For the longer term, vulnerabilities centred rather on the effects of higher cost of capital and the risk of erosion of asset quality. The report included a detailed analysis of the quality of the banks’ loan portfolios. Although the conclusion was that the banks were well prepared to face rising defaults and loan losses at that time, particular attention was drawn to the fact that the previous year had seen increases in the ratio of large exposures to capital and in the proportion of holding companies among borrowers. The report emphasised that there was  2  BIS Review 22/2009  good reason to scrutinise this development closely. The Central Bank had actually noted this in earlier publications as well. For the near term, the banks’ most critical task was to guarantee access to foreign credit and reduce their borrowing requirement. Furthermore, confidence among investors and depositors was of vital importance. It was deemed unlikely that conditions in the international markets would improve to any dramatic extent in the near future, and when they did, investors would undoubtedly demonstrate more caution and conservatism than they had previously. In addition to this, the report shed light on the banks’ very large re-financing needs in the next few years: They would need to re-finance 35 billion euros in foreign bonds through 2012, including 17 billion in 2009 and 2010.
This latter factor causes the current “premium” observed on electricity prices in France that are expected in the future markets for next winter. The bottom line is that it is not really possible to disentangle domestic and external factors in the rise in electricity prices, and thus to compute the additional “external tax” due to electricity. II. The ex-ante and ex-post distribution of the external tax Let me now turn to the second key issue: the question of the distribution of the external tax, or in other terms the burden sharing of the shock. I will illustrate this issue in the case of France for the energy bill only, for which more data is available at a granular level. Analysing this question involves three logical steps. First, how the increase in the energy bill is distributed “ex-ante” (as economists say) among households, firms and the general government, based on their respective volumes of energy  Page 9 of 14 consumption in the year before the price shock. In a second step, we need to take into account the fiscal measures put in place in 2021 and 2022 by the government in order to limit the energy bill of households and businesses – since they modify the distribution of the external tax. The third step should involve taking into account all the macroeconomic adjustments, in particular the pass-through of cost increases by firms in their sales’ prices and the response of wages to prices.