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Facade of the Banque de France, in Paris. CHARLES PLATIAU
No alarmism, but the hopes of a rapid economic recovery that had followed the deconfinement of spring 2020 seem far away. In its half-yearly risk assessment report for the French financial system, published Thursday, January 7, the Banque de France is concerned about the consequences of the rebounds of the health crisis on the health of companies and, consequently, on that of lenders.
“By complicating the repayment of debts contracted in the spring  to cope with the cash flow shock associated with the first confinement, a slow recovery would be liable to seriously deteriorate the financial situation of the most fragile companies ”, warns the institution. Such a scenario would cause “A significant increase” bankruptcies and weigh “On the results of banks”, who have distributed record amounts of credits in recent years.
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“We have no concerns for financial stability in the next six months but remain very vigilant, because of the vulnerabilities of the financial system that existed before the health crisis and the uncertainties of the future, especially if it were to be to continue, calling for the extension of the exceptional support mechanisms of the EU and the States ”, summarizes Sylvie Goulard, Deputy Governor of the Banque de France.
To keep businesses afloat in the face of this economic shock, banks “Very quickly and amply provided funding”, notes the report. The figures make you dizzy: the gross debt of companies (bank loans and debt issuance on the market) increased by nearly 175 billion euros between March and September 2020, against 65 billion euros over the same period in 2019 At the same time, some of these companies have made reserves, massively increasing their cash flow.
Recourse to market financing, after a sudden interruption in mid-March 2020, at the start of the crisis, was again very dynamic from the end of March, and “These issues took place under favorable financial conditions”, emphasizes the Banque de France. However, this signals points of vigilance: the rating agencies have initiated a vast movement of downgrading the credit ratings of companies, and “The volume of debt which could soon be degraded amounts to 196 billion euros”. For their part, banks could “Be more selective, in particular to mitigate the risk of their own credit rating downgrading, by granting fewer loans to already weakened companies”, warns the central bank.
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