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Transcript
s e le c t e d fr e n ch ba nki ng
2013
a n d fi n a n c i a l regu l at i ons
CCLRF
COMITÉ CONSULTATIF DE LA LÉGISLATION ET DE LA RÉGLEMENTATION FINANCIÈRES
SELECTED FRENCH BANKING AND
FINANCIAL REGULATIONS
Updated 21 January 2013
The following English translation of the selected French Banking and Financial Regulations in force as at
21 January 2013 has been prepared by the Banque de France for information purpose only
It is not binding in law
CONTENTS
INTRODUCTION ........................................................................................................................................... 9
THE COMPILATION OF “SELECTED FRENCH BANKING AND FINANCIAL REGULATIONS” ................... 9
1. TEXTS RELATING TO THE EXERCISE OF BANKING AND FINANCIAL ACTIVITIES ...................... 11
1.1. CONDITIONS OF EXERCISE OF BANKING AND FINANCIAL ACTIVITIES ........................................... 11
1.1.1. AUTHORISATION AND REVOCATION OF AUTHORISATION ..................................................... 11
1.1.1.1. Credit institutions ............................................................................................................................. 11
Regulation 96-13 of 20 December 1996, relating to the revocation of authorisation and the
striking off of credit institutions ............................................................................................. 11
1.1.1.2. Investment firms other than portfolio management companies ....................................................... 13
Regulation 96-14 of 20 December 1996, relating to the revocation of authorisation and the
striking off of investment firms other than portfolio management companies ....................... 13
Order of 2 July 2007 on investment firms other than portfolio management companies with a
single manager ........................................................................................................................ 14
1.1.1.3. Payment institutions ......................................................................................................................... 14
Order of 29 October 2009 relating to the prudential regulation of payment institutions ...................... 14
1.1.1.4. Electronic money and electronic money institutions............................................................................. 25
Regulation 2002-13 of 21 November 2002, relating to electronic money and electronic money
institutions .............................................................................................................................. 25
1.1.1.5 Associations and foundations............................................................................................................ 28
Order of 18 July 2012 relating to associations and foundations authorised to advance certain
loans and implemented for the application of Articles R. 518-59 and R. 518-62 of the
Monetary and Financial Code................................................................................................. 28
1.1.2. MINIMUM CAPITAL ............................................................................................................................. 28
1.1.2.1. Credit institutions ............................................................................................................................. 28
Regulation 92-14 of 23 December 1992, relating to the minimum capital of credit institutions .......... 28
1.1.2.2. Investment service providers............................................................................................................ 30
Regulation 96-15 of 20 December 1996, relating to the minimum capital of investment service
providers ................................................................................................................................. 30
1.1.3. CHANGES IN THE SITUATION OF CREDIT INSTITUTIONS AND INVESTMENT FIRMS
OTHER THAN PORTFOLIO MANAGEMENT COMPANIES ...................................................................... 31
Regulation 96-16 of 20 December 1996, relating to changes in the situation of credit
institutions and of investment firms other than portfolio management companies ................ 31
1.1.4. IMPLEMENTATION OF THE SINGLE MARKET .............................................................................. 35
1.1.4.1. Credit institutions ............................................................................................................................. 35
Regulation 92-12 of 23 December 1992, regarding the provision of banking services abroad by
credit institutions and financial institutions having their registered office in France ............. 35
Regulation 92-13 of 23 December 1992, relating to the provision of banking services in France
by institutions having their registered office in other Member States of the
European Union ...................................................................................................................... 37
1.1.4.2. Investment service providers............................................................................................................ 39
Excerpt from Monetary and Financial Code: Articles R. 532-20 to R. 532-29, relating to the
right of establishment and freedom to provide services for investment services
providers in other States party to the European Economic Area Agreement ......................... 39
1.1.5. DEPOSIT GUARANTEES ...................................................................................................................... 42
Selected French Banking and Financial Regulations – 2013
3
Regulation 99-05 of 9 July 1999, relating to the guarantee of deposits and other repayable
funds received by credit institutions having their headquarters in France or in the
Principality of Monaco............................................................................................................ 42
Regulation 99-06 of 9 July 1999, relating to the resources and operation of the deposit
guarantee fund ......................................................................................................................... 45
Regulation 99-07 of 9 July 1999, relating to the guarantee of deposits or other repayable funds
received by the branches of credit institutions ........................................................................ 53
Order of 6 November 2012, relating to the total amount of contributions to the deposit
guarantee fund ......................................................................................................................... 55
Order of 29 September 2010, relating to special contributions to the deposit guarantee fund .............. 56
1.1.6 SECURITIES GUARANTEES ................................................................................................................. 56
Regulation 99-14 of 23 September 1999, relating to the guarantee of securities .................................. 56
Regulation 99-15 of 23 September 1999, relating to the resources and operation of the
securities guarantee scheme .................................................................................................... 59
Regulation 99-16 of 23 September 1999, relating to the guarantee of securities held on behalf
of investors by a branch established on the territory of the French Republic and of the
principality of monaco of a credit institution or investment firm having its
headquarters in another country. ............................................................................................. 66
Order of 6 november 2012, relating to the total amount of contributions to the securities
guarantee mechanism for 2012. .............................................................................................. 68
Order OF 6 NOVEMBER 2012 CONCERNING THE EXCEPTIONAL CONTRIBUTION TO
THE SECURITIES GUARANTEE MECHANISM ............................................................... 69
1.1.7. GUARANTEES OF BANK GUARANTEES .......................................................................................... 69
Excerpt from Monetary and Financial Code: Articles D. 313-26 to D. 313-31, relating to the
guarantees of bank guarantees................................................................................................. 69
Regulation 99-12 of 9 July 1999, relating to the conditions and time limits for compensation
through the guarantee mechanism ........................................................................................... 70
Regulation 2000-06 of 6 September 2000, relating to the membership and resources of the
guarantee mechanism .............................................................................................................. 71
