“Strengthening Paris as a place of sustainable finance”, Interview

The AMF has just published its review of financial risks, which do you think is key?

Financing our economies, that is, our businesses, has become a major problem. Five years ago, when I headed the AFM, interest rates were low, there was no inflation, and the economy was growing. Today, the situation is almost the opposite, and this reversal comes at a time when significant investment is needed to finance the necessary energy transition. Business financing is slowing down. The best subscribers manage to enter the bond market, especially when they issue “green bonds”, but others have a much more difficult time. Bank credit also decreased. Another point of vigilance concerns the functioning of the commodity markets, which are affected by a certain number of factors, of course, the invasion of Russia in Ukraine, but not only, and the proper functioning of which, as we see, in addition to the rise in prices, is called into question. . Funding, often from non-financial players in these professions, has become problematic. If you want to hedge in the gas futures market in Amsterdam, you have to deposit almost 100% of the contract value. This requires huge funds. We can see the problems this can cause in Uniper’s difficulties in Germany. However, companies of this type are essential to the supply and management of energy in Europe.

You don’t think it could be a risk private capital with high grades?

I don’t fully share the concerns of some. Essentially, the company the fund is selling is not the same company it bought a few years ago. IN private capital operators are highly specialized and often develop the companies they resell. But the lever, however, can be an object. If the fund resells to rotate its assets, there is no problem. A general risk to financial stability exists when these sales are linked to a problem debt reduction (debt reduction) forced. When the creditor demands a debt reduction. Fortunately, funds open to the public are not “leveraged”. In addition to leverage, fund health is also a potential problem private capital at the end of life. The AMF has created a working group on this last issue. He is due to present his findings next September.

How do you think Paris stacks up against other major global markets? Is she progressing? Where should efforts be concentrated?

Looking back over the past five years, one big event has happened: Brexit. This strengthened the European locations as service providers operating in the Union from London were forced to relocate and many did so in Paris directly or indirectly by placing their foothold in the Union in Dublin or Frankfurt, but the Paris branch often concentrates most of the activities, especially when it comes to market transactions. The United States has also benefited from the transfer of activities previously carried out in the United Kingdom. But it must be admitted that London remained a very large financial center. But in general, bond stock trading, which obligates a player in a Union to trade there Union value in the Union and not elsewhere, had the effect of repatriating to Europe many trading operations in Amsterdam and Paris. You look at Euronext five years ago, and today it is not the same company. The appeal of Paris is strong, it is established over time, but if Brexit was a one-time shock, it is also an evolution that is beginning, with different rules and changing locations. Where we have strengths and where we need to strengthen them is the role of Paris as a center for sustainable finance. The ecosystem exists, it needs to be consolidated in all its dimensions, research, legal framework, issuers, financial system, asset managers, insurers… I would add that we need to think about the small pebbles that we can remove and the small advantages that we might add. For example, we may reflect the Paris authorization of shares with multiple voting rights claimed by certain issuers.

In terms of sustainable finance, where do we stand on the key issue of rating standards to have a common frame of reference like in accounting?

The declared policy is as follows: in Europe we develop our standards, we participate in the development of international standards and try to ensure their compatibility and consistency. This is a strategy that was chosen because we know that international standards are likely to be less demanding and/or comprehensive than regional standards. The real crux of the matter is who will enforce these international standards. Will the United States implement them? Today, the Securities and Exchange Commission (SEC) submitted for consultation a rather demanding draft on these topics, but it has caused numerous objections, and the debate is actually extremely political. Upon arrival, regardless of official country selection, many issuers must maintain fairly demanding standards because investors want them to. But it seems to me that it would be a good practice for Europe not to wait for international standards to develop its own more progressive approach.

It is noted that in the course of takeovers or mergers, non-financial rating agencies become very Anglo-Saxon. Is this not a threat to this European approach?

