PARIS, Jan 15 (Reuters) - Bank of France Governor Francois Villeroy de Galhau suggested on Wednesday that the government decrease the regulated interest rate on popular tax-free savings accounts, providing French banks with relief from payouts surpassing those offered by European peers.
Villeroy informed the Senate's finance commission that he proposed setting the interest rate on the Livret A savings accounts at 2.4% starting Feb. 1, down from the current 3%.
The Finance Ministry typically adheres to the central bank's interest rate recommendation, which impacts banks' asset-liability management.
According to the Caisse des Depots, a public sector finance body, French savers held a total of 427 billion euros ($440 billion) in Livret A accounts as of the latest data from November, along with an additional 155 billion euros in similarly regulated LDDS accounts.
The central bank bases its interest rate recommendation on a formula considering factors such as inflation and short-term interest rates, aiming to provide savers with a slight real return above inflation.
The possibility of reducing the interest rate that banks are obligated to pay savers on these accounts coincides with some investors in European bank shares showing renewed interest in French opportunities.
Guy de Blonay, a fund manager at Jupiter Asset Management, mentioned that a rate cut could benefit French banks that have not been able to capitalize on higher interest rates in recent years, aiding them in competing more effectively for investor funds compared to their European counterparts.
"Europe has a two-speed banking sector. France is on one side, and countries like Italy and Spain are on the other," he expressed to Reuters. "The expected cut to the Livret A rate may help to alter that, though political and economic uncertainty will persist in influencing French banks."
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