Are banks too cautious when deciding whether or not to grant a loan? This is what François Villeroy de Galhau, governor of the Bank of France, fears.
“ The refusal rate of banks, for equal risk, should not increase. Let’s be clear, this rate is not precisely measured, and this undoubtedly justifies a lot of interpretation and suspicion. (But) there is a diffuse feeling that he has risen », noted the governor when opening the annual conference of the Prudential Control and Resolution Authority (ACPR).
The average interest rate has increased three and a half times in the space of 18 months
The governor does not see “ no justification for this », because the profitability and liquidity of banks should not be a brake according to him. “ It appears necessary and in the collective interest to better monitor these refusal rates. “, while the granting of real estate loans fell to a “ low point » of 9.2 billion euros in September, to levels before the establishment of a monetary policy « ultra-accommodating ” in 2015.
The tide has since turned on this market, after months above 20 billion euros as in April and May 2022, driven by a catch-up effect after periods of confinement for 2020 and 2021 and the desire of borrowers in 2022 to benefit from attractive rates before the announced rise.
Because since spring 2022, the average interest rate has increased three and a half times in the space of 18 months, to 3.81% in September. This rapid increase is explained by the policy of central banks to counter inflation, which increases the cost of money for banks, the latter passing it on to their customers to maintain their margins. Banking establishments are therefore less active in this market and potential buyers, hoping for a drop in prices, are also fewer in number, leading to a drop in the number of transactions. The total outstanding amount of real estate loans is also starting to plateau, at around 1,300 billion euros, which remains four times higher than 20 years ago.
“ To reflect on » to open an amicable procedure
In this context of a cold snap on real estate transactions, François Villeroy de Galhau invites banks and public authorities to “ to reflect on » to open an amicable procedure for “ apparently solvent real estate loans which would have given rise to refusal ”, as exists for business credit.
The governor of the Bank of France also defended the maximum debt rate set at 35% of income by the High Financial Stability Council (HCSF) – criticized by banks and brokers who accuse him of blocking numerous files . The central banker recalled that this tool has “ fulfilled (his) mission » to stem over-indebtedness and that there was room for flexibility. On September 26, the HCSF, which brings together the Minister of the Economy and the governor of the Bank of France, decided to keep the rules for granting real estate credit unchanged, judging that a relaxation would not resolve the difficulties of the market.
More generally, the governor welcomed the “ great resilience » of the French financial sector, despite “ an exceptional level of uncertainty “. Even if the importance of fixed rates in loans slows down the process for French banks, the increase in interest rates and the stabilization of the Livret A rate have strengthened the profitability and solvency of French banks.