1.1.8. INTERNAL AUDITING .......................................................................................................................... 74
Regulation 97-02 of 21 February 1997, relating to internal control in credit institutions and
investment firms ...................................................................................................................... 74
Order of 13 December 2010 amending various regulatory requirements relative to the
monitoring of the incomes perceived by the persons whose functions may have an
impact on the risk profile of credit institutions and investment firms as well as various
prudential provisions ............................................................................................................... 93
1.1.9. REPRESENTATIVE OFFICES ............................................................................................................... 94
Circular of 22 February 1990 as amended relative to the opening and functioning of
representative offices of credit institutions ............................................................................. 94
Circular of 26 March 1999 as amended relative to the opening and functioning of
representative offices of investment companies ...................................................................... 95
1.2. DETAILS OF OPERATIONS CARRIED OUT BY CREDIT INSTITUTIONS AND INVESTMENT
FIRMS ........................................................................................................................................................... 96
1.2.1. SETTLEMENT FINALITY IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS ............. 96
Excerpt from Monetary and Financial Code: Articles R. 330-1 to R. 330-3, adopted with a view
to transposing Articles 6 and 10 of Directive 98/26/CE of the European Parliament
and Council concerning settlement finality in payment and securities settlement
systems .................................................................................................................................... 96
1.2.2. EQUITY PARTICIPATIONS .................................................................................................................. 96
Regulation 90-06 of 20 June 1990, relating to equity holdings in the capital of enterprises ................. 96
Regulation 98-04 of 7 December 1998, relating to equity interests taken by investment firms
other than portfolio management companies and investment firms which have neither
funds nor securities belonging to their customers and which only provide the
4
Selected French Banking and Financial Regulations – 2013
investment service mentioned in Article L. 321-1.1 OF the monetary and financiel
code in existing or new undertakings ..................................................................................... 97
1.2.3. VIGILANCE VIS-A-VIS MONEY LAUNDERING .............................................................................. 98
Regulation 2002-01 of 18 April 2002, relating to obligations of vigilance with regard to
cheques in order to combat money laundering and the financing of terrorism ....................... 98
Order of 2 September 2009, implementing Article R.561-12 of the Monetary and Financial
Code and defining the information relating to knowing the customer and the business
relationship for the purposes of assessing the risks of money laundering and the
financing of terrorism ........................................................................................................... 101
Order of 27 July 2011, relating to the list of equivalent third countries with respect to
combating money laundering and the financing of terrorism referred to in 2°, section
II of Article L. 561-9 of the Monetary and Financial Code .................................................. 102
1.2.4. NEGOTIABLE DEBT SECURITIES.................................................................................................... 102
Order of 13 February 1992, implementing Amended Decree n° 92–137 of 13 February 1992
and defining the mandatory references for financial documentation compiled by
issuers of negotiable debt securities ..................................................................................... 102
Order of 31 December 1998, relating to the requirements that issuers of negotiable debt
securities must comply with referred to in 2° to 10° of Article L. 213-3 of the
Monetary and Financial Code............................................................................................... 103
Order of 16 February 2005 implementing Article 1, Section III of Decree 92-137 of 13
February 1992 as amended on the terms and conditions for the issuance of negotiable
debt securities by investment firms, credit institutions and the Caisse des Dépôts et
Consignations ....................................................................................................................... 104
1.2.5. CLEARING OF CHEQUES .................................................................................................................. 105
Regulation 2001-04 of 29 october 2001, relating to cheque clearing ................................................. 105
1.2.6. NON BANKING ACTIVITIES OF CREDIT INSTITUTIONS ........................................................... 106
Regulation 86–21 of 24 November 1986, relating to the exercise of non banking activities ............. 106
1.2.7. CREDIT OPERATIONS AND ACTIVITIES OTHER THAN INVESTMENT SERVICES OF
INVESTMENT FIRMS ................................................................................................................................... 106
Regulation 98–05 of 7 December 1998, relating to the credit operations of investment firms .......... 106
Order of 5 September 2007 relative to activities other than investment services and related
services that may be carried out by investment companies other than portfolio
management companies....................................................................................................... 107
1.2.8. SEGREGATION OF FUNDS OF INVESTMENT FIRMS’ CUSTOMERS ........................................ 108
Order of 2 July 2007 on the segregation of funds of investment firms’ customers ............................ 108
1.2.9. INTERBANK MARKET ....................................................................................................................... 110
Regulation n° 85-17 of 17 December 1985, relating to the interbank market .................................... 110
1.3. MANAGEMENT STANDARDS FOR CREDIT INSTITUTIONS AND INVESTMENT FIRMS .................... 111
1.3.1. OWN FUNDS ........................................................................................................................................ 111
Regulation 90-02 of 23 February 1990, relating to own funds ........................................................... 111
1.3.2. CAPITAL ADEQUACY ....................................................................................................................... 118
Regulation 97-04 of 21 February 1997, relating to the management standards applicable to
investment firms other than portfolio management companies ............................................ 118
Order of 20 February 2007 relating to capital requirements for credit institutions and
investment firms ................................................................................................................... 119
1.3.3. OWN FUNDS AND PERMANENT CAPITAL RATIO ...................................................................... 259
Order of 2 July 2007 on minimum capital, own funds and internal control of market
undertakings ......................................................................................................................... 259
1.3.4. SOLVENCY .......................................................................................................................................... 260
Regulation 91-05 of 15 February 1991, relating to the solvency ratio ............................................... 260
Regulation 93-05 of 21 December 1993, on supervising large exposures .......................................... 268
1.3.5. LIQUIDITY ........................................................................................................................................... 273
Selected French Banking and Financial Regulations – 2013
5
Order of 5 May 2009 on the Identification, Measurement, management and control of Liquidity
Risk ....................................................................................................................................... 273
1.3.6. LIMITS ON INTERBANK RISKS ........................................................................................................ 283
Regulation 90-07 of 20 June 1990, relating to the monitoring of interbank risks. .............................. 283
