The bonding market - France

1.2 A surety market in France that grows every year ...

Guarantee companies, particularly for personal loans, are paid a commission of between €*** and €***, depending on the value of the sum guaranteed. In other words, the higher the sum, the higher the commission. Then, as soon as the borrower receives the loan, he or she must pay the surety company *.*% of the total amount loaned. Part of this amount is then returned to the borrower once the loan has been repaid in full. It is estimated that **.*% of the amount is returned to the borrower. The size of the surety market can therefore be estimated on the basis of total outstanding home loans (***). Total outstandings are estimated at *,*** billion euros in ****. The rate of recourse to surety bonds for home loans was **.*% in ****. This gives us a market size for surety companies of around *.* billion euros in ****:

*******^***,*****,*****.*** = *,****^* €

*******^* is the total amount of outstanding mortgages; *.*** is the bonding rate; *.*** is the amount the borrower owes the surety company when he borrows; *.*** is the amount that the surety company does not pay back to the borrower once the loan has been repaid in full.

to this must also be added the commissions mentioned above, which are not included in the total outstandings.

Total ...

1.3 ... which, despite the global pandemic, is still going strong

despite the global pandemic, sums guaranteed by surety companies (***) continued to grow. In fact, sums guaranteed in mortgages for individuals rose by *.*% compared with ****, effectively taking their total to *** billion euros. Financial guarantees also rose by **.*% to a total of **.* billion euros.

By contrast, the sums committed for guarantees to businesses and professionals retracted, as growth was estimated at -*.*%, with an overall value of **.* billion euros.

Off-balance sheet commitments by surety companies and year-on-year trends France, ****, billions of euros and as a % of total commitments Source: ****

2.1 Credit guarantee applications for individuals

An "outstanding amount" is the sum that the debtor still has to pay when he takes out a loan, for example if person A takes out a loan of **,*** euros at a rate of *% in ****. He repaid **,*** between **** and ****, in the space of * years. Person A's outstanding balance is therefore **,*** euros in ****.

Total outstanding mortgages for individuals grew steadily between **** and ****, from *** billion euros to *,*** billion euros. This increase underlines the fact that the French took out more home loans over the period ****-****, or that home loans were for larger amounts. The two reasons may well be combined. In other words, if the French have borrowed more, this has encouraged the growth of insurance and credit institutions that act as guarantors for this type of loan.

Healthy outstanding mortgages for individuals France, ****-****, in billions of euros Source: ****

The rate of recourse to surety bonds has also risen every year since ****, reaching **.*%, in ****, compared with **.* in ****. Two types of company offer their bonding services to individuals: insurance companies and credit institutions. In ****, the breakdown was **.*% for credit institutions and **.* for insurance companies. Over the period ****-****, insurance grew slightly faster than credit institutions, as it increased by *.*% while banks grew ...

2.2 The sums involved in guaranteeing companies and professionals

Outstanding cash and investment loans to non-financial companies France, **** - *****, € billion Source: ****

in the chart below, ***** is marked with a star, as we do not yet have data up to December **, ****, but we do have data up to October **, ****. Thus, the data shown are representative up to October ****.

Overall, both investment and cash outstandings have grown over the ****-**** period. Outstanding investments jumped by *** billion euros, from ***.* billion euros to ***.* billion euros, representing a CAGR of +*.* over the period. In ****, these outstandings reached *** billion euros. As for cash outstandings, over the ****-**** period, they grew by ***.* billion euros, from ***.* to ***.* billion euros, representing a CAGR of +*.* over the period. In ****, for the first time since ****, outstandings fell by **.* billion euros.

Guaranteed sums for businesses and professionals increased between **** and ****, rising from **.* billion euros to **.* billion euros, giving a compound annual growth rate over the period of *.*%. In ****, the sums committed by surety companies fell, probably due to the high risks to businesses and professionals as a result of the health crisis, which then turned into an economic crisis.

Guarantees provided by surety companies for businesses and professionals France, ****-****, in billions of euros Source: ****

2.3 Demand for surety bonds from the financial sector

Between **** and ****, the sums committed by surety companies to the sector declined, falling by *.* billion euros, or **.*%. Over the ****-**** period, the sums committed have risen again, reaching **.* billion euros in ****. The biggest increase was seen in ****, with committed sums growing by **.*%, according to the ASF (***) report.

Amounts committed by surety companies for the financial sector France, ****-****, in billions of euros Source: ****

The sectors associated with the financial sector of sureties are :

Temporary work Building construction Legal professions Real estate administrators Travel agencies

They enable customers to recover part of the sums they have invested in a company of one of the above types. It's a form of security for the consumer.

