Decision No. 2022-04 of June 30, 2022 Amending Decision No. 2020-02 of April 20, 2020 on Additional Temporary Measures Concerning Refinancing Operations of the Banque de France and Eligibility of Collateral

Decision No. 2022-04 of June 30, 2022 Amending Decision No. 2020-02 of April 20, 2020 on Additional Temporary Measures Concerning Refinancing Operations of the Banque de France and Eligibility of Collateral

THE GOVERNOR OF THE BANQUE DE FRANCE

Having regard to:

• the Treaty on the Functioning of the European Union, and in particular Article 127(1) and Article 127(2), first indent,
• the Statute of the European System of Central Banks and of the European Central Bank (ECB), and in particular Articles 3.1, first indent, 12.1, 14.3 and 18.2,
• ECB Guideline (EU) 2014/528 of 9 July 2014 on additional temporary measures concerning refinancing operations of the Eurosystem and the eligibility of collateral and amending Guideline ECB/2007/9 (ECB/2014/31), as amended,
• ECB Guideline (EU) 2015/510 of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60), as amended,
• ECB Guideline (EU) 2022/989 of 2 May 2022 amending Guideline ECB/2014/31 on additional temporary measures concerning refinancing operations of the Eurosystem and the eligibility of collateral (ECB/2022/19),
• the Monetary Agreement between the European Union and the Principality of Monaco of 26 December 2001, as amended on 29 November 2011,
• the Monetary and Financial Code, and in particular Article L. 142-8,
• the Order of 23 March 2020 granting State guarantee to credit institutions and financing companies as well as to lenders referred to in Article L. 548-1 of the Monetary and Financial Code, under Article 6 of Law No. 2020-289 of 23 March 2020 on supplementary finance law for 2020, as amended,
• Decision D-HCSF-2021-7 on the conditions for granting mortgage loans of 29 September 2021,
• the Decision of the Governor of the Banque de France No. 2015-01 of 22 April 2015 on the implementation of the monetary policy and intraday credit policy of the Banque de France, as amended,
• the Decision of the Governor of the Banque de France No. 2020-02 of 20 April 2020 on additional temporary measures concerning refinancing operations of the Banque de France and the eligibility of collateral, as amended.

DECIDES

Article 1

The Decision of the Governor of the Banque de France No. 2020-02 of 20 April 2020 on additional temporary measures concerning refinancing operations of the Banque de France and the eligibility of collateral (hereinafter "the Decision") is amended as follows:

1. In Article 4 (BDF 1):
   a) Paragraph 1.a) i) a. is replaced by the following text:
   "Euro or United States dollar (USD) loans whose credit quality, defined by a credit assessment, corresponds to a maximum one-year probability of default of 1.5% according to an internal rating system approved by the ECAI, or to obtaining at least a Banque de France (FIBEN) rating of 4+. The residual maturity of loans concerning debtors whose one-year probability of default is greater than 1% and less than or equal to 1.5% (EQC 5) must be less than or equal to 30 years;" b) In paragraph 1.a) iii), the introductory text is replaced by the following text:
   "Loans guaranteed by the French State under Article 6 of Law No. 2020-289 of 23 March 2020 on supplementary finance law for 2020, granted between 16 March 2020 and 30 June 2022, and meeting the following criteria:" c) After paragraph 1.b) i) k., paragraph l is inserted as follows:
   "l. Residential mortgage loans whose first disbursement is made from 1 January 2022 meet the following cumulative criteria set out in Article 1 of Decision D-HCSF-2021-7:

• the borrower's debt-to-income ratio does not exceed 35%,
• the loan maturity at origination does not exceed 25 years."
  For the purposes of this Article, the terms "debt-to-income ratio" and "loan maturity at origination" are understood in the sense of Article 4 of Decision D-HCSF-2021-7."

2. In Article 4 (BDF3):
   a) Paragraph 1 is replaced by the following text:
   "1. Regarding loans to companies with a one-year probability of default between 0.40% and 1% and loans to companies with a FIBEN rating of 3+, 3, 3- or 4+, the following haircut grid applies:

FIBEN Rating
Probability of Default (IRB)
Residual Maturity
Haircut Rate
3+ / 3 / 3- / 4+ 0.4% < PD ≤ 1.00%
< 1 year 31.5%
1-3 years 43.2%
3-5 years 46.8%
5-7 years 49.5%
7-10 years 51.3%

10 years 54.0%
Regarding loans to companies with a one-year probability of default between 1% and 1.5%, the following haircut grid applies:

