Their aggregated profit, down 36% compared with 2010 to 14 billion euro was substantially higher than the 2008 and 2009 level, and this allowed them to significantly bolster their own funds and to continue financing the French economy. The ACP’s vigilance has been decisive in helping the banks to maintain a satisfactory liquidity and solvency situation. In 2011, the ACP conducted 136 on-site inspections; the risk profiles of 700 institutions were analysed according to a harmonised procedure with, notably, a sustained pace of meetings with the senior managers and heads of the main business  BIS central bankers’ speeches  1  lines, thereby allowing the ACP to draw up detailed maps of the main risks to which they are exposed. During 2011, the two principal dimensions of prudential supervision – monitoring credit institution liquidity and solvency – required particular vigilance by the ACP. Credit institutions’ liquidity levels were monitored more closely, particularly in its dollar resources dimension; this is an area where the rationale behind the ACP’s being placed under the aegis of the Banque de France – which is responsible for central bank refinancing – is clearly demonstrated. By ensuring that the adequate risk provisioning, the reduction of management’s and market participants’ compensation and the allocation of the bulk of profits to strengthen own funds, the ACP has managed to ensure – over the longer term – the solvency of the French banking sector. Today, all the major banking groups have Core Tier 1 own funds ratios above 9%.
Since the beginning of the recovery, the number of people employed in the euro area has risen by 9.2 million. Euro area unemployment declined to 8.1% in August, its lowest level in almost ten years. Consumer spending is being driven by steady growth in households’ real disposable income. Strong labour markets – with increasing job creation and rising wages – boost household income and, in turn, consumer spending. The investment outlook remains solid on the back of robust demand, improving profitability and favourable financing conditions. Since the end of 2014, bank lending rates in the euro area have declined significantly, by around 130 basis points for non-financial corporations and by around 110 basis points for households. Lending rates on very small loans, which can be used as a proxy for loans to small and medium-sized enterprises (SMEs), have fallen by more than 210 basis points. This is encouraging, as SMEs provide two-thirds of total private sector employment in the euro area. Overall, the underlying strength of domestic activity in the euro area continues to support a sustained adjustment in inflation. According to the flash estimates, HICP inflation increased to 2.1% in September, from 2.0% in August. On the basis of the latest oil futures prices, headline inflation is expected to hover around the current level for the rest of the year. Our most recent projections foresee annual headline inflation at 1.7% in 2018 and in each of the two subsequent years.