2023 Finance Active observatory on local authorities' debt

After a significant increase in 2021, representing over 15% compared to the previous year, borrowing decreased by 19% in 2022, amounting to 9.4 billion euros (compared to 11.6 billion euros the previous year). This reduction in subscribed volumes occurs in a context of a rapid and sudden increase in interest rates and constrained banking offerings.

The interest rate for new financings soared to 2.12% in 2022 with a slightly reduced average duration of 19.3 years

The interest rate at which local authorities borrowed last year averaged 2.07%, marking a 145 basis points (1.45%) increase compared to 2021 (0.62%). In 2022, the average loan duration for new financing remains stable at 18 years, continuing from 2021. These durations are more concentrated as nearly 65% of the volume was contracted for maturities between 15 and 25 years, compared to 56% in 2021. Borrowers in 2022 renewed their preference for fixed-rate contracts, accounting for 73% of new flows, but opted more for variable loans (27% compared to less than 17% last year), primarily due to constraints related to the usury rate throughout the year.

The share of bank financing in new flows continues its progression (58.3%), with bond utilization losing momentum

Bond financing, at 33%, represents a smaller share than the previous year, as bank financing increases in 2022 to reach 56.5% (an increase of 8.7 points). Regarding banks, La Banque Postale/SFIL group maintains its position as the leading bank with 31.1% market share, while Groupe Crédit Mutuel/Arkéa makes a steep ascent to the second position with 22.8% of new financings (compared to only 10.4% in the previous period), ahead of Groupe BPCE, which ranks third in 2022 with 22% of bank credits taken in 2022.

Outstanding balance as of December 31, 2022: The end of 10 consecutive years of decrease in the average debt balance rate

From 3.29% in 2011 to 1.72% in 2021, the average rate of local authorities' debt reverses its trend, settling at 2.01% by December 31, 2022, with an average remaining life of 14.1 years (compared to 14.2 years at the end of 2021). "This increase stems from the rise in the cost of new financing, but also from the increase in interest rates indexed to the Euribor and Livret A for loans constituting the local authorities' variable-rate debt stock," highlights Olivier Bertrand, Senior Manager Consultant in the Local Public Sector.

The share of fixed-rate debt in the overall outstanding debt continues to rise, reaching 75.6%. A gradual increase partly explained by the very low-interest rate environment before 2022, strongly encouraging borrowers to lock in particularly attractive fixed-rate conditions.

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