Conference of the ACPR – Palais Brongniart, 8 June 2018 The major issues at stake in the review of prudential supervision of banks  Speech by François Villeroy de Galhau, Governor of the Banque de France, Chairman of the Autorité de contrôle prudentiel et de résolution (ACPR)  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 of 6 Ladies and Gentlemen, I am very pleased to welcome you to this conference of the Autorité de contrôle prudentiel et de résolution (ACPR), which this morning focuses on major issues at stake in the review of prudential supervision of banks. The subject is not new, but it is always topical. Let me first stress the greater degree of security already achieved in prudential matters: the agreement of 7 December 2017 on the finalisation of Basel III and the now standard use of macroprudential instruments. I will then touch on what remains to be done in Europe, specifically the completion of the Banking Union, an essential step. ** I. The implementation of the Basel III agreement of 7 December 2017  in Europe, fully respecting the envisaged timetable, is essential The finalisation of Basel III – and not of Basel IV, definitely not – brings to an end a decade of regulatory efforts which have considerably strengthened the resilience of the international banking system. I reiterate that the agreement of 7 December 2017 is the best possible agreement for France and for Europe.
It is this excessive credit cycle – the risk of “go and stop” seen during financial crises – that a moderate capital buffer must seek to smooth out. It should be noted in passing that a clear majority of Member States of the European Union have adopted other macroprudential measures  Page 3 of 6 to specifically limit residential lending, constraining households: in my view it is out of the question in France. II. To reduce fragmentation and improve private risk sharing in Europe, we must now complete the Banking Union. We must now resolutely work towards completing the European Banking Union. I would first like to explain why. The finalisation of the Banking Union should, alongside the Capital Markets Union, contribute to improving private risk sharing within the euro area. Private risk sharing fulfils an economic stabilisation function: in the United States, for example, private financial flows between the federal states are a more powerful damper than budget mechanisms involved in public risk sharing. Furthermore, this private risk sharing should help to channel the euro area’s large savings surplus – EUR 390 billion in 2017 – towards European companies, within a real Financing Union for Investment and Innovation at the European level. We have taken a step forward with the agreement of 25 May at the Ecofin Council meeting on the "banking reform package" set out in the Commission's legislative proposal of 23 November 2016.