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France raises countercyclical capital buffer for banks

France is requiring lenders to hold a countercyclical capital buffer of 0.5% of their risk-weighted assets, up from 0.25% in June 2018.

The country's High Council for Financial Stability said the risk of a repricing of financial assets remains high in the financial markets, with nonfinancial private-sector indebtedness reaching 133.3% of GDP in the third quarter of 2018. The council also noted that the increase would enable lenders to mobilize their capital reserve to protect their ability to provide credit, particularly to small and medium-sized enterprises.

The decision would have to be passed to the European Central Bank for non-objection. If approved, the buffer would be imposed before April 2 and lenders would have 12 months to meet it. The new rate would also apply to EU banks operating within France.

Banque de France Governor François Villeroy de Galhau told the Financial Times that the regulator would be ready to lower the buffer when necessary.