Structural reform and supervision of the banking sector in France

The crisis has shown that there is no such thing as an optimal banking structure or model. The Liikanen report highlighted excessive risk taking and excessive reliance on short-term funding not matched with adequate capital protection. The French reform of the banking sector builds on this insight as well as the agreement reached by the Basel Committee on Banking Supervision and the European CRD 4 to foster financial stability. Risky speculative activity will have to be separated from the rest of the banking sector while taking into account the assets of the universal banking model. Further, the reform introduces a strong resolution framework and new macro-prudential powers. JEL Classification: G18; G38; G33; G32. Keywords: Banking system; bank supervision; bankruptcy; liquidation; systemic risk; macro-prudential policy.