Regulation 99-10 of 9 July 1999, relating to Mortgage and Public Loan Companies and home
loan companIES .................................................................................................................... 284
2. ACCOUNTING REGULATIONS FOR CREDIT INSTITUTIONS AND INVESTMENT FIRMS ............287
2.1. ORGANISATION OF THE ACCOUNTING SYSTEM , PREPARATION AND PUBLICATION OF
THE ACCOUNTS ........................................................................................................................................ 287
Regulation 91-01 of 16 January 1991, relating to the preparation and publication of the annual
individual accounts of credit institutions............................................................................... 287
Regulation 91–03 of 16 January 1991, relating to the preparation and publication of the
quarterly financial statements, and to the individual and consolidated statement of
half-year operations and results of credit institutions and securities houses ......................... 312
Regulation 97-03 of 21 February 1997, relating to the preparation and publication of the
accounts of investment firms other than portfolio management companies ......................... 316
Regulation 2002-02 of 12 December 2002 of the Comité de la réglementation comptable,
relating to the audit of investment firms by a sole auditor .................................................... 319
Regulation 2002-04 of 12 December 2002 of the Comité de la réglementation comptable,
relating to the individual financial statements of investment firms....................................... 319
Regulation 2002-05 of 12 December 2002 of the Comité de la réglementation comptable,
relating to the consolidated financial statements of investment firms ................................... 341
Regulation 2009-08 of 3 december 2009 of the Comité de la Réglementation Comptable,
relating to the accounts of payment institutions .................................................................... 355
2.2. CONSOLIDATION RULES .......................................................................................................................... 356
Regulation 99-07 of 24 November 1999 of the Comité de la Réglementation Comptable,
relating to the consolidation rules ......................................................................................... 356
Regulation 2000-03 of 6 September 2000, relating to prudential supervision on a consolidated
basis....................................................................................................................................... 394
2.3. ACCOUNTING RULES ................................................................................................................................ 403
Regulation 88-02 of 22 February 1988, relating to the accounting treatment of interest-rate
financial futures operations ................................................................................................... 403
Regulation 89-01 of 22 June 1989, relating to the accounting treatment of foreign currency
operations .............................................................................................................................. 404
Regulation 89-07 of 26 July 1989, relating to the accounting treatment of asset disposal or
securitization transactions ..................................................................................................... 406
Regulation 90-01 of 23 February 1990, relating to the accounting treatment of securities
operations .............................................................................................................................. 409
Regulation 2005-01 of 3 November 2005 of the Comité de la réglementation comptable
relating to the accounting treatment of securities .................................................................. 416
Regulation 90-15 of 18 December 1990, relating to the accounting treatment of interest-rate or
currency swaps ...................................................................................................................... 416
Regulation 93-06 of 21 December 1993, relating to the accounting treatment of securitization
operations .............................................................................................................................. 419
Regulation 2002-03 of 12 December 2002 of the Comité de la réglementation comptable,
relating to the accounting treatment of credit risk ................................................................. 421
APPLICATION FORMS FOR BANKING LICENCES AND OTHER AUTHORISATIONS ......................427
CHRONOLOGICAL INDEX ......................................................................................................................431
6
Selected French Banking and Financial Regulations – 2013
INTRODUCTION
THE COMPILATION OF
“SELECTED FRENCH BANKING AND FINANCIAL REGULATIONS”
The Monetary and Financial Code (code monétaire et financier) was published for the first time in 2000. This Code includes the
main legal provisions (laws and decrees) relating to the currency as well as to banking and financial activities. Its English
translation is available at: http://www.legifrance.gouv.fr/Traductions/en-English/Legifrance-translations. Thus, the compilation
of "Selected French Banking and Financial Regulations" only contains those texts established by way of delegated legislation
(i.e. ministerial orders).
The power to regulate the banking and financial sector is devoted to the Minister of Finance, assisted by the Comité Consultatif
de la Législation et de la Réglementation Financières (Advisory Committee on Financial Legislation and Regulation – CCLRF)
whose advisory missions cover all regulation and legislation applying to the financial sector (banks, insurance companies,
investment firms ...).
This compilation takes into account recent changes to the legal framework for banking and financial activities. These changes are
a consequence of international agreements and provisions adopted by the European Union. They also reflect France’s proposals
to improve the functioning of credit institutions and capital markets, and to increase the transparency, efficiency, stability and
security of the banking and financial system.
As regards accounting matters, the Autorité des normes comptables, which replaced the Comité de la Réglementation Comptable,
is in charge of laying down accounting regulations, including the accounting rules with which credit institutions, investment
firms, financial holding companies and, more recently, payment services institutions must comply. The compilation includes the
texts relating to credit institutions and investment firms.
This compilation of regulations is divided into two parts:
•
part one includes decrees and regulations that are deemed to be of special interest as regards the conditions governing
banking, financial and payment activities, the details of certain operations carried out by credit institutions, investment
firms and payment institutions along with the management standards applying to these regulated entities;
•
part two contains various texts concerning the accounting rules applying to credit institutions, investment firms and
payment institutions.
Further information on all these issues and on the present compilation may be obtained from the Direction des Agréments, des
Autorisations et de la Réglementation of the General Secretariat of the Autorité de Contrôle prudentiel (ACP) as well as on the
Website of the ACP: www.acp.banque-france.fr
The annual report of the CCLRF can be obtained on the website of the CCLRF (www.cclrf.fr) or from the Banque de
France - Service de la documentation et des relations avec le public – 9 rue du colonel Driant - 75049 PARIS Cedex 01
(telephone: +33.1.42.92.39.08; website: www.banque-france.fr).
Fabrice PESIN
Secretary General
of the Comité consultatif de la législation et de la réglementation financières
Selected French Banking and Financial Regulations – 2013
9
1.TEXTS RELATING TO THE
EXERCISE OF BANKING AND
FINANCIAL ACTIVITIES
takes effect, shall be refunded and redeemed at a date prior
to the expiry of said period, which shall also be set by the
Autorité.
1.1.CONDITIONS OF EXERCISE OF
BANKING AND FINANCIAL ACTIVITIES
Article 6
All institutions whose authorisation has been revoked shall
immediately inform all persons who hold on its books
repayable funds as defined by Article L. 511-16 of the
Monetary and Financial Code, or a securities account and
other financial instruments or who benefit from a
commitment from them of this decision by a registered
letter sent with return receipt requested or by a letter
personally delivered against a receipt. When the decision is
accompanied by conditions precedent, these persons shall
be advised when the conditions stipulated are met.
