Measuring France’s Financial Vulnerability

2026-06-09T00:00:00+02:00

Macroprudential policy strives to limit imbalances in the financial system with an eye to forestalling financial crises or mitigating their severity. In France, the High Council for Financial Stability (HCSF) has been tasked with managing this policy since 2013. To do so, it has a number of resources at its disposal, one of which is the countercyclical capital buffer. To determine its measures, the HCSF examines a set of quantitative indicators and relies on expert judgment.

In looking to enhance its monitoring and analysis of financial stability, the French Treasury (DG Trésor) has established a composite indicator of the vulnerability of the French financial system which incorporates 17 macro-financial variables in five categories – using a machine learning process – tying them in with previous periods of extreme stress.

The indicator accurately captures both identified periods of vulnerability that have affected France’s financial landscape (subprime and euro area crises, COVID-19 pandemic) and the vulnerability caused by recent resurgence of inflation.

In recent times, France’s financial vulnerability indicator has not flagged up major upward pressure on the aggregate risk. Private debt-related risks have diminished although they remain a source of vulnerability. However, since 2024, financing conditions on the markets and real estate market have played an accommodative role. It should be noted that some data for the period subsequent to Q3 2025 has not yet been published. This means that the forecasts do not capture the full effects of the conflict in the Near and Middle East.

The Consequences of Regulating Mortgage Lending Conditions

2025-04-08T00:00:00+02:00

An increase in household mortgage debt was the catalyst for the decision made by the macroprudential authority – the High Council for Financial Stability (HCSF) – to regulate mortgage lending conditions for households in France. In 2019, the HCSF published a recommendation for credit institutions to limit the debt service to income (DSTI) ratio – the share of income allocated to monthly mortgage repayments – and the maturity of the mortgages approved. This recommendation became legally binding in 2022.

The Primmo model was used to assess this regulation, taking into account the varying impact that government policies may have depending on actual observed interest rates. This assessment showed that the HCSF’s measure had enabled the average DSTI ratio to be reduced while increasing the average mortgage maturity. However, the effect on property prices is limited amid rising interest rates. The findings are in line with the studies presented in the HCSF’s 2024 Annual Report.

When using the variation in the average income of buyers in the model as a proxy of the exclusion of households, the analysis reveals that lower-income households are “excluded” from the credit market due to high interest rates, but that this is not compounded by the HCSF measure.

If the HCSF had not applied the measure, the average DSTI ratio would have risen while the average mortgage maturity would have decreased. However, this would not have had a major effect on transactions and property prices within one year, as short-term market momentum is primarily influenced by the interest rate environment.

The model can also be used to examine the effect of exogenous shocks – relating to interest rates, as well as construction and rent – on the property market’s momentum and the profile of borrowers.

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Measuring France’s Financial Vulnerability

The Consequences of Regulating Mortgage Lending Conditions