“Strengthening Paris as a destination for sustainable finance”, Interview

AMF has just published its review of financial risks, which one do you consider the main one?

Financing our economy, that is, our business, has become a serious 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. Today, the situation is almost the opposite, and this reversal comes at a time when huge investments are needed to finance a critical energy transition. Business funding is slowing down. The best signatures manage to enter the bond market, especially when issuing green bonds, but it is much more difficult for the rest. Bank credit has also shrunk. Another point of vigilance concerns the functioning of commodity markets, which were affected by a number of factors, of course, the Russian invasion of Ukraine, but not only, and we see that, in addition to price increases, the proper functioning is called into question. . Funding, often from non-financial players in these professions, has become problematic. If you want to insure on the gas futures market in Amsterdam, you must deposit almost 100% of the contract value. This requires huge amounts of money. We can see the problems that this can cause with Uniper’s difficulties in Germany. However, companies of this type are essential for the supply and management of energy in Europe.

Don’t you think there might be a risk on private equity with rising ratings?

I do not fully share the concerns of some. Essentially, the company the fund is selling is different from the one it bought a few years ago. in private equity operators are highly specialized and often expand the companies they resell. But the lever, however, can be an object. If the fund resells to rotate its assets, there is no problem. Where there is a general financial stability risk when these sales are related to a problem deleveraging (debt reduction) forcibly. When a creditor asks for a debt reduction. Fortunately, the funds that are open to the public are not “borrowed”. In addition to leverage, the situation with the fund is also a possible problem. private equity at the end of life. The AMF has set up a working group on this last issue. It is due to present its findings next September.

How do you think Paris stands compared to other major global markets? Is she progressing? Where should efforts be concentrated?

Looking back, there has been one major event in the past five years: Brexit. This strengthened the European position as service providers who operated 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 activity, especially when it comes to market transactions. The United States has also benefited from the transfer of activities that previously took place in the United Kingdom. But it must be admitted that London has remained a very large financial center. But in general, bond trading, which obliges the player in the Union to trade the cost of the Union in the Union there, and not elsewhere, has led to the repatriation to Europe of many trades in Amsterdam and Paris. You look at Euronext five years ago and it’s not the same company today. The attraction of Paris is strong, asserting itself over time, however, if Brexit was a one-time shock, it is also a beginning evolution with rule divergence and relocation. 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, legal framework, issuers, financial system, asset managers, insurers… I would add that we should think about the little pebbles that we can remove and the little benefits, which we can add. For example, we may reflect the authorization in Paris of shares with multiple voting rights claimed by certain issuers.

With regards to sustainable financing, how do we feel about the key issue of rating standards to have a common frame of reference, as in the field of accounting?

The stated policy is as follows: in Europe we develop our own standards, participate in the development of international standards and try to make them compatible with each other, consistent. This is the chosen strategy because we know that international standards are likely to be less demanding and/or comprehensive than regional standards. The real key to the question is who will apply these international standards. Will the US implement them? The Securities and Exchange Commission today submitted a rather complex draft on these issues for consultation, but it has generated a lot of objection and the debate is actually highly political. Upon arrival, regardless of the official choice of countries, many issuers must maintain fairly high standards because investors want it. But I think it’s good practice for Europe not to wait for international standards to develop their own more advanced approach.

It is noted that in the course of acquisitions or mergers, non-financial rating agencies become very Anglo-Saxon. Isn’t this a danger to such a European approach?

We also see here the desire of the Anglo-Saxons to take advantage of the European experience… First of all, in five years the world will be completely different. Non-financial information, in particular on ESG topics, of large companies will be standardized, verified, harmonized in Europe and, I hope, in a large part of the world. This information will be easily accessible through a single European access point (Esap) operated by the European Securities and Markets Authority (ESMA). Non-financial rating agencies, like credit agencies, should be subject to Esma’s supervision at the European level. Their methodology must be completely transparent, conflicts of interest and exchanges with companies must be controlled. The ESG research balance will be part of a very different structure than it is today, with agencies using a methodology based on very heterogeneous data.

The topic of the environment was at the center of discussions at the meetings. Did some challenge the AMF’s position when TotalEnergies refused to submit a climate resolution?

In this case, it is so inherent in corporate law that we believe that we do not have the ability to impose or deny the permissibility of this type of resolution. We see that let’s talk about climate (climate vote) like it say we pay (vote on executive pay) are subjects subject to the law. I don’t think the AMF should regulate this. When the European Corporate Sustainability Reporting Directive (CSRD) comes into effect, the company’s environmental policy will be included in its communication and this topic will be present at general meetings.

What do you personally think?

That company policy in this area should be the subject of discussion at the meeting seems legitimate to me. The question arises as to the implications we derive from this. If the assembly votes no, what should we do?

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

The fact that people express themselves, convey their message, is good. After that, they should not interfere with the course of the meeting. This is a matter of public order. This also applies to the issue of holding general meetings in person, virtual, mixed form. During the pandemic, we saw that it worked, but not completely. I will not object to the opening of the possibility of submission of resolutions, but on the condition that this is done before the meeting. The AMF has made several suggestions based on the prison’s experience.

Influencers are invading all areas, including finance. How can these practices be regulated?

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

Regulations regarding cryptocurrencies no longer seem to be adapted to the growth of transactions in this area. What developments are planned?

The message is simple. It is high time to have a more serious framework in this area. France was at the forefront, but we used a subtle distinction between registered intermediaries and approved intermediaries. Now I believe that the time for recording is over. The approval will become mandatory as part of the European Mica (crypto asset markets) regulation, which has just been concluded on June 30 in a tripartite agreement between the European Commission, Council and Parliament. It then takes a little over eighteen months before its introduction and a transitional period for national schemes of another eighteen months. We must move faster and expect to meet the European framework by focusing on two pillars. primarily stable corners, which, fortunately, are still few in Europe, but we must be vigilant, because if they develop, then this is the equivalent of a monetary fund. Then there are the investment providers, which must be approved, as are all financial providers.

INCONVENIENT QUESTION

Many deviations have been noted in the AMF. Is it a situational or structural problem?

The structural aspect is the AMF model of hiring people who already have professional experience and who spend five to ten years in the Office and then leave for various reasons, including higher remuneration, as well as incompatibility with future positions outside, which are getting higher the higher you climb. in the hierarchy. Our turnover rate is between 8% and 12% depending on the year. We are currently 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 staff of about 500 people is not decreasing, but we would like to increase them a little. The fact that people who know the rules and are committed to following them come to the financial sector contributes to the quality of the ecosystem. It also allows us to recruit new specialists.

But AMF is doing well. We just did an image survey to find out how the institution is perceived. Our questionnaire was answered by 1300 people and 50 interviews were conducted with very representative players in France and abroad. It is concluded 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, this is an excellent assessment that shows that the quality of the AMF teams is recognized by our interlocutors.