PARIS: Financial market and private sector debt risks have increased and should remain high through the rest of the year, the Bank of France said on Friday in a biannual report on risks to the French financial system. The French central bank said there was an “unprecedented de-correlation” between markets and political risk which could lead to a surge in risk premiums in the case of an unforeseen shock. It also called for caution in the coming months on corporate and household debt, which has been growing rapidly in France amid low interest rates.
However, the Bank of France said interest rates represented a lower level of risk for the financial sector than six months ago although it also urged financial institutions to remain prepared for both the possibilities that rates stay low and that they rise rapidly. Meanwhile, regulatory risks to the financial sector were judged to be only moderate and were expected to remain so for the rest of the year.
