and shadow banking 42 The Banking Union and Capital Markets Union 45 The Central Banks and Supervisors Network for Greening the Financial System (NGFS) 47 Madre, the first operational blockchain run by a central bank 48 Banque de France locations 52 Partnership with the Education Ministry 54 The Banque de France and financially vulnerable populations 59 Assigning ratings: the responsibility of Banque de France branches 62 A portal for the French Treasury 65 Execution of the Public Service Contract in 2018 65 A one‑off bonus payment 71 The reduction in net operating expenses 73 AnaCredit 75 The Banque de France satisfaction survey 77 The Golden Gallery: 300 years of history 83 Exceptional EUR 5 million allocation to the Social Cohesion Fund by the Banque de France 84 A strategy game on the market 85 2nd Forum for Charitable Initiatives: the 2018 awards ceremony 86 Launch of skills sponsorship in 2018 87 Hall 32, professional integration through apprenticeships 87 Reduction in office paper consumption: profit‑sharing target achieved 91 Banque de France University 93 Cyber-risks 103

160 BANQUE DE FRANCE – ANNUAL REPORT 2018 Banque de France Press and Communication Directorate Photo credits Pascal Assailly - Jean Derennes - Philippe Jolivel / BDF Émilie Albert - Aurélia Blanc - Pablo Bustamante Laurent Carpentier - Yann Dejardin - Marthe Lemelle Xavier Rauffet - Confino Explosition - Shutterstock Printed by Navis Copyright: July 2019 ISSN 1240-6813