1.1.1. AUTHORISATION AND REVOCATION
OF AUTHORISATION
1.1.1.1.CREDIT INSTITUTIONS
REGULATION 96-13 OF 20 DECEMBER 1996,
RELATING TO THE REVOCATION OF
AUTHORISATION AND THE STRIKING OFF OF
CREDIT INSTITUTIONS
as amended by Regulation 2000-05 of 6 September 2000
and Order of 29 October 2009
Article 1
The revocations of authorisation decided by the Autorité
de contrôle prudentiel pursuant to Article L. 511-15 of the
Monetary and Financial Code shall be published monthly
in the Official Bulletin of said Autorité with, where
appropriate, indications of the date on which they take
effect.
However, the revocations of authorisation that are due to
the transfer of ownership of all the assets and liabilities
arising on the banking activities of the institution
concerned to one or several other authorised credit
institutions shall be published quarterly in said Bulletin.
Article 2
The credit institutions struck off by the Autorité de contrôle
prudentiel pursuant to Article L. 511-17 of the Monetary
and Financial Code shall be published monthly in the
Official Bulletin of said Commission with, where
appropriate, indications of the date of liquidation of the
legal person.
Article 3
Institutions in the process of having their authorisation
revoked or of liquidation shall be mentioned in the
appendices to the list of credit institutions drawn up
pursuant to Article L. 612-2 of the Monetary and Financial
Code and published in the Journal Officiel de la
République Française. Where relevant, they shall also be
mentioned in the list of investment service providers
operating in France set forth in Article 76 of Act 96–597 of
2 July 1996 aforesaid.
Article 4
The revocation of authorisation takes effect at the end of a
period specified by the Autorité de contrôle prudentiel in
accordance with Article L. 511-15 of the Monetary and
Financial Code, which shall not exceed two years.
Article 5
The funds or securities mentioned Article L. 511-16 of the
Monetary and Financial Code due to be repaid after the
expiry of the period set by the Autorité de contrôle
prudentiel in accordance with Article L. 511-15 of said
Code, at the end of which the revocation of authorisation
Selected French Banking and Financial Regulations – 2013
This letter shall specify, where necessary, the date at which
the funds or securities mentioned in Article L. 511-16 of the
Monetary and Financial Code will be refunded or
redeemed when they mature after the expiry of the period
set by the Autorité de contrôle prudentiel. It shall contain a
reminder of the possibility for the customer to obtain the
transfer of the assets and commitments mentioned in
Article L. 511-18 of the Monetary and Financial Code to
another authorised institution.
Article 7
Where, pursuant to Article L. 511-16 of the Monetary and
Financial Code, an institution in the process of having its
authorisation revoked is led to refund or redeem early the
funds or securities, at the date set by the Autorité de
contrôle prudentiel, it is required, in the absence of written
stipulations accepted by the co-contracting party when the
deposit was made or the security purchased, to restitute the
current value at that date of the sums due calculated
according to the compound interest method.
The annual rates that shall be used as references for this
calculation are:
–
for funds received on deposit, the yield to maturity of
rising-rate Treasury bills in force at the date of the
repayment applicable for an investment with a maturity
equal to the residual maturity, which is deemed to be at
least equal to one year;
–
for securities issued by the institution, the most recent
average at the day of repayment of the negotiable debt
securities market rates published by the Banque de
France, corresponding to the residual maturity of the
securities redeemed and their nature or otherwise the
status of the issuer.
Article 8
The transfer of the assets held in the form of housings
savings plans and accounts, business savings passbooks,
"people’s" savings plans and passbooks, personal equity
plans and of customer liabilities under letter of credit and
guarantees per contra may be effected on the books of one
or several other credit institutions authorised to receive
such assets, if it suits the owner or beneficiary. The transfer
shall be made free of charge for the giver of the instruction
and without prejudice to the rights and commitments
arising on the transferred operations. The institution to
which the transfer is made shall inform in writing the
owner or beneficiary of the completion of the transfer.
11
When the Autorité de contrôle prudentiel revokes an
institution’s authorisation at its request, it shall state the
names of credit institutions, which must be at least two in
number, that have reached an agreement with the institution
making the request under the terms of which they have
declared that they accept to take over all the assets and
commitments mentioned in the preceding paragraph.
The provisions of the first paragraph above shall also apply
to financial instruments other than those mentioned in
Article L. 511-16 of the Monetary and Financial Code
registered on accounts with the institution whose
authorisation has been withdrawn. They may also be
transferred to an investment firm authorised to receive such
assets or to the legal person issuer of the instruments.
Where necessary, the transfer shall be made in liaison with
the clearing house(s) having registered the financial
instruments transferred.
Article 9
If, at the repayment date set by the Autorité de contrôle
prudentiel in accordance with Article 5 above, the
institution still owes sums or securities mentioned in
Article L. 511-16 of the Monetary and Financial Code, the
institution is required to immediately transfer, under the
conditions of Article 7 of this Regulation where relevant,
the equivalent value to another authorised institution with
which it has signed an agreement to this effect and which
will keep this sum on deposit on behalf of the owner.
At the same date or, if the Autorité de contrôle prudentiel
has not fixed a date, at the end of the authorisation
revocation period, the other financial instruments still held
by the institution on behalf of third parties shall be
transferred by the institution to another investment service
provider which has previously accepted to keep them on
behalf of their owners under the terms of an agreement.
Copies of these agreements shall be forwarded to the
Autorité de contrôle prudentiel. In the absence of any
agreement or if, in order to safeguard the interests of
creditors or owners, the Autorité de contrôle prudentiel
opposes these transfers, the sums and securities shall be
paid to the Caisse des Dépôts et Consignations.
Article 10
The credit operations that the institution has entered into or
committed itself to entering into before the decision to
revoke its authorisation may be carried through to their
initially agreed maturity.
However, the corresponding claims may be assigned to one
or more credit institutions authorised to conduct such
operations. Without prejudice to the provisions applicable
to the other methods of transfer of claims provided for by
law, the assignments thus effected shall be binding on third
parties in accordance with the provisions of
Article L. 511-18 of the Monetary and Financial Code:
–
if the debtor has given prior written consent, a copy of
which shall be forwarded to the transferring institution
so that it may provide proof of this agreement at any
time;
–
if they have been the subject of a decision of the
Autorité de contrôle prudentiel as soon as notice of this
12
decision is given by the assignor to the assignee and to
each assigned debtor, by means of a simple letter.
