An Analysis of Financial Conglomerate Resilience: A Perspective on bancassurance in France

To that end, we estimate models of the entities' Return on Assets (ROA), the standard deviation of the ROA, the Z-score, a measure of banks' default risk, and intragroup funding standard deviation, using quarterly supervisory data available at the ACPR on a solo basis for French banks. We find that the financial conglomerate membership has a dampening effect on the volatility of the ROA and of intragroup funding growth, an effect that is even stronger in periods of financial stress. Moreover, financial conglomerate membership is found to reduce banks' default risk as it has a positive effect on a bank's Z-score overall. By contrast, no significant effect is shown on the ROA. By and large, these results invalidate the moral hazard assumption associated with financial conglomerates but rather highlight financial solidarity mechanisms within conglomerates.