FIBEN Rating
Probability of Default (IRB)
Residual Maturity
Haircut Rate

1.00% < PD ≤ 1.50%
< 1 year 45.0%
1-3 years 54.0%
3-5 years 57.6%
5-7 years 59.4%
7-10 years 61.2%
10-30 years 63.0%

An additional haircut of 16% is applied to corporate loans denominated in United States dollars (USD)." b) Paragraph 2 is replaced by the following text:
"Regarding residential mortgage loan portfolios and automobile loan portfolios referred to in Article 4 (BDF1) 1. b), the applicable haircut rate for this category of loan portfolio corresponds to the haircut rate defined as follows:

Minimum Haircut = 0.9 x (∑ (Amount Outstanding / ∑ Amount Outstanding) × Stressed PD_i × Adjusted LGD_i) + 10%

This formula applies taking into account the following:
a) The stressed probability of default factor for loan i in a portfolio of n loans is obtained using Table 1 or 2, appropriate to the type of portfolio, appearing in Annex BDF. It is defined by the non-stressed one-year probabilities of default of the debtor and the residual maturity of the corresponding loan. b) The adjusted loss given default (or "LGD") factor for loan i in a portfolio of n performing loans is obtained using Table 3 appearing in Annex BDF. It is defined by the unadjusted LGD factor of the loan and the residual maturity of the corresponding loan. The resulting haircut, rounded down to the nearest whole percentage, cannot be less than 18% and applies to the total outstanding amount of the claims included in the portfolio. The Banque de France updates these minimum haircuts at least every month and when it observes that a significant modification has occurred in the loan portfolio during the month. A significant modification in the loan portfolio is deemed to have occurred if the total outstanding amount of claims entering or leaving the portfolio exceeds 5% of the total outstanding amount of that portfolio per week. In order to ensure sufficient granularity of loan portfolios, an additional haircut of 3% is applied to loan portfolios whose Herfindahl-Hirschman Index (HHI) is between 0.5% and 1%, inclusive. The haircuts applicable to loan portfolios are calculated using PD/LGD factors from internal rating systems ("Internal Rating-Based" or IRB) approved in accordance with the procedure provided for in Article 122 of Decision No. 2015-01. The credit assessment systems used for the assessment of probabilities of default (PD) and loss given default (LGD) are subject to the regular performance monitoring procedure of the ECAI."

3. In Article 7, paragraph 3 is replaced by the following text:
   "Negotiable debt instruments described in paragraph 1, bearing coupons indexed on a single money market rate provided by a central bank or an administrator in accordance with Article 36 of Regulation (EU) 2016/1011 of the European Parliament and of the Council1, or on a money market rate listed as a third-country reference index in the register referred to in Article 36 of said Regulation, in the currency in which the instruments are denominated, or indexed on an inflation index not containing complex structures such as those where coupons are defined as in the case of exotic options ("discrete range", "range accrual", "ratchet"), or other complex structures, for the country concerned, also constitute eligible collateral for the monetary policy operations of the Eurosystem."

4. In Article 8 bis, paragraph 3 is deleted.

5. In Article 8 ter, paragraph 12 is replaced by the following text:
   "The provisions of this Article are applicable until 7 July 2022."

6. Annex BDF bis is replaced by the following text:
   "Annex BDF bis
   Haircuts applicable to loans guaranteed by the French State under Article 6 of Law No. 2020-289 of 23 March 2020 on supplementary finance law for 2020

TABLEAU 1: HAIRCUTS APPLICABLE TO FRENCH STATE-GUARANTEED LOANS FOR TWO MONTHS OR LESS

TABLEAU 2: HAIRCUTS APPLICABLE TO FRENCH STATE-GUARANTEED LOANS FOR MORE THAN TWO MONTHS, WITHOUT DEFINITION OF AN AMORTIZATION PLAN OVER A PERIOD OF ONE, TWO, THREE, FOUR OR FIVE ADDITIONAL YEARS AT THE END OF THE FIRST YEAR

FIBEN Rating
Probability of Default (IRB)
State Guarantee Share
90% 80% 70%
1+ / 1 / 1- PD ≤ 0.1% 14.4% 14.4% 14.4%
2+ / 2 / 2- 0.1%<PD ≤ 0.4% 16.2% 18.1% 19.9%
3+ / 3 / 3- / 4+ 0.4%<PD ≤ 1.0%
17.6% 20.9% 24.1%