Article 11
All institutions whose authorisation is in the process of
being revoked may only conduct the banking operations
and, where relevant, the investment services provided for
by its authorisation and the payment services strictly
necessary to clear up the accounts.
As an exception to the provisions of the preceding
paragraph, a legal person that has obtained authorisation as
an investment firm in place of that which it had as a credit
institution may develop the investment services provided
for by the authorisation in the process of being revoked and
compatible with its new authorisation as well as the
services related to these authorisations, in compliance with
the regulations applying to the provision of these services.
As an exception to the provisions of the first paragraph of
this Article, a legal person that has obtained authorisation
as a payment institution in place of that which it had as a
credit institution may develop the payment services
provided for by the authorisation in the process of being
revoked and compatible with its new authorisation as well
as the services related to these authorisations, in
compliance with the regulations applying to the provision
of these services.
Article 12
An institution whose authorisation is in the process of
being revoked may continue to carry on the operations
related to its business, as defined by Article L. 311-2 of the
Monetary and Financial Code, other than those that
constitute the provision of investment services referred to
Article L. 321-1 of said Code or of payment services
mentioned at Article L. 314-1, II of the same Code, which it
carried on previously as its regular business.
The monthly amount of all income from activities
authorised pursuant to the preceding paragraph shall not
however exceed one quarter of the income recorded in the
course of the last year closed before the decision to revoke
authorisation, except when an exception is granted by the
Autorité de contrôle prudentiel.
Article 13
An institution whose authorisation is in the process of
being revoked may take or hold equity interests in
undertakings in the conditions set forth by Article L. 511-2
of the Monetary and Financial Code and by
Regulation 90-06 of 20 June 1990 issued for its enactment.
It may also continue to carry on non-banking activities
referred to in Article L. 511-3 of the Monetary and
Financial Code, in the conditions set forth by
Regulation 86-21 of 24 November 1986 aforesaid.
Article 14
If, in accordance with the provisions of Article 100-2 of
Act 84-46 of 24 January 1984 aforesaid [This provision is
now aimless. As a result, it has not been inserted in the
Monetary and Financial Code], the Autorité de contrôle
prudentiel notes that an institution whose authorisation has
been revoked by the Comité des Établissements de Crédit
prior to the entry into force of the Act of 2 July 1996
Selected French Banking and Financial Regulations – 2013
aforesaid [inserted in the Monetary and Financial Code],
still owes repayable funds received from the public, on
expiry of the six-month period provided for by said
Article 100-2 it shall so inform the Autorité de contrôle
prudentiel, which shall set a new period at the end of which
the institutions will lose its credit institution status. During
this new period, the institution shall be subject to the
provisions of Articles 4 to 13 of this Regulation.
Article 15
The institutions that have been struck off the list of credit
institutions by the Autorité de contrôle prudentiel by way
of a disciplinary sanction may only carry out the operations
strictly necessary for the winding-up of their business, as
soon as the decision to strike off enters into force, whether
these are banking operations, the provision of investment
services, related operations, acquisitions of equity interests
or non-banking operations.
The provisions of paragraphs 1 and 3 of Article 8 above
relating to the transfer of certain balance sheet and
off-balance-sheet elements and financial instruments
registered in accounts shall also apply to these institutions.
They may also assign, in the conditions set forth by
Article 10 of this Regulation, the claims they hold to one or
more other credit institutions authorised to handle such
operations.
1.1.1.2.INVESTMENT FIRMS OTHER THAN
PORTFOLIO MANAGEMENT COMPANIES
REGULATION 96-14 OF 20 DECEMBER 1996,
RELATING TO THE REVOCATION OF
AUTHORISATION AND THE STRIKING OFF OF
INVESTMENT FIRMS OTHER THAN PORTFOLIO
MANAGEMENT COMPANIES
Article 1
The revocations of authorisation decided by the Autorité de
contrôle prudentiel pursuant to Article L. 532-6 of the
Monetary and Financial Code shall be published monthly
in the Official Bulletin of the Autorité de contrôle
prudentiel with, where appropriate, indications of the date
on which they take effect.
However, the revocations of authorisation that are due to
the transfer to one or more other authorised investment
services providers of the ownership of all the assets and
liabilities arising on the investment service provider
activities of the undertaking concerned shall be published
quarterly in said Bulletin.
Article 2
The investment firms struck off by the Autorité de contrôle
prudentiel pursuant to Article L. 532-7 of the Monetary and
Financial Code shall be published monthly in the Official
Bulletin of said Commission.
Article 3
Firms whose authorisation is in the process of being
revoked or in the process of being liquidated shall be
mentioned in the appendices to the list of investment
service providers drawn up pursuant to Article L. 612-2 of
Selected French Banking and Financial Regulations – 2013
the Monetary and Financial Code and published in the
Journal Officiel de la République Française.
Article 4
The revocation of authorisation takes effect at the end of a
period specified by the Autorité de contrôle prudentiel in
accordance with Article L. 532-6 of the Monetary and
Financial Code, which shall not exceed two years.
Article 5
Any securities issued by the firm that are not traded on a
regulated market, mentioned in Article L. 532-6 of the
Monetary and Financial Code, and that mature subsequent
to the end of the period specified by the Autorité de
contrôle
prudentiel
in
accordance
with
said
Article L. 532-6, at the end of which the revocation of
authorisation takes effect, shall be redeemed prior to the
end of the aforesaid period at a date which shall also be
specified by the Autorité.
Article 6
All firms whose authorisation has been revoked shall
immediately inform all persons who hold on its books a
securities account and other financial instruments of this
decision by a registered letter sent with return receipt
requested or by a letter personally delivered against a
receipt. When the decision is accompanied by conditions
precedent, these persons shall be advised when the
conditions set forth are met.
