2014 ANNUAL REPORT BANQUE DE FRANCE To The President of the Republic And Parliament By Governor Christian Noyer Page n°13 Annual Report 250147 10/07/2015 AR2014.indb 1 10/07/2015 15:43:27 Contents The Banque de France commissioned a team of specialists to restore its architectural and artistic heritage. Photographs of their painstaking work, by Pascal Assailly and Jean Derennes, were used to illustrate this Annual Report. The photographs of the governors and other members of the Executive Committee are by Marthe Lemelle. 2 Banque de France Annual Report 2014 Page n°14 Annual Report 250147 10/07/2015 AR2014.indb 2 10/07/2015 15:44:05 Contents First part Report on monetary policy and fi nancial stability 7 Monetary policy, measures to promote fi nancial stability 8 1| INTERNATIONAL ENVIRONMENT 9 1|1 Economic activity outside the euro area 9 1|2 Capital and commodity markets 13 2| ECONOMIC AND MONETARY SITUATION IN THE EURO AREA AND FRANCE 17 2|1 Growth and infl ation 17 2|2 Monetary and fi nancial developments in 2014 21 3| THE EUROSYSTEM’S MONETARY RESPONSE 25 3|1 Eurosystem monetary policy decisions 25 3|2 Implementation of Eurosystem monetary policy decisions 27 4| MEASURES TO CONSOLIDATE THE RECOVERY 28 4|1 Measures to promote fi nancial stability 28 4|2 Measures to promote fi nancing of the economy 29 4|3 Keeping government fi nances under control in the euro area 30 4|4 International coordination of economic policies 33 4|5 Implementation of structural reforms to stimulate growth 35 Second part Report on activities 37 Activities 38 1| PROVISION OF SERVICES TO THE NATIONAL COMMUNITY 40 1|1 Assessing the economy and its fi nancing 40 1|2 Monitoring companies 42 1|3 Consumer protection and access to banking services 43 1|4 Handling of household over‑indebtedness 45 1|5 Holding general government accounts and managing Treasury auctions 45 2| EUROSYSTEM-RELATED TASKS 46 2|1 Monetary policy 46 2|2 Banknotes and coins 51 3| MEASURES TO SAFEGUARD FINANCIAL STABILITY 53 3|1 Prudential supervision and oversight of fi nancial institutions 53 3|2 Security of means of payment and oversight of market infrastructures 55 3|3 Mitigation of systemic risks 56 Banque de France Annual Report 2014 3 Page n°15 Annual Report 250147 10/07/2015 AR2014.indb 3 10/07/2015 15:44:11 Contents Strategy 58 1| ASSERT THE BANK’S INFLUENCE 60 1|1 Developing top‑quality economic research 60 1|2 Strengthening its leadership in the security of payment means and systems 60 1|3 Increasing the resilience and activities of Paris financial centre 62 1|4 Creating a public banknote manufacturing division for the Eurosystem 62 1|5 Playing a central role in safeguarding financial stability 63 2| GUARANTEE THE BANK’S FINANCIAL INDEPENDENCE 64 3| PREPARE THE BANK FOR 2020 AND BEYOND 64 3|1 Transformation challenges 64 3|2 Human resources policy 66 Governance 70 1| EXECUTIVE BODIES 71 1|1 Governor and Deputy Governors 71 1|2 The Executive Committee 74 1|3 Operational management bodies 74 1|4 The branch network and the College of Regional Managers 74 2| DECISION-MAKING AND CONTROL BODIES 74 2|1 The General Council 74 2|2 The Audit Committee 74 2|3 Compensation Committee 77 3| INTERNAL AUDIT AND RISK MANAGEMENT 77 3|1 Internal Audit 77 3|2 Risk management 77 Corporate social responsibility 78 1| ECONOMIC AND FINANCIAL EDUCATION FOR THE PUBLIC 80 1|1 The Cité de l’économie et de la monnaie 80 1|2 Partnerships with education authorities and educational workshops 81 2| PROMOTING PROFESSIONAL INTEGRATION AND TRAINING OF SOCIAL WORKERS 82 2|1 Contributing to young people’s integration into the workforce 82 2|2 Training social workers 83 3| SPONSORSHIP POLICY 83 4| A RESPONSIBLE EMPLOYER 84 4|1 Supporting staff throughout their career 84 4|2 Promoting gender equality in the workplace 85 4|3 Promoting the integration of disabled people 85 4|4 Improving the quality of life at work 85 4 Banque de France Annual Report 2014 Page n°16 Annual Report 250147 10/07/2015 AR2014.indb 4 10/07/2015 15:44:11 Contents 5| THE BANK’S ENVIRONMENTAL STRATEGY 87 5|1 The Bank’s environmental strategy translated into actions: 2014 highlights 87 5|2 The Bank’s environmental strategy: 2014 results and outlook 89 Financial management and the accounts 92 1| REPORT ON ASSETS, LIABILITIES AND RESULTS 93 1|1 Assets and liabilities 93 1|2 Breakdown of profit 97 2| INDIVIDUAL ACCOUNTS OF THE BANQUE DE FRANCE 100 2|1 Balance sheet and profit and loss account 100 2|2 Notes to the annual accounts 101 2|3 Auditor’s report on the annual accounts of the Banque de France 123 3| THE