French authorities could take extra measures to curtail bank lending to large businesses if the expansion of credit significantly outpaces economic growth, the Bank of France said Thursday.
In a speech to bankers gathered at the Bank of France, the bank's governor, Francois Villeroy de Galhau, said authorities could activate so-called counter-cyclical capital buffers if needed in 2018. The measure gives bank regulators the scope to ratchet up banks' minimum capital ratios if they see rising risks to the economy from the financial system.
"If the risks to the credit cycle were to increase [...] we are ready to act further at any moment in 2018, if necessary by activating counter-cyclical capital buffers," Mr. Villeroy de Galhau said.
In December, France's High Council for Financial Stability, which brings together market and financial regulators, the central bank and the finance ministry, already said it would prepare measures to limit the exposure of France's systemic banks to "the most indebted large resident companies" to 5% of the capital of those banks. The council warned at the time that the debt level of France's nonfinancial companies had risen to 71.8% of gross domestic product while the level for the whole eurozone was falling.
Mr. Villeroy de Galhau said Thursday the measure that was decided in December will apply from July 1 once it is approved by European authorities.
-Write to William Horobin at firstname.lastname@example.org
(END) Dow Jones Newswires
January 18, 2018 13:35 ET (18:35 GMT)