This letter shall specify, where necessary, the date at which
the securities issued by the firm which are not traded on a
regulated market will be redeemed, where their maturity is
subsequent to the end of the period specified by the
Autorité de contrôle prudentiel. It shall state the possibility
for the customer to obtain the transfer of the other financial
instruments and, where relevant, of the funds waiting to be
allotted or withdrawn, pursuant to Article L. 532-8 of the
Monetary and Financial Code.
Article 7
Where, pursuant to Article L. 532-6 of the Monetary and
Financial Code, a firm whose authorisation is in the
process of being revoked is led to redeem early, at the date
set by the Autorité de contrôle prudentiel, the securities
issued by it which are not traded on a regulated market, it is
required, in the absence of written stipulations accepted by
the co-contracting party when the security was purchased,
to restitute the current value at that date of the sums due
calculated according to the compound interest method.
The annual rate that shall be used as the reference for this
calculation is the most recent average at the day of
repayment of rates on the negotiable debt securities market
published by the Banque de France, corresponding to the
residual maturity of the securities redeemed and their
nature.
Article 8
During the authorisation revocation period or, where
relevant, until the repayment day specified by the Autorité
de contrôle prudentiel, all owners of financial instruments
other than the securities issued by the firm which are not
traded on a regulated market registered on the books of said
firm, may request the transfer thereof to one or more other
13
investment service providers authorised to receive such
assets, as well as, where relevant, the transfer of related
funds. The transfer shall be made free of charge for the
giver of the instruction. The firm to which the transfer is
made shall inform the owner in writing of the completion
of the transfer.
The provisions of Article 8 above relating to the transfer of
registered financial instruments shall also apply to these
firms.
Where necessary, the transfer of the financial instruments
mentioned in the above paragraph shall be made in liaison
with the clearing house(s) having registered said
instruments.
ORDER OF 2 JULY 2007 ON INVESTMENT FIRMS
OTHER THAN PORTFOLIO MANAGEMENT
COMPANIES WITH A SINGLE MANAGER
Article 9
If, at the repayment date specified by the Autorité de
contrôle prudentiel in accordance with Article 5 above, the
firm still owes securities issued by it which are not traded
on a regulated market, the firm is required to immediately
transfer, where relevant under the conditions of Article 7 of
this Regulation, the equivalent value to another investment
service provider authorised to receive such assets with
which it has signed an agreement to this effect and which
will keep this sum on deposit on behalf of the owner.
At the same date or, if the Comité has not specified a date,
at the end of the authorisation revocation period, the other
financial instruments still held by the firm on behalf of
third parties as well as, where relevant, the related funds
shall be transferred by said firm to another investment
service provider authorised to receive such assets which
has previously accepted under the terms of an agreement to
keep them on behalf of their owners.
Copies of these agreements shall be forwarded to the
Autorité de contrôle prudentiel. In the absence of any
agreement or if, in order to safeguard the interests of
creditors or owners, the Autorité de contrôle prudentiel
opposes these transfers, the sums and securities shall be
paid to the Caisse des Dépôts et Consignations.
Article 10
An investment firm whose authorisation is in the process of
being revoked may conduct investment services and related
services only if they are necessary for the winding-up of its
investment services.
Article 11
An investment firm whose authorisation is in the process of
being revoked may take or hold equity interests in
undertakings, in accordance with Article L. 531-5 of the
Monetary and Financial Code, and continue to carry on the
activities referred to in Article L. 531-7 of said Code, in the
conditions specified for firms in business.
Article 1
In accordance with Article L.532.2 of the Monetary and
Financial Code, investment firms other than portfolio
management companies may ask for a derogation from the
Autorité de contrôle prudentiel with a view to be managed
by a single manager.
The Autorité de contrôle prudentiel grants this derogation
when the following conditions are met:
a) the investment firm does not hold any funds or
securities of the public;
b) the net banking income and the balance sheet
total of the investment firm are lower than
EUR 10 million;
c) the executive board or the decision-making body
has appointed within the investment firm or
within the group to which it belongs a person
who shall immediately replace and take over all
of the manager’s functions should the latter be
unable to carry them out.
Article 2
The present Order enters into force on 1 November 2007.
Article 3
The present Order will be published in the Official Journal
of the French Republic.
1.1.1.3.PAYMENT INSTITUTIONS
ORDER OF 29 OCTOBER 2009 RELATING TO THE
PRUDENTIAL REGULATION OF PAYMENT
INSTITUTIONS
Article 1
The payment institutions mentioned in Article L. 522-1 of
the Monetary and Financial Code, hereinafter referred to as
"supervised institutions", are required to comply with the
provisions of this order.
Article 12
Investment firms that have been struck off the list of
investment service providers by the Autorité de contrôle
prudentiel by way of a disciplinary sanction may only carry
out the operations strictly necessary for winding-up their
business as soon as the decision to strike them off enters
into force, whether these operations are the provision of
investment services, related operations, acquisitions of
equity interests or other operations.
14
Selected French Banking and Financial Regulations – 2013
TITLE I
Conditions for access to the payment services
business
Chapter III
Change in the situation of payment
institutions
Chapter I
Information to be provided to the Autorité de
contrôle prudentiel with a view to obtaining
authorisation
as a payment institution
Section 1
Changes subject to prior authorisation by the
Autorité de contrôle prudentiel
Article 2
Authorisation as a payment institution is conditional on
submitting an application to the Autorité de contrôle
prudentiel which must be framed in accordance with the
model drawn up by the Autorité de contrôle prudentiel and
published in the Official Bulletin of the Autorité de
contrôle prudentiel.
Article 3
On receiving an application, the Autorité de contrôle
prudentiel shall verify that it complies with the model
provided for in Article 2 and, if so, shall process it.
The Autorité de contrôle prudentiel may ask the applicant
for any additional item of information it needs to process
the application. Such request shall suspend the period
provided for in the following paragraph until the requested
information has been received.
The Autorité de contrôle prudentiel shall inform the
applicant of its decision within three months at most as of
the date on which it receives the application in compliance
with the model mentioned in Article 2.