3.1 An overview of the players in the surety market

The status of surety companies

Mutual guarantee companies, such as SIAGI, are companies generally set up by trade unions or private individuals to help companies wishing to enter the sector. They also guarantee companies with fewer than ** employees and sales of less than ten million euros, to help them grow. This type of company carries out a detailed study of the market and the company it is guaranteeing, in order to understand the market risks and the possible risks of non-payment by the borrowing company. They can guarantee up to * million euros. They are remunerated by taking a percentage of the credited capital when it is released. [***]

3.2 Breakdown of surety companies

Geographical distribution of surety companies

Geographical distribution of surety companiesFrance, ****, in number of companies

Source: ****

To produce this map, we used NAF code **.**Z -"Other credit distribution"-. This NAF code is not only specific to surety companies, it also includes financial services activities consisting mainly in the granting of loansthe credit granted may take various forms (***).

The leading region in terms of number of companies is the Île-de-France region, with *** companies, or **.*% of the total number of companies in mainland France. This is followed by theHauts-de-France and Auvergne-Rhône-Alpes regions, with *** and *** companies respectively, representing **.*% and *.*% of the total number of companies in mainland France. Together, these three regions accounted for **.*%.

3.3 Structure of the bonding market

Market shares of the various groups in terms of outstanding home loans at June **, **** France, ****, as % of total Source: ****

In the home loan guarantee segment, Crédit Agricole was in the lead in **** with **.*%, followed by Groupe BPCE (***) with **.*%. Confédération Nationale du Crédit Mutuel came third with **.*%.

market share trends between June **, **** and June **, **** France, ****, in points Source: ****

All French banks lost market share in outstanding home loans, with the exception of the BPCE group, which gained *.* points at June **, **** compared with June **, ****. also noteworthy is the *.*-point increase in market share for foreign banks, which comes exclusively from HSBC Holdings.

Gross and net margins on outstanding home loans France, ****, in Source: ****

After * successive years of declining margins (***) between **** and ****, in **** gross and net margins are back on the rise, with net margins increasing by +*.**% in the first half of **** and +*.**% in the second half of ****. [***]

4.1 Different types of surety

There are several types of surety offered by credit institutions:

the landlord or financial institution first turns to the principal debtor (***) to try to recover the sums owed. Only if the principal is insolvent, and legal proceedings against him or her are unsuccessful, will the guarantor be involved. in the case ofa joint and several guarantee, the landlord or financial institution can directly ask the guarantor to pay the debt (***). It is not necessary for the landlord or bank to take legal action against the tenant or borrower to engage the guarantor. mortgage guarantee: this refers to a third party who grants a mortgage on one of his or her assets to guarantee the loan. bank guarantee: this refers to a commitment by a financial institution to guarantee credit in the event of default by the borrower. It generally replaces the mortgage guarantee and requires payment of a sum that will be partially reimbursed to the borrower at the end of the loan

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4.2 Prices for surety companies

Prices of surety companies for home loans

A bank guarantee requires the payment of a commission of between *** and *** euros, as well as a contribution to a Mutual Guarantee Fund (***) of around *.*% of the loan amount.[***]

Source: ****

For mutual guarantee companies

Generally speaking, the cost of a guarantee file with a mutual guarantee company is a maximum of *% of the total loan amount. Of this amount, between **% and **% is allocated to the mutual guarantee company's remuneration. [***]

4.3 Alternatives to bank guarantees

There are several other alternatives to bank guarantees:

Conventional hypothec: the principle consists in voluntarily pledging the property that the lender has to pay to the bank that agreed to make the loan. As soon as the lender can no longer pay the fees required to repay the loan, the bank is authorized to sell the property. As soon as the property is sold, the bank recovers the sum of money owed to it and returns the remainder to the owner. The "Privilège de Prêteur de Deniers" (***) to seize the mortgaged property and put it up for auction. The sum obtained will then enable the creditor to recover its costs. The bank may also choose to recover the borrower's shares, if he or she owns any, or SCI shares ascollateral...

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5.1 Bonding regulations

A new set of laws for surety bond standards

Prior to the new ordinance introduced in ****, laws concerning surety bonds were scattered throughout the Consumer Code and the Monetary and Financial Code. In ****, they will return to the Civil Code. This means that consumers will be better protected, since the new rules now apply to both consumers and managers. At the same time, the new ordinance authorizes the introduction of online surety bonds. Previously, the bond had to be a handwritten page, copied down to the comma, for it to be valid. In ****, the bond will be simplified and made subject to a general obligation.

The ordinance consolidates the duty of professional creditors (***) to warn the guarantor. The guarantor must therefore be warned when the debtor's commitment exceeds his financial capacities.

Finally, the ordinance now allows private lenders to be eligible for the assignment of receivables mechanism. Until now, only regulated lenders (***) had access to this mechanism. [***]

New mortgage reforms

In ****, new reforms were introduced. From now on, it will no longer be possible to borrow over ** years. Under certain conditions, an additional * years may also be granted if the borrower buys a new or existing property. For example, this period ...

6.1 Player segmentation

• Allianz Trade (ex Euler Hermes)
• SOCAMA
• BPI France
• CAMCA
• Galian
• Casden Banque Populaire
• CEGC (Compagnie Européenne des Garanties et des Caution)s
• Siagi
• Crédit Logement