1.0%<PD ≤ 1.5% 18.7% 23.0% 27.4%
4 to 8 and unrated PD > 1.5%
23.0% 31.5% 40.1%

FIBEN Rating
Probability of Default (IRB)
Haircut Rate
1+ / 1 / 1- PD ≤ 0.1% 14.4%
2+ / 2 / 2- 0.1%<PD ≤ 0.4% 32.9%
3+ / 3 / 3- / 4+ 0.4%<PD ≤ 1.0% 46.8%

1.0%<PD ≤ 1.5% 57.6%

TABLEAU 3: HAIRCUTS APPLICABLE TO FRENCH STATE-GUARANTEED LOANS DISBURSED FOR MORE THAN TWO MONTHS, AFTER DEFINITION OF AN AMORTIZATION PLAN OVER A MAXIMUM PERIOD OF FIVE ADDITIONAL YEARS AT THE END OF THE FIRST YEAR

• That is to say [0-1[ residual duration less than one year, [1-3[ residual duration equal to or greater than one year but less than three years, etc."

7. Annex II bis is replaced by the following text:

Residual Duration
(in years) at the end of the first year *
FIBEN Rating
Probability of Default (IRB)
State Guarantee Share
90% 80% 70%
[0-1[
1+ / 1 / 1- PD ≤ 0.1% 7.2% 7.2% 7.2%
2+ / 2 / 2- 0.1%<PD ≤ 0.4% 7.8% 8.5% 9.1%
3+ / 3 / 3- / 4+ 0.4%<PD ≤ 1.0%
9.6% 12.1% 14.5%

1.0%<PD ≤ 1.5% 11.0% 14.8% 18.5%
4 to 8 and unrated PD > 1.5%
16.5% 25.8% 35.0%
[1-3[
1+ / 1 / 1- PD ≤ 0.1% 10.8% 10.8% 10.8%
2+ / 2 / 2- 0.1%<PD ≤ 0.4% 12.2% 13.7% 15.1%
3+ / 3 / 3- / 4+ 0.4%<PD ≤ 1.0%
14.0% 17.3% 20.5%

1.0%<PD ≤ 1.5% 15.1% 19.4% 23.8%
4 to 8 and unrated PD > 1.5%
19.7% 28.6% 37.6%
[3-5[
1+ / 1 / 1- PD ≤ 0.1% 14.4% 14.4% 14.4%
2+ / 2 / 2- 0.1%<PD ≤ 0.4% 16.2% 18.1% 19.9%
3+ / 3 / 3- / 4+ 0.4%<PD ≤ 1.0%
17.6% 20.9% 24.1%

1.0%<PD ≤ 1.5% 18.7% 23.0% 27.4%
4 to 8 and unrated PD > 1.5%
23.0% 31.5% 40.1%

"ANNEXE II BIS
Haircut rates (in %) applied to eligible asset-backed securities under Article 3, paragraph 2, and Article 8 ter of this Decision

Weighted Average Life ()
Haircut
[0-1) 5.4
[1-3) 8.1
[3-5) 11.7
[5-7) 13.5
[7-10) 16.2
[10,∞) 27.0
() That is to say [0-1) weighted average life less than one year, [1-3) weighted average life equal to or greater than one year but less than three years, etc."

8. Annex II ter is replaced by the following text:

ANNEXE II TER
Haircut rates (in %) applied to negotiable assets referred to in Article 8 bis

Category I
Credit Quality
Residual Duration
(in years)
(*)
Fixed Coupon
Zero Coupon
Variable Coupon
Tier 4
[0-1) 7.2
[1-3) 10.8 11.7 10.8
[3-5) 12.6 13.5 12.6
[5-7) 14.0 15.3 14.0
[7-10) 14.9 16.2 14.9
[10,∞) 16.2 18.9 16.2
Tier 5
[0-1) 9
[1-3) 12.6 13.5 12.6
[3-5) 14.9 15.8 14.9
[5-7) 16.2 17.6 16.2
[7-10) 17.1 18.5 17.1
[10,∞) 18.5 21.2 18.5

9. (*) That is to say [0-1) residual duration less than one year, [1-3) residual duration equal to or greater than one year but less than three years, etc."

Article 2

Publication and Entry into Force

1. This Decision is published in the Official Publication Register of the Banque de France.
2. It enters into force on 8 July 2022, with the exception of points 1 b), 4 and 5 of Article 1 which apply from 30 June 2022.
3. This Decision is applicable in the overseas departments and regions, in Saint-Barthélemy, in Saint-Martin, in Saint-Pierre-and-Miquelon, as well as in the Principality of Monaco.

Done in Paris, on 30 June 2022

The Governor of the Banque de France
François VILLEROY de GALHAU