Chapter II
Minimum capital of payment institutions
Article 4
The minimum capital of a supervised institution shall be:
•
€20,000 if it is authorised to provide the service
mentioned in Article L. 314-1-II-6 of the
Monetary and Financial Code;
•
€50,000 if it is authorised to provide the service
mentioned in Article L. 314-1-II-7 of said Code;
•
€125,000 if it is authorised to provide at least one
of the services mentioned in Article L. 314-1-II,
1 to 5 of said Code.
Article 5
For the purposes of the preceding article, the following are
deemed to constitute capital: the share capital of supervised
institutions incorporated as commercial companies,
reserves that may not be distributed and sums that may be
treated in the same way.
Selected French Banking and Financial Regulations – 2013
Article 6
Planned changes to the situation of supervised institutions
relating to the following elements are subject to prior
authorisation by the Autorité de contrôle prudentiel:
•
the legal form;
•
the identity of the shareholder(s) with unlimited
liability for the supervised institution’s debts;
•
the type of payment services for which a
supervised institution has been authorised;
•
the conditions to which authorisation was subject.
Article 7
With the exception of transactions performed within a
group, any acquisition, extension or disposal of an equity
interest, direct or indirect within the meaning of Article L.
233-4 of the Commercial Code, in a supervised institution
is subject to prior authorisation by the Autorité de contrôle
prudentiel where it enables a person or a group of persons
acting in concert within the meaning of Article L. 233-10 f
the Commercial Code:
•
to cross in either direction the threshold of 10%,
20% or 33⅓% of the voting rights;
•
to acquire or relinquish, alone or jointly, effective
control over the firm’s management.
For the purposes of this article, voting rights are calculated
according to the provisions of Article 4 of CRBF
Regulation 96-16 of 20 December 1996 relating to changes
in the situation of credit institutions and of investment
firms other than portfolio management companies.
Section 2
Changes that must be notified to the
Autorité de contrôle prudentiel,
which may oppose them
Article 8
Where a transaction performed between persons governed
by the law of another country transfers effective control of
a company located outside France which directly or
indirectly owns 10%, 20% or 33⅓% of the capital or voting
rights of a supervised institution or has effective control
over a supervised institution as provided for in Article 7,
the supervised institution is required to inform the Autorité
de contrôle prudentiel of the transaction within one month.
The Committee shall re-examine the supervised
institution’s situation in the light of the elements taken into
15
consideration at the time of authorisation, in particular in
accordance with Articles L. 522-6 to L. 522-8 of the
Monetary and Financial Code.
•
the rules for calculating voting rights;
•
the membership of the board of directors or
supervisory board and executive board of
supervised institutions;
•
the conditions for the exercise of general
management, in accordance with the provisions
of Article L. 225-51-1 of the Commercial Code;
•
the organisation of the powers of management
and supervision entrusted to an executive board
and a supervisory board in accordance with the
provisions of Article L. 225-57 of said Code.
Article 9
The appointment of any new person to perform the
functions mentioned in Article L. 522-6-II-b of the
Monetary and Financial Code in a supervised institution
shall be notified to the Autorité de contrôle prudentiel
within five working days. The Committee may oppose the
appointment having regard to the criteria of Article L. 5226-II-b of the Monetary and Financial Code. The Committee
may decide to call the person concerned to a hearing.
Article 10
Supervised institutions shall promptly inform the
Committee of any administrative, disciplinary, civil or
criminal sanctions ordered or of any disciplinary or legal
proceedings pending against them or against any of the
persons mentioned in Article L. 522-6-II-b aforesaid of
which they are aware and which may call into question the
Committee’s assessment of those persons’ integrity,
experience and competence. Such notice shall be
accompanied by all elements enabling the importance of
the facts to be assessed.
Where facts that may call into question the conditions of
integrity and competence and appropriate experience for
performance of the functions mentioned in Article L. 5226-II-b of the Monetary and Financial Code come to the
Committee’s attention, it may ask the institution what
conclusions it intends to draw from such facts with regard
to the person performing the functions in question. The
person concerned shall be invited to make his observations
known to the Committee. In the light of the information
and observations transmitted in accordance with the abovementioned procedures, the Committee may decide to
initiate a procedure to withdraw the supervised institution’s
authorisation or to pass the case on to the Autorité de
contrôle prudentiel.
Section 3
Changes that must be merely declared to the
Autorité de contrôle prudentiel
Planned changes to the situation relating to foreign
exchange services and the granting of credit mentioned in
Article L. 522-2 of the Monetary and Financial Code must
be declared beforehand.
Section 4
General provisions
Article 13
The applications for authorisation, notifications and
declarations provided for in this chapter should include all
relevant information to advise the Autorité de contrôle
prudentiel about the causes, aims and effects of the change
concerned. Additional information may be requested if
necessary. In such case, the periods provided for in this
section shall be suspended until such information is
received. If the Committee does not respond to an
application submitted in compliance with the provisions of
this article within the time-limit defined in this section, the
requested authorisation or notified change shall be deemed
to have been respectively granted or approved.
Article 14
The Autorité de contrôle prudentiel shall take a decision
within two months of receiving the application for
authorisation or the notification provided for in this chapter
or, if the application or notification is incomplete, within
the same time-limit as of receiving all the necessary
information for it to take its decision.
Article 15
Article 11
Cessation of the functions mentioned in Article L. 522-6-IIb of the Monetary and Financial Code shall be declared to
the Autorité de contrôle prudentiel within five working
days.
Article 12
A supervised institution that has obtained authorisation to
change its situation under the terms of Article 7 shall,
within eight days of making such change, send the Autorité
de contrôle prudentiel a letter in which one of the persons
mentioned in Article L. 522-6-II-b of the Monetary and
Financial Code informs it of the date of the operation and
certifies that it complies with the authorisation given.
Changes to the following shall be declared to the Autorité
de contrôle prudentiel within one month:
16
•
the company name;
•
the trade name;
•
the address of the registered office;
•
the amount of the capital of fixed-capital
companies;
Selected French Banking and Financial Regulations – 2013
Chapter IV
Provision of payment services in a Member
State other than France
or in France by an institution from another
Member State
Section 1
Freedom of establishment and freedom to
provide services on the territory
of other Member States of the European
Community
Article 16
Any supervised institution having its registered office on
the territory of metropolitan France, in the overseas
départements, in Saint-Martin or in Saint-Barthélemy that
wishes to establish a branch or operate under the freedom
to provide services for the first time in another Member
State of the European Community or in another State party
to the agreement on the European Economic Area in order
to provide payment services in accordance with the
provisions of Article L. 522-13-I of the Monetary and
Financial Code shall provide the Autorité de contrôle
prudentiel with the following information:
1.
