AFL Group Celebrates the Removal of Pillar 2 Requirement
AFL Group recently received exciting news regarding its financial requirements, which will allow the institution to grow and support its local authority clients more efficiently. The French Prudential Supervision and Resolution Authority (ACPR) has announced the removal of the Pillar 2 own funds requirement (P2R), effective from 1 January 2025.
A Significant Change for AFL Group
On 20 June 2025, the ACPR notified Agence France Locale - Société Territoriale (AFL-ST), the parent company of AFL, about this pivotal decision. The revision followed a careful assessment of AFL-ST's risk profile.
Understanding the Pillar 2 Requirement
The Pillar 2 Requirement was initially imposed as an extra financial buffer to ensure that a financial institution could withstand economic challenges. However, after the ACPR's Supervisory College meeting on 24 October 2024, it was determined that AFL-ST has demonstrated sufficient financial resilience, making the additional requirement unnecessary.
Current Financial Health of AFL Group
The authority's decision indicates a positive trend for AFL Group's financial management and operational strategy. As of 31 December 2024, the AFL Group has reported an impressive capital adequacy ratio of 62.75%, positioning itself as a robust player in the financial market.
Strategic Management Praised
Yves Millardet, Chairman of the Management Board of AFL, commented on the ACPR's decision, stating, "This decision reflects the strength of our prudent management framework and will allow the AFL Group to continue its sound and sustainable development in support of French local authorities." This strong endorsement illustrates the commitment of AFL Group to uphold high standards of financial governance while supporting its local clients.
Afl: The Bank for Local Authorities
AFL Group has a unique ethos as it is the only French bank completely owned by local authorities. This innovative model offers local entities the opportunity to gain access to rapid and customized financial solutions for their various projects.
The Role of AFL in Local Development
Since its inception in 2015, AFL Group has successfully facilitated nearly €11.5 billion in loans, with €2 billion being allocated in 2024 alone. By becoming shareholders of AFL, local authorities witness the empowerment of their financial capabilities to invest in projects that matter most to their communities.
A Commitment to Responsible Finance
AFL Group is dedicated to the principles of sustainable and responsible finance, which are crucial in effectively addressing the current and future needs of citizens. The bank's mission emphasizes fostering an environment where local authorities can thrive financially while ensuring that their investment strategies align with long-term sustainability goals.
What the Future Holds for AFL Group
With the removal of the Pillar 2 Requirement, AFL Group is poised to embark on a new journey that will allow it to expand its support for local authorities. The strategic decision by the ACPR reflects confidence in the bank’s management and vision, which should lead to enhanced financial products and services for its clients.
Frequently Asked Questions
What does the removal of the Pillar 2 Requirement mean for AFL Group?
The removal signifies that AFL Group no longer needs to maintain an additional financial buffer, enhancing its financial flexibility and capacity to support local authorities.
When does this change take effect?
The decision takes effect from 1 January 2025.
How does this change impact local authorities?
Local authorities will benefit from improved access to financing, allowing them to invest in essential projects without the burdens imposed by additional financial requirements.
What is the significance of AFL Group's capital adequacy ratio?
The capital adequacy ratio of 62.75% showcases AFL Group's strong financial health, ensuring it can operate effectively while minimizing risks.
How can local authorities engage with AFL Group for financing needs?
Local authorities can become shareholders of AFL Group, thereby gaining access to tailored financial solutions that meet their unique investment requirements.
