The AMF has just published its overview of financial risks, what do you think is the main one?
Financing our economies, that is to say our businesses, has become a major problem. Five years ago, when I took over as chairman of the AMF, interest rates were low, there was no inflation and the economy was growing. The situation today is almost the opposite, and this reversal comes at a time when it is necessary to invest massively to finance the essential energy transition. Business financing is slowing down. The best signatures manage to go to the bond market, especially when they issue “green bonds”, but it is much more complicated for the others. Bank credit has also shrunk. The other point of vigilance concerns the functioning of the commodity markets, affected by a certain number of factors, of course the invasion of Ukraine by Russia, but not only, and of which we see, beyond the increases of price, the proper functioning questioned. Financing, often from non-financial players in these professions, has become problematic. When you want to hedge in the gas futures market in Amsterdam, you have to deposit almost 100% of the value of the contract. This requires huge cash. We can see the problems this can cause with the difficulties of Uniper in Germany. However, companies of this type are essential for the supply and management of energy in Europe.
You don’t think there could be a risk on the private equity with soaring valuations?
I do not fully share the concerns of some. Basically, the company a fund is selling is not the same company it bought a few years earlier. In the private equity the operators are highly specialized and often grow the companies they resell. But the lever, it’s true, can be a subject. If a fund resells to rotate its assets, there is no problem. Where there is an overall risk of financial stability is when these sales are linked to a problem of deleveraging (debt reduction) forced. When the lender demands a decrease in indebtedness. Fortunately, funds open to the public are not “leveraged”. Beyond the leverage, a possible problem is also the situation of the fund of private equity at the end of life. The AMF has created a working group on this last subject. It should deliver its conclusions next September.
How do you think Paris stands compared to other major world markets? Is she progressing? Where should efforts be focused?
Looking back over the past five years, there has been one major event: Brexit. It has strengthened the European places since the service providers who operated in the Union from London have been forced to relocate, and many have done so in Paris directly, or indirectly by putting their bridgehead in the Union in Dublin or Frankfurt, but the Paris branch has often concentrated most of the activities, especially when it comes to market transactions. The United States also benefited from the transfer of activities that were previously carried out in the United Kingdom. But it must be recognized that London has remained a very large financial center. But, overall, the bond share trading, which obliges a player in the Union to trade there a value of the Union in the Union and not elsewhere, has had the effect of repatriating to Europe a lot of trading activities in Amsterdam and Paris. You look at Euronext five years ago and today it is not the same company. The attractiveness of Paris is strong, it is asserting itself over time, however, if Brexit was a one-off shock, it is also an evolution that is beginning, with diverging regulations and changing locations. Where we clearly have strengths and where we need to strengthen them is in the role of Paris as a center for sustainable finance. The ecosystem exists, it must be consolidated in all its dimensions, research, the legal framework, issuers, the financial system, asset managers, insurers… I would add that we must think about the small pebbles that the we can remove and the small advantages that we can add. For example, we can have a reflection on the authorization in Paris of shares with multiple voting rights claimed by certain issuers.
Regarding sustainable finance, where do we stand with the key issue of rating standards in order to have a common frame of reference, as in the accounting field?
The stated policy is: in Europe we develop our standards, we participate in the development of international standards and we try to ensure that they are compatible with each other, consistent. This is the strategy chosen, because we know that international standards will most likely be less demanding and/or complete than regional standards. The real key to the matter is who will apply these international standards. Will the United States implement them? Today, the SEC has submitted a fairly demanding project on these subjects for consultation, but it has aroused numerous oppositions, and the debate is in fact extremely political. On arrival, regardless of the official choices of the countries, many issuers should retain fairly demanding standards because investors want them. But it seems to me to be good practice for Europe not to wait for international standards to develop its own more advanced approach.
It is noted that over the course of takeovers or mergers, extra-financial rating agencies are becoming very Anglo-Saxon. Isn’t this a danger for this European approach?
