Opinion of the European Central Bank of 6 November 2017 on a temporary freeze of the remuneration rate in respect of the French livret A and certain other French regulated savings accounts (CON/2017/45)

OPINION OF THE EUROPEAN CENTRAL BANK of 6 November 2017 on a temporary freeze of the remuneration rate in respect of the French livret A and certain other French regulated savings accounts (CON/2017/45) Introduction and legal basis

On 13 October 2017 the European Central Bank (ECB) received a request from the French Ministry of Economy and Finance for an opinion on a draft regulatory provision (hereinafter the ‘draft amendment’) freezing the remuneration rate of the livret A, the comptes spéciaux sur livret du crédit mutuel, the livret d’épargne populaire, the livret d’épargne-entreprise, the compte d’épargne-logement (together the ‘related savings accounts’). Each of them is a type of French regulated savings account, which has a remuneration rate linked to that of the livret A. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of Article 2(1) of Council 1, Decision 98/415/EC as the draft amendment relates to: (a) the basic task of the European System of Central Banks (ESCB) of implementing the monetary policy of the Union pursuant to the first indent of Article 127(2) of the Treaty; (b) the Banque de France; and (c) the rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft amendment

1.1 The purpose of the draft amendment is to set, from 1 February 2018 to 31 January 2020, a fixed remuneration rate for the livret A and related savings accounts. In particular, these rates would be fixed at 0.75 % for the livret A, at 0.75 % for the comptes spéciaux sur livret du credit mutuel, at 1.25 % for the livret d’épargne populaire, and at 0.50 % for each of the livret d’épargne entreprise and the compte épargne logement respectively. As a consequence, the remuneration formula on which the ECB rendered Opinion CON/2016/51 would not be applied during this period. Similarly, the Banque de France and its Governor’s role in making the calculations, proposing ad hoc revisions and requesting derogations from applying the rates would be temporarily suspended as regards these accounts.

1.2 As noted in the consultation request, the French authorities intend to implement the abovementioned temporary freeze of the applicable remuneration rates in order to reduce the divergence between money market rates and the remuneration rate of the livret A and related savings accounts (which the current inflation floor in the remuneration formula does not allow). Ultimately this would ensure a better monetary policy transmission. Such temporary freeze would be followed by a further amendment of the remuneration formula of the livret A and of the related savings accounts in order to better align its remuneration rate with prevailing money market rates.

2. General observations

2.1 The ECB understands that the remuneration of the above-mentioned regulated savings accounts would be fixed at the respective currently applicable rates. 2.2 The ECB reiterates that it is generally not in favour of regulating savings remuneration, as this derogates from the principle of an open market economy with free competition, presents challenges for the efficient transmission of monetary policy and, to a certain extent, for financial stability . The discrepancy between money market rates and the regulated rates may generate significant costs for banks, thus potentially impeding their financial intermediation role and the stability of the banking system. 2.3 The draft amendment maintains a regulated fixed level of remuneration for a number of French savings accounts. The fixed nature of such remuneration for a period of two years cannot ensure a remuneration of these savings accounts in line with money market interest rates. The ECB nevertheless understands that the application of the current formula – which the draft amendment is suspending – would lead to even greater discrepancies with money market rates than those resulting from fixing current rates. The ECB therefore encourages the French authorities to revise the remuneration formula, which should lead to a better alignment with money market rates, and on which it expects to be consulted in due course. 2.4 Finally, in line with its previous opinion on the subject matter , the ECB also welcomes the fact that the draft amendment temporarily suspends the tasks that have been historically exercised by the Banque de France and its Governor regarding the livret A and related savings accounts.

This opinion will be published on the ECB’s website following its adoption and in any case no later than six months following its adoption.

Done at Frankfurt am Main, 6 November 2017.

[signed]

The President of the ECB

Mario DRAGHI