Answer ... French banks are supervised under the SSM by the ECB and ACPR, or both, and by the Banque de France. The responsibilities of both the ECB and the ACPR depend on the allocation of competencies set out in the SSM. The ECB is competent to supervise all French credit institutions with respect to licensing and assessment of notifications of acquisitions and disposals of qualifying holdings in such credit institutions. Additionally, the ECB is competent for the supervision of credit institutions that are deemed ‘significant’, where:
- a credit institution has a total asset value of more than €30 billion;
- total assets exceed €5 billion and the ratio of total assets to French gross domestic product exceeds 20%;
- the ACPR and the ECB mutually decide that the credit institution should be deemed significant;
- the total value of its assets exceeds €5 billion and the ratio between its assets or liabilities in more than one participating member state and its total assets and liabilities exceeds 20%; or
- a credit institution has requested or received financial assistance directly from the European Financial Stability Facility or the European Stability Mechanism (ESM).
As of 2 October 2021, the ECB directly supervises 113 ‘significant’ institutions and banking groups in the European Union (including 11 French institutions and banking groups); and supervises member states’ regulatory authorities, which directly supervise less significant institutions and banking groups.
Within the framework of the ESM, the ECB can take binding decisions on supervised institutions, such as:
- determination of the importance of the institution;
- determination of capital requirements;
- assessment of the good repute and competence of managers;
- validation of approvals or repurchases of capital instruments; and
- enforcement of measures or sanctions.
Sanctions are intended to penalise the failures of supervised banks. They act as a deterrent for the banks concerned and for the banking sector as a whole. The ECB may impose financial penalties on major banks that violate directly applicable EU law or ECB decisions and regulations.
In the case of violations of national law implementing EU directives or violations by individuals, or where a non-pecuniary sanction is to be imposed, the ECB may require the relevant NCA to initiate the appropriate procedures. The NCA conducts these procedures and decides on the resulting sanctions in accordance with the applicable national law. The ECB can impose financial penalties on banks for non-compliance with EU prudential requirements.
The ECB may impose sanctions of up to:
- 10% of the total annual turnover generated by a bank in the previous financial year; or
- twice the gains or losses avoided by the infringement, where these can be determined.
The ECB will ensure that sanctions are effective, proportionate and dissuasive. In determining the level of such sanctions, the ECB will take into account all material circumstances relating to the infringement and assess its seriousness in light of its impact and the fault of the bank. The ECB also takes into account any aggravating or mitigating circumstances (eg, unwillingness to cooperate with the ECB in the exercise of its investigative powers or the bank’s own initiative to take remedial action).
The ECB’s independent investigation unit is responsible for conducting investigations into alleged breaches by major banks supervised by the ECB of directly applicable EU law and ECB supervisory decisions or regulations.
The Independent Investigation Unit may exercise the powers conferred on the ECB by the ESM Regulation (requesting documents or explanations, examining books and records, and conducting interviews and on-site inspections). It may also request information internally and from the NCAs; and may issue instructions to the NCAs to use their investigative powers under national law.
As a result of its investigations, the Independent Investigation Unit may initiate sanction proceedings by sending a statement of objections to the supervised bank concerned. The supervised bank will be given the opportunity to comment on the facts and objections raised by the investigation unit and on the proposed amount of the fine.
If, on the basis of its initial analysis of the facts, the evidence gathered and the written documents submitted by the bank, the Independent Investigation Unit considers that an administrative sanction should be imposed, it will submit a proposal for a complete draft decision to the Prudential Supervisory Board.
The Prudential Supervisory Board – which includes a chairman and a vice-chairman, a representative of each NCA and four representatives of the ECB – plans the supervisory tasks of the ESM and prepares decisions. These decisions are then adopted by the governing council.
The credit institutions concerned may refer to the Administrative Board of Review to request a review of a decision concerning them, prior to the adoption of the final version of that decision. They naturally retain their right to appeal to the Court of Justice of the European Union.
Whether or not ECB decisions imposing sanctions have been challenged before the Administrative Review Commission, they are published on the ECB’s banking supervision website.
ECB decisions imposing sanctions are published on the ECB’s banking supervision website. In exceptional cases, however, the publication of sanctions may be made anonymous or postponed.
The ACPR takes an active part in the work of direct supervision, at several levels:
- It is in charge of the direct supervision of smaller institutions, under the indirect control of the ECB;
- It continues to provide the bulk of the joint supervisory teams for large French institutions;
- It is involved in the definition and implementation of common procedures and is the main point of entry for French institutions on many subjects;
- It is involved, like the other NCAs, in structuring work and decisions – particularly in terms of methodology and supervisory approach – alongside the ECB’s horizontal divisions; and
- Its representative sits on the supervisory board and the governing council, the ESM’s decision-making bodies.
The ACPR is thus actively involved in the supervision of the largest European banks.
The ACPR also retains exclusive jurisdiction over certain supervisory tasks that remain outside the scope of the CRD IV Directive (2013/36/EU), such as:
- customer protection;
- the fight against money laundering and terrorist financing; and
- the implementation of the law on the separation of banking activities.
