Livret A: Your money in danger

If booklet A can be considered as ” too big to fail “, his manager is far from foolproof and could wipe out some of the outstanding credits.

Booklet A is the investment par excellence of the good father.

Its higher rate of return than the so-called “risk free” investments, its guarantee on the paid-up capital and the theoretically immediate availability of the invested sums make it an almost interest-bearing current account.

Since it can be opened in the name of any citizen from birth, it is very often the first contact of the French with the notions of capitalization and long-term savings. Families remain deeply attached to this support throughout their lives: while less than half of them have a life insurance contract and less than 15% of the shares, the Livret A account attracts more than 80%.

The quadrupling of his remuneration, from 0.5% per year at the beginning of the year to 2% on 1uh August made this investment even more attractive than in the past. If he remains absolutely unable to maintain the purchasing power of the money entrusted to him – in the face of inflation that exceeds 6% on an annual basis – his salary, revised upwards, makes him much more profitable than many alternative investments. At 2% after tax return, it at least crushes the performance of life insurance with guaranteed capital (1.28% before tax in 2021) – more flexibility.

No wonder, in this favorable context, that savers have flocked to this savings vehicle this year. In the first half of the year, the collection of Livret A accounts reached € 16.5 billion, or 42% more than in the same period of 2019, the last pre-Covid benchmark. According to data from the Caisse des dépôts, which manages outstanding payments, this summer has accelerated further. In July it thus reached 2.64 billion euros, or 83% more than in July 2019.

Also according to the Caisse des dépôts, July closed with a national balance of 362.5 billion euros (492 billion euros including the Sustainable and Solidarity Development Booklet – LDDS). The French continue to favor livret A for their short-term investments … but they are completely unaware that the solidity of this savings is by no means certain.

In early September, the Court of Auditors even raised the alarm. Due to changes in the structure of the Caisse des dépôts, the institution fears that Livret A’s savings will be dispersed on risky assets that would expose definitely savers at risk of evaporation of their supposedly protected savings.

A bulky treasure

The outstanding securities of Livret A have traditionally been destined for public utility projects. La Caisse des dépôts uses them to be able to grant loans at a better rate to social owners and local authorities to make their investments: social housing, schools, trams, very high speed, etc.

If, from an economic point of view, this type of investment is far from being risk-free (public services are structurally more expensive than return items), the outstanding balances have so far made it possible to honor coupon payments and redemptions. of the sums withdrawn.

Better yet for the manager, the pay floor rate that has prevailed in recent years has given him additional leeway in his lending business, increasing the profitability of his business model.

However, in times of rising rates, leverage works in reverse. In the same way that over-indebted states see debt service explode with the general rise in interest rates, the outstanding amounts of the Livret A passbook force the Caisse des dépôts to pay increasingly higher fees to savers.

And, with inflation forecast to be well over 6% at the end of the year, the calculation formula suggests a further increase in the Livret yield to 3% in 2023, or another 50% increase. Beneficial for savers, it is a real vicious circle for the manager: high rates favor funding, which in turn reinforces the need to cash flow.

It is the entire funding structure of Livret A that is thus called into question. And, for the Court of Auditors, the Caisse des dépôts risks being increasingly tempted to use the windfall to finance even more risky activities than social projects.

La Caisse des dépôts keeps an eye on your savings

If the Court of Auditors calls for vigilance, it is because the Caisse des dépôts has gradually transformed its mission. It is now a diversified group, which now includes quasi-industrial activities.

La Caisse des dépôts is therefore a shareholder of La Poste, carries out banking activities with La Banque Postale, insurance with CNP, finances innovation with Bpifrance… many professions that move away from financing social projects.

In its report, the Court of Auditors recalls that “the profound transformation of the Caisse des Dépôts into a very large group of mandated activities […] it shifts its center of gravity and distorts its budget structure ”. It is also concerned about the risk of “fungitisation of the savings fund as part of a global group strategy”. In good French, the speakers fear seeing the fund manager use hundreds of billions of euros of savers to finance what he sees fit.

It must be said that the wise men of the Court of Auditors have every reason to be concerned. They had already sounded the alarm earlier this year about the governance of the Caisse des dépôts, the opacity of its financial information and its operating costs. And the drifts are not new: as early as January 2017 they had signed a ferocious judgment on the performance of the state-shareholder. In this context, the prospect of seeing the Caisse des dépôts playing with the money deposited by the French in Livret A is not reassuring.

In the midst of the pandemic, Caisse des dépôts had already drawn on the savings fund to create an endowment of 28 billion euros (almost 10% of Livret A’s stock at the end of 2019!) With long-term loans for very diversified beneficiaries. The Court of Auditors deplored this choice “which corresponds to an adaptation of jobs to the opportunities or political needs of the moment, rather than to a strategy based on long-term objectives”.

At a time when the ecological transition is the new political workhorse that justifies everything “whatever the cost”, monitoring the use of Livret A funds is essential to prevent them from disappearing in risky investment operations as the Caisse well knows des dépôts.

Otherwise, a depreciation of the assets under management would be inevitable, which would lead to a rush to the counters Savers on Livret A. It would then be necessary to invoke the “State guarantee” on this theoretically risk-free investment… but when 80% of citizens are exposed to the same risk, the concept of risk pooling no longer makes sense. If the funds of Livret A were lost due to the wrong strategic choices of its manager, the citizen-taxpayers would never recover the stolen sums.

In France, the Livret A is “too big to fail”. But his manager is far from infallible. The State guarantee that should protect these savings being more of a smokescreen intended to reassure that a real economic shield, the warning of the Court of Auditors must be considered with the utmost seriousness.

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