The regulatory regime applicable to banks
Five significant steps towards European harmonisation have been taken since 2011:
- on 1 January 2011, the European Banking Authority (EBA) was created;
- on 26 June 2013, the EU adopted a legislative package to implement the Basel III Accords into the EU prudential framework, and to strengthen the regulation and supervision of the banking sector in Europe by introducing harmonised rules (the CRD IV Package);
- on 29 October 2013, the EU adopted the creation of the SSM to confer specific supervision tasks on the ECB;
- on 30 July 2014, the EU enacted the creation of a bank SRM, elements of which entered into force on 19 August 2014; and
- on 15 May 2014, the European Union enacted the BRRD, which was amended as regards the ranking of unsecured debt instruments in an insolvency hierarchy by a directive dated 12 December 2017.
Other than EU regulations of direct application, the statutory framework applicable to the regulation of banking activities is provided by the French Monetary and Financial Code, and by specific decrees and orders. The power to regulate the banking and financial sector is now shared between European legislature and the French Minister of Economy and Finance, assisted by a consultative authority, the Advisory Committee on Financial Legislation and Regulation.
In addition, the EBA issues regulatory guidelines and recommendations. In principle, the French Prudential Control and Resolution Authority (ACPR) must inform the EBA within two months whether it complies or intends to comply with those guidelines and recommendations.
In accordance with Regulation (EU) No. 1024/2013, since 4 November 2014, the authority to supervise and control banks is shared between the ACPR and the ECB. The ECB supervises all credit institutions with respect to certain domains, such as granting or withdrawing banking licences, or assessing acquisitions of qualifying holdings in such institutions. In addition, the ECB is the sole competent prudential regulator for credit institutions that are categorised as significant entities, as recently reaffirmed by the European Court of Justice. The ECB has also issued a letter stating that it is directly competent to exercise, in certain situations, supervisory powers granted under national law.
The ACPR remains directly in charge, subject to the oversight of the ECB, of credit institutions that are classified as less significant. These authorities cooperate, and the terms of such cooperation are defined, inter alia, in Regulation (EU) No. 468/2014 of 16 April 2014.
The ACPR is a public authority without legal personality. The French Central Bank (Central Bank) plays a key role in the functioning of the ACPR. It is chaired by the governor of the Central Bank, and the administrative staff are seconded from the Central Bank.
In accordance with EU Regulation No. 806/2014, since 1 January 2016, the authority to implement a bank resolution in France is shared between the national resolution authority, which is the resolution college within the ACPR, and the Single Resolution Board.
Banks and investment service providers also fall within the remit of the French Market Authority (AMF), which supervises compliance with professional rules relating to the provision of investment services and asset management activities.
The provision of banking services in France requires a licence that is, since 4 November 2014, granted by the ECB, while the provision of investment services requires a licence obtained from the ACPR. Portfolio management companies (i.e., investment companies providing portfolio management services on behalf of third parties or collective portfolio management as their main activities) must be authorised by the AMF.
Banks and investment firms licensed in a Member State of the European Economic Area (EEA) benefit from a mutual recognition procedure, and are authorised to provide banking or investment services in France through a branch or by virtue of the free provision of services subject to the procedures required in their home state and to the competent authority being informed of the provision of those services. A non-EEA bank may either apply for a licence or establish a representative office in France, but only to provide information, liaison or representation services to French customers (i.e., such an office is not permitted to carry out any banking operations in France). The competent authority must be notified of the opening of a representative office.
Under French law, only authorised credit institutions or financing companies may, on a regular basis, enter into credit transactions and only credit institutions may, on a regular basis, receive repayable funds from the public. These restrictions are commonly referred to as the French banking monopoly. Rules applicable to finance companies were outlined in a decree published on 13 November 2014. New exceptions from the banking monopoly have been included:
- by Ordinance No. 2014-559, dated 30 May 2014, to allow crowdfunding companies to carry out their business in France;
- by Law No. 2015-990, published on 6 August 2015 (known as the Macron Law), allowing certain companies to grant credit for a maximum term of two years to small and medium-sized businesses with whom they maintain a business relationship;
- by Law No. 2015-992, published on 17 August 2015, allowing third-party financing companies to grant credit to builder–owners in the field of energy-efficient construction;
- by Law No. 2016-1691, published on 9 December 2016, regarding transparency, anticorruption and economic modernisation, certain funds are entitled to carry out credit transactions; and
- by Ordinance No. 2017-1432, published on 4 October 2017, on the modernisation of the legal framework of asset management and debt financing.
For banks authorised to carry out investment services, it should be noted that at the beginning of January 2019, the European Commission published a draft delegated regulation on how investment firms should take into account the environmental, social and governance preferences of clients.