We also see here the desire of the Anglo-Saxons to take advantage of the European experience… Moreover, in five years the world will be completely different. The non-financial information of large companies, particularly on ESG topics, will be standardized, verified and harmonized in Europe and, I hope, in a large part of the world. This information will be easily accessible through the European Single Access Point (Esap), managed by the European Securities and Markets Authority (Esma). Non-financial rating agencies, like credit agencies, are supervised at the European level by Esma. Their methodology must be fully transparent, conflicts of interest and exchanges with companies must be controlled. The balance of ESG research will be part of a very different system than today, where agencies adopt a methodology based on very heterogeneous data.

The environmental theme was at the center of debate during the assemblies. Did some challenge the AMF’s position when TotalEnergies refused to present a climate resolution?

In this case, it is so inherent in company law that we feel we are not in a position to dictate whether or not this type of decision is admissible. We see that to say about the climate (to vote at the climate meeting) like the let’s say we pay (voting on executive salaries) are subjects subject to the law. I don’t think the AMF should regulate it. When the European CSRD is implemented, the company’s environmental policy will be included in its communication and this topic will be present at the general meeting.

What do you personally think?

It seems legitimate to me that the company’s policy in this area should be the subject of debate at the meeting. The question arises about the consequences that we have from this. If the assembly votes against it, what do we do?

More and more NGOs are completely disrupting the smooth functioning of meetings. How can we avoid this problem?

It’s good that people are speaking out, getting their message across. After that, they should not disturb the progress of the meeting. This is a matter of public order. This also applies to the issue of holding general meetings in physical, virtual, mixed form. During the pandemic, we saw that it worked, but we didn’t go all the way. I will not be opposed to opening up the possibility of submitting resolutions, but on the condition that it be done before the meeting. AMF made several suggestions based on the experience of prisons.

Influencers are invading all areas, including finance. How to regulate these practices?

The AMF has begun work on creating a legislative framework with a potentially repressive component, but the work is not complete. Next year, we will have a clear position on best practices for influence. It has to go through Esma. Indeed, the topic concerns all the countries of the European Union, and a common position is needed, since the platforms are cross-border. The exercise is difficult because in some cases it is necessary to enter the influencer’s community to understand how he or she communicates and gives advice…

Norms related to cryptocurrencies seem no longer adapted to the growth of transactions in this area. What are the planned developments?

The message is simple. It is time to create a more serious foundation in this area. France was at the forefront, but we operated on a fine line between registered intermediaries and approved intermediaries. Now I believe that the recording time has expired. The approval will become mandatory under the European Mica (crypto-asset markets) regulation, which was just concluded on June 30 in a tripartite agreement between the European Commission, the Council and the Parliament. It then takes just over eighteen months for its implementation and a transition period for national schemes of another eighteen months. We need to move faster and anticipate compliance with the European framework, focusing on two pillars. First of all 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, investment providers, which must be approved, like all financial providers.

INCONVENIENT QUESTION

Many deviations were noted within the AMF. Is it a situational or structural problem?

The structural aspect is AMF’s pattern 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 compensation, as well as incompatibilities with future positions outside the country, which is growing , the higher you advance. in the hierarchy. Our turnover rates range from 8% to 12% depending on the year. Now we are rather at the top of the range because the market is very demanding, this is also an indirect consequence of Brexit. But we are recruiting at the same time. Our workforce of about 500 people is not shrinking, but we would like to increase it a bit. The fact that people who know the rules and are committed to following them go into the financial sector contributes to the quality of the ecosystem. It also allows us to attract new specialists.

But everything is fine in AMF. We have just done an image study to find out how the institution is perceived. 1300 people responded to our questionnaire and 50 interviews were conducted with very representative players in France and abroad. The conclusion is as follows: 93% of respondents consider the AFM to be independent. At a time when my mission at the head of the AMF is coming to an end, this is a good assessment that shows that the quality of the AMF teams is recognized by our interlocutors.