We can also see here the desire of the Anglo-Saxons to take advantage of European expertise… Above all, in five years, the world will be very different. The extra-financial information, in particular on ESG topics, of large companies will be standardized, audited, harmonized in Europe and, I hope, in a large part of the world. This information will be easily accessible via the European Single Access Point (Esap), managed by the European Securities and Markets Authority (Esma). Extra-financial rating agencies are intended to be supervised, like credit agencies, at European level by Esma. Their methodology should be completely transparent, conflicts of interest and exchanges with companies, supervised. The balance of ESG research will be part of a totally different framework from today, where the agencies adopt a methodology based on very heterogeneous data.
The environmental theme was at the heart of the debates during the assemblies. Some have challenged the AMF’s attitude when TotalEnergies refused to table a climate resolution?
In this case, it is so intrinsic to company law that we believe that we do not have the ability to impose or not the admissibility of this type of resolution. We see that the say on climate (vote in assembly on the climate) like the say we pay (voting on executive salaries) are subjects that fall within the scope of the law. I don’t think the AMF has to regulate this. When the European directive on corporate sustainability reporting (CSRD) is put in place, the company’s environmental policy will be included in its communication, and this theme will be present at general meetings.
And personally, what do you think?
That the company’s policy in this area should be the subject of a debate in the assembly seems legitimate to me. The question that arises is that of the consequences that we draw from it. If the assembly votes no, what do we do?
More and more NGOs are completely disrupting the smooth running of assemblies. How can we avoid this problem?
That people express themselves, get their message across, that’s a good thing. Afterwards, they must not disturb the course of an assembly. It is a matter of public order. This also refers to the question of the conduct of general meetings in a physical, virtual, mixed form. We saw during the pandemic that it worked, but we didn’t go all the way. I will not be opposed to opening up the ability to file resolutions, but on condition of doing so before the meeting. The AMF has made some proposals based on the experience of confinements.
Influencers are invading all areas, including finance. How to regulate these practices?
The AMF has started working on setting up a legal framework with a potentially repressive component, but the work is not finished. We will have a clear position on influencer best practices next year. This should go through Esma. Indeed, the subject affects all the countries of the European Union, and a common position is needed, because the platforms are cross-border. The exercise is complex because, in some cases, it is necessary to enter the influencer’s community to understand how he or she communicates and gives advice…
The regulations surrounding cryptocurrencies no longer seem adapted to the growth of transactions in this area. What are the planned developments?
The message is simple. It is high time to have a more serious framework in this area. France was at the forefront, but we operated on the subtle distinction between registered intermediaries and approved intermediaries. I now consider that the time for recording is over. Approval will become mandatory within the framework of the European Mica (Markets in Crypto-assets) regulation, which has just been concluded, on June 30, in a trilogue agreement between the European Commission, the Council and the Parliament. It then takes a little more than eighteen months before its implementation and a transitional period for the national schemes for another eighteen months. We must go faster and anticipate to comply with the European framework by focusing on two pillars. First of all the stable corners, which, fortunately, are still few in Europe, but we must be vigilant because, if they develop, it is the equivalent of a monetary fund. Then, the investment providers, who must be approved, like all financial providers.
THE INCONVENIENT QUESTION
Many departures have been noted within the AMF. Is it a situational or structural problem?
The structural aspect is the AMF’s model of recruiting people who already have professional experience and who spend five to ten years with the Authority, then leave for various reasons, including better salaries , but also the incompatibilities with future positions outside that grow the higher you go in the hierarchy. Our turnover rates are between 8% and 12% depending on the year. Currently, we are rather at the top of the range, because the market is very demanding, it is also an indirect consequence of Brexit. But we are recruiting at the same time. Our workforce of around 500 people is not decreasing, but we would have liked to increase them a little. That people, who know the regulations and are committed to enforcing them, go into the financial sector, this contributes to the quality of the ecosystem. It also allows us to recruit new expertise.
But the AMF is doing well. We have just done an image study to find out how the institution is perceived. 1,300 people responded to our questionnaire, and 50 interviews with very representative players, in France and abroad, were carried out. The conclusion is that 93% of respondents consider the AMF to be independent. At a time when my mission at the head of the AMF is coming to an end, it is a fine assessment, which shows that the quality of the AMF teams is recognized by our interlocutors.