COMBINED ACCOUNTS 125 3|1 Combined balance sheet and profit and loss account 125 3|2 Notes to the combined annual accounts 126 3|3 Auditors’ report on the combined annual accounts 129 Appendix 132 1| Organisation of the Banque de France at 13 March 2015 132 2| The recycling of euro banknotes and coins by private operators in 2014 135 3| Summary of the Household Debt Commissions’ activity reports for the year 2014 137 List of illustrations 141 Banque de France Annual Report 2014 5 Page n°17 Annual Report 250147 10/07/2015 AR2014.indb 5 10/07/2015 15:44:12 Contents BOXES 1 The decline in oil prices: why it happened and the impact on the global economy 12 2 Volatility on capital markets in 2014 14 3 External trade in goods and France’s competitiveness 18 4 Wage developments in France since the crisis 20 5 Situation of large listed groups in the first half of 2014 23 6 French households’ financial behaviour in 2014 24 7 Arrangements for the asset purchase programmes introduced in 2014 26 8 Take-up of alternative financing by mid-tier enterprises 30 9 France’s government finances in 2014 31 10 Implementation of European governance in the euro area under “Two Pack” regulations 32 11 Macroeconomic impact of structural reforms 35 12 Access to credit for SMEs 40 13 Studies on large listed group 41 14 Ratings offer a synoptic assessment 42 15 Penalties issued in 2014 43 16 The Observatory for Banking Inclusion 44 17 The balance of payments and new international standards 47 18 International symposium on 7 November 2014: “Central Banking: The Way Forward?” 48 19 Targeted Long-Term Refinancing Operations (TLTROs) 49 20 Securities purchase programmes 50 21 The new €20 banknote and pilot €50 notes 52 22 Launch of the Europa series €10 banknote on 23 September 2014 52 23 BRRD adoption and establishment of the Single Resolution Mechanism 53 24 Key figures in the comprehensive assessment of bank balance sheets 54 25 Preparing the market for Solvency II – 2014 results 55 26 The quality of the Bank’s economic research 61 27 Target2 Securities 61 28 Euro Secured Notes Issuer (ESNI) 62 29 Spin-off of the Bank’s paper mill 62 30 Representation of the Banque de France at the ECB as part of the SSM 63 31 Construction of the new currency management centres 65 32 Major projects in services activities 65 33 The Paris-La Défense site 65 34 Recruitment policy 68 35 Training and change management 68 36 Transforming working conditions in the network 69 37 The Banque de France network at end-2014 75 38 The values of the Banque de France 79 39 A photographic illustration of the economy at the JECO 80 40 Conferences aimed at teachers in Auvergne 81 41 Prevention on the banknote manufacturing site 86 42 Cutting back the number of printers: performance objective achieved 88 43 The positive effect of the Bank’s circular on travel policy 90 6 Banque de France Annual Report 2014 Page n°18 Annual Report 250147 10/07/2015 AR2014.indb 6 10/07/2015 15:44:12 First part Report on monetary policy and financial stability Banque de France Annual Report 2014 7 Page n°19 Annual Report 250147 10/07/2015 AR2014.indb 7 10/07/2015 15:44:12 Monetary policy, measures to promote financial stability 8 Banque de France Annual Report 2014 Page n°20 Annual Report 250147 10/07/2015 AR2014.indb 8 10/07/2015 15:44:23 Monetary policy, measures to promote financial stability n 2014, the main regions of the global economy upturn, coupled with gains in purchasing power reported mixed trends. Overall, industrialised and a marked improvement on the labour market, I countries saw a pick‑up in economic growth, stimulated household consumer spending. Meanwhile, with a confirmed recovery in the United States and residential investment slowed considerably in 2014, the United Kingdom and a return to a positive growth with average annual growth of just 1.6%, compared rate in the euro area. In Japan, however, economic with 12% in 2013. activity slowed sharply. Growth also cooled on average in emerging countries, with an especially pronounced Overall, 2014 was a mixed year for the property market. slowdown in Russia and Brazil, as well as in China, After increasing for three years in a row, sales of existing albeit to a lesser degree. Oil prices experienced a steep homes fell back in 2014. Sales of new homes continued decline in 2014, which should ultimately provide to rise, but at a slow pace. Although transactions support to the global economy, although the expected were down, property prices continued to increase, effects vary considerably from one country to another.