The issue of debt management comes to the fore in the discussions of local lenders. As indicated two months ago, inflation which is driving up interest rates is starting to affect the financing choices of local authorities. So much so that the Ministry of Economy announced to the banks, at the beginning of June, its intention to reform the method of calculating the usury rate.
This legal maximum rate, which aims to contain bank offers, finds its limits in periods of high rate volatility. Calculated quarterly by the Banque de France on the basis of the average rates applied by the banks in the previous quarter, the usury rate, given the rapidity of the evolution of inflation in recent months, is calculated, for the Banks, with a delay. The next dropout rate will be released on July 1st. Currently at 1.76% for fixed-rate loans with a duration of more than two years and at 1.53% for variable-rate loans with a duration of more than two years, it severely limits the banking offer to local authorities.
The fixed rate offer has almost disappeared
“We expected, at the end of March, usury rate scales corresponding to the evolution of inflation. With a rate of 1.76% for fixed rate loans, we had to quickly reduce the duration of the loans to 15 or 20 years. Today it is no longer a question of making proposals at a fixed rate ”, says Philippe Rogier, director of Credit for the AFL (local Agence France).
And confirms Robert Le Bourgeois, Market Manager for the Territorial Communities of Société Générale: “it has become almost impossible to lend at a fixed rate. On the other hand, we offer attractive conditions at variable rates to allow local authorities not to delay their projects ”. While large communities take out variable rate loans without difficulty, others are not always equipped for these offers. Banks have introduced mixed rate loans, hoping for better days. The local French agency now also offers small communities a variable rate with the ability to change the index (switching to a fixed rate) as quickly as possible. “We are hoping for a revision of the usury rate calculation within three to six months,” estimates Philippe Rogier.
The Banque des Territoires touches the margins of Livret A
Long-term offers (Aqua loan, Edu loan, etc.) from the Banque des Territoires are always displayed at a booklet rate A of + 0.60%. However, the wear rate for the variable is 1.53%. “We comply with the law by cutting our margins. We operate in this market mainly with the floating rate but we also have a fixed rate offer based on the European resource (EIB) and so far we have been able to offer loans without lowering the terms but by cutting margins, or even taking negative margins “, he explains. Pierre Laurent, Director of Development in the Loan Department of the Banque des Territoires. And for this summer, the rate increase for booklet A is announced. “The theoretical formula provides for an increase of 1.9%, the OAT (1) 10 years have exceeded 2% ”, adds Pierre Laurent.
Bring communities out of bounds?
Bercy’s lines of work concern a better graduation of the usury rate according to the duration of the loans and a better take into account of the bank rates at the end of the previous quarter. These provisions, expected in the Official Gazette from 20 June, would not be sufficient. “The Governor can adopt an exemption measure up to 6 months, invoking the exceptional circumstances provided for by the texts and concretized by the historic and rapid increase in refinancing costs, and that of the 10-year OAT” adds Robert Le bourgeois, Head of the Entities Market Locals. This solution would consist in modifying the perimeter of the usury rate by excluding, temporarily (or not?) Local authorities. This cap regulation aims to protect uninformed consumers. And the communities? According to Alexis Maréchal, mission director of the financial consulting firm Orféor, “if we need to reform the usury rate to regain coherence with the markets, I still think they need to be supervised, toxic loans are not that far off.
(Obligations similar to the Treasury): the interest rate of the OAT serves as a reference for the lenders to establish the credit rates Back to the text