Clarity in Credit

In the latest episode of our “Clarity in Credit” podcast series, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Jason Graffam, Senior Vice President of Global Sovereign & Financial Institution Ratings, joined Mehdi Fadli, Senior Vice President and Sector Lead of Global Sovereign Ratings to discuss developments regarding the Republic of France.

Government instability in France has resurfaced, marked by the resignation of Prime Minister Lecornu on 6 October 2025, though he was reappointed later that week. This latest government collapse is the third since the snap legislative elections in July 2024, highlighting the ongoing instability that France has faced over the past year. On 19 September 2025, we downgraded France’s sovereign credit rating to AA with a Stable trend from AA (high).

Key Highlights 

-- The political turmoil also accentuates the uncertainty over France's policy and fiscal outlook. The downgrade of France’s sovereign credit ratings reflects our expectation that the fiscal consolidation path will be more gradual than anticipated in the government’s medium-term fiscal plan amid ongoing domestic political fragmentation and reduced policy consensus. 

-- Despite the prevailing headwinds, France’s economy remains resilient. The country’s real GDP growth outpaced the euro area average in 2023–24, underpinned by foreign trade and public spending. Furthermore, labour reforms enacted in recent years have bolstered employment, with the national unemployment rate currently at historically low levels. Even with the potential suspension of pensions reform until 2028, the near-term fiscal impact of the potential suspension seems relatively contained. 

-- In the near term, we anticipate two potential scenarios unfolding in France’s domestic political landscape. The second Lecornu government could continue negotiating with some parties in the National Assembly, possibly making new budget concessions to avert a vote of confidence. Alternatively, the government might opt for new snap legislative elections, which could potentially result in more seats for the far-right National Rally party. 

-- In the current geopolitical context, the absence of a strong and stable government in France also poses a challenge for Europe, particularly in light of the ongoing war in Ukraine and the increasing military spending among NATO members. The French presidential election slated for 2027, if won by the National Rally, could have significant implications for European Union (EU) member states’ cohesion, their commitments towards the EU, and the EU’s funding and policy objectives. 

See our 6 October 2025 commentary, “France: Another Government Collapses, Accentuating Uncertainty on the Fiscal Outlook” at https://dbrs.morningstar.com/research/464260 for additional insight on France from our analysts.

-- Credit Rating Report: Morningstar DBRS Downgrades the Republic of France to AA, Trend Changed to Stable: https://dbrs.morningstar.com/research/462894

Catch up on these topics and more thought leadership from across the Fundamental Ratings teams and around the globe via our monthly Consider Credit newsletter: https://dbrs.morningstar.com/research/464905

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

In the latest episode of our “Clarity in Credit” podcast series, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Chloe Blais, Vice President of European Corporate Ratings, Diversified Industries & Energy, are joined by Maureen Levelis, Vice President of North American Financial Institution Ratings and Scott Rattee, Senior Vice President and Sector Lead of Corporate Ratings to discuss digital currencies.

Digital currencies have been catalysts for how we define and use money. In this episode, Morningstar DBRS analysts discuss two examples, cryptocurrencies and stablecoins, and how their growing prevalence affects both Financial Institutions and Corporates. 

Key Highlights 

• Stablecoins, digital tokens pegged to assets like the U.S. dollar, have demonstrated rapid growth with increasing integration into payment systems as a quick and low-cost means of sending money across borders with 24/7 settlement, global accessibility, and efficiency. However, they lack the safety of deposit insurance and rely on the issuers’ management of reserves.
• In the U.S., the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law in July 2025, sets a regulatory foundation for stablecoins. Major U.S. banks are now exploring their own stablecoins or forming a consortium to compete with private players and stay relevant in the digital finance space. While stablecoins offer efficiency and innovation in the financial system, they pose both opportunities and risks for banks, potentially disrupting deposit bases and payment fees.
• The use of cryptocurrencies has started to move beyond simply being transactional in nature to being used for operational purposes such as treasury functions. Cryptocurrency treasury companies are using cryptocurrencies such as bitcoin as their primary corporate reserve currency.
• Given the inherent volatility in cryptocurrency values, when a cryptocurrency represents most of a company's available on-balance-sheet capital, there can be issues with it as a reliable store of value and a unit of account, particularly in periods of either company-specific or macroeconomic stress.
• In addition, some of the other primary credit risk considerations include factors such as a lack of clear regulatory oversight, liquidity risk, counterparty and security-level risks, and custodial considerations.

Related Content: 

• Stablecoins and U.S. Banks: A New Chapter in Financial Disruption (August 9, 2025), https://dbrs.morningstar.com/research/460729
• Risky Business: Cryptocurrency Treasury Strategy May Increase a Company's Credit Risk Profile (August 21, 2025), https://dbrs.morningstar.com/research/455943

Catch up on these topics and more thought leadership from across the Fundamental Ratings teams and around the globe via our monthly Consider Credit newsletter: https://dbrs.morningstar.com/research/458585.

