Press Release
11 March 2026
Progress in AFL’s initiatives towards 0% risk-weighting for its debt securities to support the financing of French local governments
The draft Simplification Bill, which is due to be examined by Parliament following the municipal elections in France, includes in Article 26 an amendment to the framework governing the guarantee provided by local governments to AFL’s creditors. This legislative proposal represents a major milestone for the local government bank, which is continuing its efforts to ultimately secure 0% risk-weighting for its debt securities.
The proposal is the culmination of an initiative launched by AFL several years ago in conjunction with the relevant authorities, aimed at improving the financing conditions offered to local governments. It was in this context that the ACPR reached its decision on 21 June 2024 to risk-weight French local government debt at 0%, although AFL was unable to benefit from this as an issuer of debt securities. To finalise this process, it would make sense for AFL, as the local government bank, to be assigned a risk-weighting aligned with that of its shareholders and borrowers.
Reference regulatory framework
The decision issued by the ACPR Supervisory College on 21 June 2024, establishing a 0% risk-weighting for French local government debt, constituted a major step forward in recognising their financial strength.
This decision has notably enabled debt securities issued by AFL to be classified as High-Quality Liquid Assets (HQLA Level 1), enhancing their attractiveness to investors.
However, despite this progress in 2024, bonds issued by AFL remained risk-weighted at 20% (under the standardised approach) and subsequently at 30% since AFL has been rated A+ (by Fitch and S&P), following the downgrade of France’s sovereign rating. This remains the case even though the vast majority of the bank’s exposures (loans granted to local governments) are risk-weighted at 0%.
Ongoing discussions with public authorities
To align the risk-weighting of its debt securities with that of its shareholders, AFL has entered into discussions with government departments to examine the legal and regulatory developments likely to support this initiative. These exchanges are part of the ongoing work surrounding the Simplification Bill, which is linked to the decentralisation process. This text is due to be presented to the Council of Ministers following the municipal elections.
Article 26 of the bill provides for the possibility for AFL shareholders to adapt their guarantee mechanisms to enable 0% risk-weighting for either AFL itself or the securities it issues.