Thus, when the Monetary Policy Council makes interest-rate decisions, it bears in mind first the objective of preserving the purchasing power of the currency, for and on behalf of all French people, and second, its corollary, namely the creation of monetary, financial and competitive conditions that will allow our economy to achieve its full potential for sound and sustained growth, for job creation and therefore for combating unemployment. Central Banks cannot “command” growth. Growth is the fruit of the labour of men and women, of the efficiency of employees, workers and engineers, of the imagination and skill of business leaders, and also, more broadly, of the influence of European and international business conditions. It is stimulated, in the medium and long term, by structural reforms that liberate initiative, strengthen the dynamism of the economy, combat unemployment effectively and encourage the creation of the greatest possible number of jobs for a given level of wealth and growth. However, it is up to Central Banks to create the best possible monetary and financial conditions, through the credibility and stability of the currency. These conditions now exist in our country and the Monetary Policy Council is convinced that the time has come for firms and households to invest. In many sectors and firms, the financing exists. The self-financing rate of the entire French productive sector is above 100% overall. Interest rates as a whole are at historic lows. The French economy has substantial BIS Review 2/1997  -6-  potential for growth in the medium term.
The legacy of those losses has likely limited the banking sector’s ability to extend new loans during this expansion, as banks acted in a highly precautionary way to accrue capital that had been depleted as well as to add to their previous capital levels. The need for banks to repair their balance sheets following the financial crisis contributed to the far slower growth of outstanding bank loans during this expansion when compared to previous long expansions. Real outstanding loans to businesses, which are dominated by bank loans, declined more in this recovery than in previous recoveries (Figure 4). On the household side, real outstanding residential mortgages, which are largely originated by banks, have declined through most of this expansion while they grew steadily in previous expansions (Figure 5). Consumer credit has risen at a modest rate in this recovery – comparable to that of the last cycle (Figure 6). This category includes auto loans, credit cards and other consumer debts that are mainly originated by banks. But it also includes student loans where the federal government is the dominant lender. Student loans have risen robustly during this expansion, and have driven much of the rise of overall consumer credit. We will have much more to say about them later in today’s briefing. The U.S. financial system relies more heavily on capital markets than other advanced economies. Bonds and other negotiable debt instruments are an important source of funding to credit-worthy corporations.