The Cercle des Economistes organized a day of conferences this week on the theme of the role of finance in the exit from the crisis. The consensus is clear: the savings of the French must be better directed towards the financing of companies. While the process has already begun, opening up private equity to individuals and an overhaul of prudential rules will help to achieve the objective.
The way out of the crisis will be to direct household savings towards companies that need equity capital. The observation was made at a conference organised this week by the Circle of Economists on the theme: "How can finance contribute to the exit of the crisis?
These savings, already very abundant, have accumulated further since the beginning of the health crisis. An additional 110 billion euros were placed in French people's wallets last year. And by the end of 2021, this surplus could even reach 160 billion, according to the OFCE. Even if private individuals have returned to the stock market over the past year, this reserve is essentially sleeping on bank accounts or in very liquid products with very low returns (Livret A, Livret de Développement Durable, euro funds, etc.).
Positive developments
The roundtable speakers first noted that attitudes are beginning to change.
"Of the 2,700 billion euros of investments available to insurers at the end of 2020, 60 % were already invested in companies. While in 2020, we recorded an overall outflow of €6.5 billion on life insurance policies, inflows were positive by €18 billion on unit-linked policies. The French life insurance model is indeed changing, despite the crisis of 2020 and the halt in commercial activity due to the health crisis"commented Florence Lustman, President of the French Insurance Federation.
Philippe Heim, Chairman of the Management Board of Banque Postale, agrees: "We note a structural change. Low interest rates on euro funds have led households to reconsider their investment choices. We are seeing a shift towards unit-linked products, with current gross inflows of".
The French are not averse
The trend is also apparent from the initial findings of a study launched by Yomoni, the online savings service, in partnership with Viavoice:
"Risk-free investments are overwhelmingly favoured by the French (84 %), but a significant proportion of the population (45 %) also declare that they hold risky savings. While French savers remain familiar with a secure form of savings, the desire for more personalised, more dynamic savings and, above all, more freedom of choice is also revealed. Far from being resistant, the French express a need for information and support in this quest for autonomy in managing their savings.".
Confidence and financial education
Much remains to be done, however, particularly in terms of restoring confidence in finance, even if this is tending to improve with the rise of green and social investments. "This requires better financial education. It's up to us to explain things better and to ensure that these subjects are integrated into the school curriculum at a very early stage. People wait too long to build up financial savingsThis is a good thing," said Eric Pinon, Chairman of the French Asset Management Association (AFG), who has just joined the Strategic Committee on Financial Education.
Faced with the volatility of the stock market and the contraction of the stock market in recent years, private equity investments are an alternative that should be developed and made available to savers who wish to invest in SMEs.
Last October, the Banque Publique d'Investissement (BPI) launched a venture capital fund, BPI France Entreprise 1, accessible from 5000 euros. In view of the rapid success of the fundraising, it is necessary to go further and to many management companies are thinking about it or taking action.
Relaxing the rules
"Investors are willing to sacrifice some liquidity to gain yield"Patrick Artus said.
The head of economic research at Natixis and a member of the Cercle des Economistes nevertheless pointed to the regulatory obstacles that are still holding back the ongoing process: "Financial intermediaries (banks and insurance companies) need to be able to diversify their assets for better financing of companies. However, for the time being, this implies a massive and costly commitment of equity capital on their part. It is therefore necessary to progressively relax the prudential and solvency rules that currently steer them towards debt instruments, thereby slowing down the financing of the economy.".