Investing.com -- The Bank of France has proposed a reduction in a crucial regulated savings rate for the first time in half a decade. This move could potentially elevate profits for French banks.
The rate on a unique type of deposit, known as Livret A, should be decreased next month to 2.4% from the current 3%, according to the Bank of France Governor Francois Villeroy de Galhau. The decision was influenced by the recent dip in inflation and was communicated to the upper house of Parliament on Wednesday.
The decision to implement the French central bank's recommendation now rests with Finance Minister Eric Lombard. Lombard had previously indicated in a local radio interview that the cut in the Livret A rate should be approximately 0.5 percentage points.
The Livret A savings accounts are extremely popular in France. The rate on these accounts has been steady at 3% since the beginning of 2022. As of the end of November, French consumers held €427 billion ($440 billion) in these accounts, as per data from La Caisse des Depots.
A reduction in the rate would assist in lowering the funding costs for French banks. These banks have largely been unable to capitalize on the surge in net interest income that has benefitted their peers in recent years.
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