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

In the latest episode of our “Clarity in Credit” podcast series, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Jason Graffam, Senior Vice President of Global Sovereign & Financial Institution Ratings, are joined by Marcos Alvarez, Managing Director of Global Financial Institution Ratings to discuss climate change and the insurance industry.

Natural disasters are becoming more severe and frequent. In fact, total losses from these disasters, including both insured and uninsured losses, reached $318 billion in 2024, which is significantly higher than the 10-year average of $254 billion.  Our analysts discuss these extreme natural disasters in North America and Europe. 

Key Highlights 

• The global insurance industry covered between 39% and 47% of total natural disaster losses in the past five years, which translates to more than $124 billion in claims paid every year. Nevertheless, there is still a significant protection gap between total economic losses and insured losses and closing this gap remains a challenge for the industry.
• The Canadian Property and Casualty (P&C) Insurance industry suffered record losses in 2024, and the industry appears to be on pace for another record year of losses in 2025. Amid volatile underwriting results, as mitigating factors, Canadian insurers may choose to limit coverage, increase deductibles, or further raise prices in high-risk areas, especially if global reinsurers reduce their willingness to take on Canadian risks.
• Nevertheless, the overall financial and credit performance of the Canadian P&C industry remained resilient, supported by rate increases, reinsurance protections, and favorable investment returns during the year. Insurance issuers in Canada rated by Morningstar DBRS remain well capitalized to absorb the trajectory of natural catastrophe losses observed in 2025.
• While many countries have implemented public mechanisms or public-private partnerships to address natural disasters, the Consorcio de Compensación de Seguros (CCS) in the Spanish insurance sector stands out as one of the most comprehensive public solutions available globally. As a public entity, the CCS covers damages generated by extraordinary risks in Spain, including floods, and is funded through surcharges of premiums applied to regular insurance providers.
• Nevertheless, given the increasing frequency and severity of weather-related events, there is a growing need for additional government-backed facilities, alongside market-based solutions such as catastrophe bonds.

Related Content: 

• Line of Fire: How Wildfires Threaten Utility Credit (July 2, 2025), https://dbrs.morningstar.com/research/457577
• Navigating a New Normal: 2025 Wildfires Renew Volatility of Natural Catastrophe Losses for Canadian Insurers (June 10, 2025),  https://dbrs.morningstar.com/research/455943
• Is It Time for an EU-Level Natural Catastrophe Insurance Scheme? (February 24, 2025) https://dbrs.morningstar.com/research/448420
• Spain's Costliest Adverse Weather Event in History Anticipated to Drive Total Insured Losses Over EUR 4 Billion (November 14, 2024) https://dbrs.morningstar.com/research/442944
• Morningstar DBRS Comments on the Impact of Severe Weather Events in Spain for Insurance Companies, and the Role of the Consorcio de Compensación de Seguros (October 31, 2024) https://dbrs.morningstar.com/research/442341
• Could Europe Become Uninsurable Against Catastrophic Weather Events? (May 29,2024) https://dbrs.morningstar.com/research/433343
• Extreme Conditions: Exploring Spain’s Drought Impact and the Need for Catastrophe Insurance Coverage (July 19, 2023) https://dbrs.morningstar.com/research/417307

Catch up on these topics and more thought leadership from across the Fundamental Ratings teams and around the globe via our monthly Consider Credit newsletter:https://dbrs.morningstar.com/research/458585

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

In the first episode of the Morningstar DBRS “Clarity in Credit” podcast, Arnaud Journois, Senior Vice President of European Financial Institution Ratings, and Jason Graffam, Senior Vice President of Global Sovereign & Financial Institution Ratings, are joined by Chloe Blais, Vice President of European Corporate Ratings, to discuss the European defense sector.

European Union defense spending is expected to increase further from all-time high levels seen in 2024 as the conflict in Ukraine has continued. While governments and financial institutions are expected to facilitate this expansion by expediting approval processes and providing financing, the corporate sector will play a critical role in the build-out of the European defense capacity. Morningstar DBRS’ analysts discuss where new military procurements will come from as well as capacity constraints and expected timelines. Journois, Graffam, and Blais also examine how governments will fund the capital required for further investments in defense, highlighting the challenges this expansion will bring and the potential effects on credit.

Related Content: 

• Rethinking Bank Funding to the European Defence Sector: https://dbrs.morningstar.com/research/449341
• Ammunition for Future Growth: Benefits to Defence Sector From Rising European Budgets Will Take Time to Materialise: https://dbrs.morningstar.com/research/449460
• Germany's Elections: Ramping Up Defence Spending Will Require Significant Policy Compromises: https://dbrs.morningstar.com/research/448493

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.

By downloading or listening to this podcast, you are agreeing to the Morningstar DBRS disclaimer and legal terms and conditions found at https://dbrs.morningstar.com/about/disclaimer and https://dbrs.morningstar.com/about/termsAndConditions, including that the information provided is not investment, financial or other advice. Morningstar DBRS will not be liable for losses arising from your use of the information. Please note that the content of this podcast is intended for European, North American and UK audiences only.