France's central bank has not yet seen an uptick in corporate bankruptcies as government support policies have cushioned the impact of the coronavirus pandemic on the business sector, the bank's governor said July 9.

Speaking to journalists in Paris, François Villeroy de Galhau said there could be business failures or restructurings over the next year, but government measures such as furloughing employees over the longer term should help companies. France has also implemented a €300 billion loan guarantee scheme to soften the impact on businesses.

There have been concerns that the pandemic will lead to a spike in bad loans, but Villeroy de Galhau said banks were strong enough to overcome the crisis, which he noted was due to an emergency health situation, not a financial crisis.

French banks' financial situation at the end of 2019 was much better than it was during the 2008 financial crisis, he said. Their common equity Tier 1 ratio — a key measure of financial strength — had more than doubled, he said. In the governor's annual letter to the French president, he said the CET1 ratio stood at 14.4% at the end of 2019 compared to 5.8% in 2008. Their liquidity coverage ratio, which determines banks' ability to make short-term financial commitments, stood at 132%.

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Large French banks include BNP Paribas SA, Société Générale SA, Crédit Agricole Group, and Groupe BPCE.

Villeroy de Galhau also said France's economy was recovering better than had been initially expected based on data from the bank's monthly business surveys.

Economic activity contracted by 9% in June, a figure that had initially been expected by September, compared to 17% in May, Villeroy de Galhau said.

The French economy is set to return to pre-coronavirus levels at the beginning of 2022 instead of a previous forecast of mid-2022, he added, but much will depend on consumer spending, business confidence and the health emergency.

Villeroy de Galhau also warned against rising public debt in France, which is forecast to reach 120% of GDP by the end of the year, up from about 100% in 2019.

At the height of the financial crisis in 2009, France's public debt was the same as Germany's, but since then it has risen at a faster pace than the eurozone average, his letter to the president said.

The country's status in Europe depends on its public debt level, and it will lose investor confidence if it is not contained, the letter said.