WFY’24: French factoring volume grew slowly in 2023

The year 2023 was, after the Covid crisis, a year of limited economic recovery, due to external shocks, such as the war in Ukraine and the rise in energy prices creating inflation and the increase in interest rates. Solenne Lepage, Board member of EU Federation and Director General of French Association of Finance Companies (ASF) describes the French factoring market and its development in the regional article included in the World Factoring Yearbook 2024 (WFY’24).

In this context, French factoring volume grew slowly, even if reaching a new record level. Receivables transferred to French factoring companies in 2023 represented EUR 426.5bn, the highest amount ever reached in one year.
Thus, the market in total is up by 1.5 per cent compared to 2022.

Factoring Industry Environment
In France, most factoring companies are credit institutions, even if they don’t take deposits. As a result, they are strongly regulated and supervised, in the same way as banks. However, the creation in 2013 of a ‘non-bank’ status of ‘sociétés de financement’, gives French factoring companies the opportunity to give up their classification as European credit institutions fully regulated and supervised under the Capital Requirements Directive (CRD)/Capital Requirements Regulation (CRR). By choosing the status of ‘société de financement’, a factor becomes a financial institution instead of a credit institution, but remains duly regulated and supervised by the French supervisor. Indeed, the French status of ‘sociétés de financement’ is designed and recognised as ‘comparable’ to the CRR credit institution status.

Under this financial institution status, capital requirements – solvency ratios – remain the same as CRR/CRD requirements. In order to take into account the fact that those institutions do not take deposits, liquidity ratios are adapted and different from the European Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), and there is no imposed leverage ratio.

Despite the availability of this alternative legal status, most major factoring companies have chosen a full credit institution status, which allows them to continue participating in the Eurosystem refinancing operations, and to benefit directly from the European financial passport. Only a few have chosen the ‘non-bank’ status of financial institution.

The refinancing of factoring companies is an issue. Currently, Eurosystem does not accept any counterpart which is not directly regulated and supervised under the European prudential framework of the CRD and the CRR. Factoring financial institutions, that are mainly subsidiaries of a banking group, can be integrated into internal refinancing processes by delivering their receivables as collateral to their parent bank company. But this is only possible through a ‘true sale’ process which means a real transfer from one balance sheet to another. This operation is in practice operationally complex and costly.

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To read the whole article, order World Factoring Yearbook 2024 here.