The ACPR has three missions:
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Preserve the stability of the financial system: According to Article L612-1 of the FMC, the ACPR is responsible for ensuring the stability of the financial system. This involves the following responsibilities, among others:
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- issuing the necessary approvals and authorisations to banking and insurance institutions operating in France. Directive 2014/59/EC, incorporated in Article R613-14 of the FMC, provides that a decision submitting a person to the jurisdiction of the ACPR to collective proceedings may be taken only with the ACPR’s consent;
- conducting ongoing surveillance of the financial situation and operating conditions of the legal entities under its supervision and, more specifically, monitoring compliance with solvency and liquidity requirements;
- ensuring that the entities under its supervision comply with the applicable rules, including by enforcing sanctions; and
- developing and implementing measures for the prevention and resolution of banking crises, in order to preserve financial stability, ensure the continuity of the activities, services and operations of institutions whose failure would have a systemic effect – that is, serious consequences for the economy, and to protect depositors and avoid or limit as much as possible the need for public support.
- Protecting the customers of banking and insurance institutions: The ACPR ensures that the companies under its supervision comply with all rules designed to protect customers. It also checks the procedures and means implemented by organisations to ensure compliance.
- Representing French supervision abroad: The ACPR is responsible for representing French supervision in international and European insurance and banking bodies, in cooperation with the Banque de France and the relevant government departments. As such, the ACPR contributes to the achievement of financial stability objectives in Europe and to the harmonisation of national and European supervisory practices.
Chaired by the governor of the Banque de France, to which it is attached, the ACPR has three decision-making bodies:
- Supervisory Board: The full college deals with general supervision issues common to the banking and insurance sectors. It analyses the risks of the two sectors in light of the economic situation. It is responsible for determining the principles of organisation, operation and budget, as well as the internal regulations of the ACPR. Two sub-colleges are foreseen – one for the banking sector, the other for insurance – each composed of eight members. The restricted formation of the supervisory board deals with individual issues likely to have a significant effect on the two sectors or on financial stability as a whole.
- Resolution Board: The resolution college, set up by Law 2013-672 and chaired by the governor of the Banque de France, is composed of six members. The college must oversee the development and implementation of measures to prevent and resolve banking crises.
- Enforcement Committee: The Enforcement Committee punishes various breaches of the legal and regulatory provisions applicable to institutions subject to ACPR supervision. It is independent of the two aforementioned ACPR boards which are in charge of prosecution functions.
The initiation of disciplinary proceedings – which is the sole responsibility of the ACPR’s Supervisory Board or Resolution Board – may occur in three cases:
- in light of the conclusions of reports drawn up following on-site inspections decided by the secretary general of the ACPR;
- in light of the findings of an off-site inspection by the ACPR’s departments; and
- at the request of the ECB, where the alleged offences do not fall within the ECB’s power to impose sanctions. When the ECB refers a matter to the ACPR, the Supervisory Board must initiate proceedings.
When the competent panel of the board decides to initiate disciplinary proceedings, its chairman will notify the persons concerned of the grievances and, at the same time, refer the matter to the Enforcement Committee by sending it notification of the grievances (Article L612-38 of the FMC).
The chairman of the Enforcement Committee appoints a rapporteur from among the members of the committee, whose duties are similar to those of an investigating judge.
During this pre-hearing investigation phase, the rapporteur ensures that the disciplinary proceedings are conducted in an adversarial manner between the parties:
- on the one hand, the board – the prosecuting authority, which intervenes through the representative it has appointed; and
- on the other hand, the accused person(s), assisted, where appropriate, by counsel (Article L612-38 of the FMC).
The penalties incurred by persons subject to the supervision of the ACPR are:
- a warning;
- a reprimand;
- a ban on carrying out certain operations for a maximum period of 10 years;
- temporary suspension of managers for a maximum period of 10 years;
- the compulsory resignation of managers;
- partial or total withdrawal of approval or authorisation; or
- removal from the list of approved persons.
Instead of, or in addition to, these sanctions, a financial penalty of up to €100 million may be imposed (Articles L612-39 and L612-41 of the FMC). With respect to the fight against money laundering and terrorist financing, assets and unpaid life insurance contracts can be frozen; and an alternative ceiling of 10% of annual net sales is provided for most categories of reporting entities (Article L561-36-1, IV of the FMC). A fine of €5 million may also be imposed on the effective managers and persons who have direct and personal responsibility for the implementation of the anti-money laundering/counter-terrorist financing system.
In prudential matters, for credit institutions and financial companies, the maximum penalty is set at:
- 10% of the annual net turnover; or
- if it can be determined, twice the amount of the benefit derived from the breach; and
- €5 million for natural persons who are effective managers (Article L612-40 of the FMC).
In terms of financial stability, the Banque de France has a dual responsibility of protection and supervision:
- It is in charge of strengthening regulation and risk prevention, as well as ensuring the security of savers’ deposits; and
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Together with the ACPR, it:
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- supervises financial sector companies (777 banking institutions, 827 insurance companies and mutual insurers);
- ensures the proper functioning of payment systems and market infrastructure; and
- regularly assesses the risks and vulnerabilities of the financial system.
The ACPR is an administrative authority; and the FMC establishes its independence for the exercise of its missions and its financial autonomy. In its operations, the ACPR is backed by the Banque de France, which provides it with resources – particularly human and IT resources.