Banque de France Bulletin no. 217: Article 1 French banks were behind almost half of the increase in lending to euro area non-financial corporations and households in 2017

1.       Since the beginning of 2015, money supply in the euro area and France has grown  steadily, sustained by the increase in overnight deposits

Money supply in the euro area has risen on average by 5% per year since 2015

Growth in the euro area’s money supply (see box) has not returned to the level recorded prior to the 2008 financial crisis. It started to pick up in 2010 and hovered around 1.7% in 2011 (see Chart 1). After a brief acceleration in 2012, money supply growth slowed again until April 2014. Then, between May 2014 and April 2015, it accelerated sharply, reaching 5.2% (see Chart 1). Since then, growth has been stable at around 5.0% (see table below). Since the start of 2012, money supply growth has been sustained mainly by a rise in overnight deposits. The contribution of the M1 “currency” component remains stable and the other money supply components have decreased overall over the last six years. This has resulted in greater liquidity for the component’s instruments. The M1 component’s weight in the M3 aggregate rose from 51% in January 2012 to 65% in December 2017 (see Chart 2).

Since November 2016, the French component has been growing faster than the euro area M3 aggregate

The euro area M3 aggregate and its French component followed similar trends from January 2012 to October 2016 (see Chart 3). Between February and October 2014, their trends diverged, with the French component decreasing in April and May 2014, then growing more slowly than the M3 aggregate from June to September 2014. Thereafter, the M3 aggregate and its French component converged again until October 2016. At that time, their growth rates were comparable (4.2% for the French component of M3 and 4.5% for the euro area monetary aggregate).

Since November 2016, the French component has grown faster than the M3 aggregate, which saw growth of around 5.0% to January 2018, while the French component surged to a high point in September 2017 (9.5%), before slowing to 7.7% in January 2018.

Overnight deposits are fuelling growth in the euro area money supply and its French component

As in the euro area, overnight deposits have also fueled the acceleration in the French component since July 2014 (see Chart 4). At end-2014, the respective growth rates were 8.4% for the euro area and 9.0% for France.