François Villeroy de Galhau: The consequences of Brexit for the French and European financial sectors Speech by Mr François Villeroy de Galhau, Governor of the Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), at the ACPR conference, Paris, 23 November 2018. * * * Ladies and gentlemen, I am delighted to welcome you along with Bernard Delas to this new conference organised by the ACPR, which this morning will focus on the consequences of Brexit for the financial sector. This issue is admittedly constantly evolving in line with current events... I welcome the agreement that was reached between the European negotiators and their British counterparts last week and we all hope that it will pass through the stages to come and ultimately be finalised. However, in a context that remains uncertain, we must be cautious: even if we hope to avoid it, we must also be ready for a possible no deal scenario. The ACPR and the Banque de France are preparing for this eventuality to ensure the smooth functioning of the financial system. That will be my first point and for that reason I will discuss it using the conditional. I would then like to look beyond Brexit to see how we can transform some of today’s difficulties into opportunities for the future and build a more integrated “financial Eurosystem”. ** I.
Or, put differently, consumer spending in the UK is probably already above the level projected to prevail in Q3 in the May MPR scenario. Some of these data cover the opening-up of non-essential retail stores on 15 June. That opening-up was quantitatively significant, representing around 13% of consumption spending and halving the share of goods and services consumers which were previously unavailable (Chart 10b). Initial indications from payments and footfall figures suggest this opening-up has accelerated, perhaps significantly, consumer spending. In particular, CHAPS data suggests spending on delayable goods has now returned to pre-Covid levels (Chart 8), well ahead of the corresponding May scenario profile. Looking ahead, the opening of pubs, restaurants, hotels, cinemas and other hospitality outlets on 4 July will provide further impetus to spending. My own market intelligence suggests considerable pent-up demand. Together, these categories represent around another 10% of consumer spending. Initial reports from businesses in these sectors, including from the Bank’s Agents, suggest advance bookings are brisk. There is less evidence on which to base an updated judgement on the other components of GDP. For net trade, the May MPR scenario suggested around a 40% peak-to-trough fall in gross export and import volumes. Trade and port traffic data suggest a somewhat smaller contraction. With the world economy recovering sooner than in the UK, this implies a slightly larger boost to UK GDP growth from net trade in Q2. For housing and business investment, there are even less data on which to make an assessment.