France is bolstering its efforts to make Paris a more attractive financial centre. Direct secured lending by non-traditional lenders is part of the plan. Several recent regulations in France (with more due to be enacted in 2017) demonstrate France's willingness to introduce flexibility where previously the country had a more conservative approach.
These changes are partly driven by French banks reducing their lending activities after the global financial crisis and also by the increasing regulatory constraints (especially capital requirements) imposed on the banks. Other sources of lending will, therefore, continue to expand in France in common with what is happening in Italy and in other European countries. This article outlines relevant changes.
France is slowly but surely relaxing its banking monopoly rules.
Whilst the principle remains that only licensed French credit institutions, or EU credit institutions licensed to conduct their activities in France (through a branch), are entitled to provide financing on a regular basis to French entities based in France, the French banking monopoly rules have been relaxed as part of the French authorities' desire to encourage alternative forms of financings from a more diverse group of lenders.
Initially, the French Insurance Code was amended to permit insurance companies to provide loans to SMEs either direct or through "funds for loans supporting the economy".  The French Insurance Code was modified further between 2014 and 2016 to clarify and document this exception.
In 2015, the French legislator opened up another important exception to the banking monopoly rules by allowing certain funds to provide direct lending to companies. Before 2015, no fund could lend to companies direct (instead funds had to subscribe for notes or purchase participations in existing loans). As a result of the European ELTIF Regulation, French investment funds using the ELTIF label (that label being awarded under the control of the French Autorité des marchés financiers) are now authorized to grant long-term loans direct to companies.
In 2016, two other types of French investment funds (namely, French professional specialized funds and professional private equity funds) also became authorised to lend directly to companies under certain conditions.
Further measures are awaited in 2017 because the Sapin II Law  allows French authorities to adopt legislation in order to create a new category of "funds supporting direct financing to the economy".
Moreover, the need for more liquidity in France has accelerated the flexibility regarding the granting of loans between companies. In 2015, the Macron Law  made it possible (subject to certain conditions) for loans to be made between companies having certain business relationships. The previous exception only applied to loan made between companies within the same group.
France is also simplifying the taking of French security.
The French law reform dated October 2016 simplified the French law assignment of receivables. Before this reform, the assistance of a bailiff at law was required to make the assignment enforceable against third parties. Now, this can be achieved by sending a simple notification, facilitating the taking of assignment of receivables in many types of financings (including receivables-based financings, international project finance, etc.).
The French authorities have planned to go further in the liberalization of French law assignments. The Sapin II law provides that, subject to further regulations to be implemented in 2017, certain funds will be authorized to use the French law governed "Dailly" assignment. This type of assignment is widely used in France due to its simplicity and efficiency (especially in the context of French insolvency scenarios). The use of Dailly assignments is currently restricted to French credit institutions and passported EU institutions only. This change will signify significant progress for the relevant funds and will generally simplify the uptake of "Dailly" assignment on transactions where there is a pool of different type of lenders.
Last but not least, a reform of the French security agent is awaited in 2017. In the context of cross-border transactions, the parallel debt concept or the mandate concept are used in order for a security agent to be granted the benefit of French security for the benefit of a pool of lenders. When the current relevant law was enacted in 2007, it was supposed to clarify the status of the security agent but is not widely used in practice in France because of residual legal uncertainty. The awaited regulation will redraft the provisions of the French code civil regarding the security agent status and this should simplify the uptake of security in France in all types of secured financings.