French Senator: ‘All the Ingredients of a New Financial Crash Are in Place’

Ten years after the sub-prime mortgage crisis threatened to destroy the global financial system, conditions in France are ripe for another financial crash, according to a recent senate report. EURACTIV’s partner La Tribune reports.

As the major French banks unveil solid annual profits for 2016, with revenues in excess of pre-crisis levels, in spite of the low-interest rates eating into their margins, Senator Pierre-Yves Collombat on Wednesday (1 March) presented his report entitled A crisis without end: when history repeats itself. In it, the RDSE (European Democratic and Social Assembly, formerly the Radical Left Party) senator examined “the possibility of another financial crash, nearly ten years after the crisis which began in 2007 and has still not finished”.

His conclusion is pessimistic: the “technical” probability of another financial crisis of similar amplitude “has not fallen, quite the contrary. All the ingredients for another crash are in place”, he told senators.

But for Collombat, this is “not the most probably scenario”. The philosopher-turned-politician fears above all the “electoral riots” unleashed by the economic crisis, which could provoke another financial crash.

Universal Banks in the Spotlight

This resolutely political approach is probably the weak point of this report, which offers little by way of concrete solutions. Collombat suggests “some sectoral reforms capable of securing the sustainable development of the European financial system, which would avoid the need for intervention in a future catastrophe”.

And he outlines one priority: “We absolutely must have a real separation between the activities of deposit banks and commercial banks, making deposit banks solely responsible for the provision of loans. If we do not do this, banks can speculate with deposits and the credits these deposits can generate,” the senator told journalists on Wednesday

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