Energy prices threaten the solvency of households and businesses

Rising energy prices pose a risk to household solvency, and could lead to an increase in loan repayment incidents. On the corporate side, repayment of state-guaranteed loans is likely to be impacted by the economic climate.


Rising energy prices and household solvency

In a letter addressed to the Governor of the Banque de France, a number of associations sound the alarm about the solvency of households, threatened by rising energy prices.

According to the Fondation Abbé Pierre, Positive Money Europe and négaWatt, who are among the signatories of this letter, the energy crisis considerably increases the risk of late or defaulted mortgage payments, which could lead to a " financial stability crisis ", they warn.

Despite the introduction of a tariff shield to contain rising gas and electricity prices, there are signs that the most vulnerable households are already in difficulty. In August, for example, the Banque de France recorded a 26% year-on-year increase in FICP (fichier des incidents de remboursement des crédits aux particuliers) registrations.

To avoid numerous personal bankruptcies, the associations expect the Banque de France to allow banks "to integrate into their prudential rules the solvency of households made possible by loans to improve the energy efficiency of their homes ".

According to the associations that signed the letter, banks should have access to targeted information such as DPEs (energy performance diagnostics), and take part in financing home energy renovation by granting zero-interest loans.

The resulting savings for households, after renovation, would help preserve their solvency, and reduce the risk of late payment or default on mortgages.

Difficult repayment of state-guaranteed loans

Concerns are also growing among companies, most of which began repaying their state-guaranteed loans (PGE) in the spring.

In addition to the energy crisis, the rising cost of materials and recruitment difficulties have led to a rise in business failures since the summer. Year-on-year, they rose by 24.1% in July, and by 26.5% in August.

In the first half of 2022, the Banque de France estimated an EMP default rate of 3.1%, representing a loss of 4.6 billion euros. This estimate is being revised upwards, and banks are now betting more on a default rate of around 5%.

According to the Bpifrance Le Lab business survey published in July, 6% of VSE-SMEs surveyed feared they would not be able to repay their EMP, 2 points more than in May 2021.

The State, which bears 90% of the risk on guaranteed loans, is cautious. The Finance Bill (PLF) for 2023 forecasts budget expenditure of almost 1.9 billion euros for EMPs, which should gradually decline to 0.9 billion in 2025.