2.
its company name and the address of its
registered office;
the country in which it intends to operate and the
type of payment services it intends to provide on
the territory of the country in question;
Article 18
The payment institution shall promptly inform the Autorité
de contrôle prudentiel of any change to the information
mentioned in Article 16, stating when it occurred. The
Committee shall inform the host country competent
authority and, if necessary, shall amend the list mentioned
in Article L. 612-2 of the aforementioned Code.
Section 2
Freedom of establishment and freedom to
provide services in France
Article 19
Before a payment institution having its registered office in
another Member State of the European Community or
another State party to the agreement on the European
Economic Area may create a branch, use an agent or
operate under the freedom to provide services with a view
to providing payment services on the territory of
metropolitan France, in the overseas départements, in
Saint-Martin or in Saint-Barthélemy in accordance with the
provisions of Article L. 522-13-II of the Monetary and
Financial Code, the Autorité de contrôle prudentiel must
have received the following information from the home
country competent authority, accompanied by certified
translations into French:
1
the company name and the address of the
payment institution’s registered office or, where
relevant, central administration;
2
the type of payment services the institution
intends to provide on the territory of metropolitan
France, in the overseas départements, in SaintMartin or in Saint-Barthélemy;
and, for branches:
3
the address of the branch;
4
the identity of the persons responsible for
managing the branch;
and, for branches:
3
the address of the branch;
5
the organisational structure of the branch;
4
6
a description of the internal control mechanism,
including a description of the anti-money
laundering
and
anti-terrorist
financing
arrangements applicable to the branch.
the identity of the persons responsible for
managing the branch;
5
the organisational structure of the branch;
6
a description of the internal control mechanism,
include a description of anti-money laundering
and anti-terrorist financing arrangements;
The information shall be accompanied by a certified
translation into the official language of the host country.
Article 17
In the month following receipt of all the information
mentioned in Article 16, the Autorité de contrôle prudentiel
shall transmit it to the host country competent authority,
inform the institution concerned that it has done so and
include the branch or register the declaration under the
freedom to provide services in the list mentioned in Article
L. 612-2 of the Monetary and Financial Code. The
institution may then operate under the freedom to provide
services. In the context of declarations under the freedom
of establishment, the institution shall be informed that it
may start operations as soon as the competent authority of
the host State has acknowledged receipt of the information
mentioned in Article 16.
Selected French Banking and Financial Regulations – 2013
and, for agents:
7
the agent’s surname and first names, if a natural
person, or company name, if a legal entity;
8
the agent’s address;
and, for agents established in France:
9
the identity of the senior managers and the
persons responsible for managing the agent;
10
a description of the agent’s organisational structure;
17
11
a description of the internal control mechanism
implemented to ensure that agents comply with
anti-money
laundering
and
anti-terrorist
financing obligations;
The Committee shall promptly advise the home country
competent authority and the institution in question of
receipt of this information.
Chapter V
Withdrawal of authorisation and striking off
of payment institutions
Section 1
Publication of decisions to withdraw
authorisation from
or strike off payment institutions
Article 20
Withdrawals of authorisation ordered by the Autorité de
contrôle prudentiel pursuant to Article L. 522-11-I of the
Monetary and Financial Code shall be published monthly,
where relevant stating the date on which they take effect, in
the Official Bulletin of the Autorité de contrôle prudentiel.
Article 21
Striking-offs ordered by the Autorité de contrôle prudentiel
pursuant to Article L. 522-11-IV of the Monetary and
Financial Code shall be published monthly in the Official
Bulletin of the Autorité de contrôle prudentiel and Autorité
de contrôle prudentiel
Article 22
Institutions whose withdrawal of authorisation or
liquidation is pending shall be mentioned in an annex to the
list of payment institutions drawn up pursuant to Article L.
612-2 of the Monetary and Financial Code and published in
the Official Journal.
Section 2
Return of funds to users of payment services
Article 23
Withdrawal of authorisation shall take effect on expiry of a
period set by the Autorité de contrôle prudentiel in
accordance with Article L. 522-11-II of the Monetary and
Financial Code, which may not be longer than fifteen
months and during which funds collected with a view to
providing payment services must be returned before a date
set by the Committee.
Where the Autorité de contrôle prudentiel has given notice
of the opening of disciplinary proceedings, the Autorité de
contrôle prudentiel shall suspend its consideration of the
request for withdrawal of authorisation until the decision
that closes the proceedings initiated by the Autorité de
contrôle prudentiel.
18
Article 24
Any institution whose authorisation has been withdrawn
shall immediately advise any person on its books holding
funds collected with a view to providing payment services
within the meaning of Article L. 522-4-II of the Monetary
and Financial Code of the decision, by means suited to the
nature of its customers, stating the date before which the
funds will be returned under the terms of Article 23.
Section 3
Transfers of funds to a credit institution
or to another payment institution or to the
Caisse des Dépôts et Consignations
Article 25
The payment institution shall inform its customers of the
terms and conditions of the transfer to a credit institution or
to another payment institution of funds collected with a
view to providing payment services. Such transfer shall be
made without charge to the user of payment services.
Article 26
Funds still in the possession of the payment institution at
the date set by the Committee pursuant to Article 23 shall
be transferred to the Caisse des Dépôts et Consignations.
The transfer of funds collected shall be made without
charge to the user of payment services. The supervised
institution shall advise fundholders of the transfer.
TITLE II
The management and organisation of
payment institutions
Chapter I
Own funds
Article 27
For the purposes of this chapter, own funds shall be
determined in accordance with Regulation 90-02 of 23
February 1990 on own funds.
Section 1
Own funds requirements relating to payment
services
(three methods)
Article 28
For the purposes of Article L. 522-14 of the Monetary and
Financial Code, the supervised institution shall use one of
the three methods provided for in Articles 29 to 31 to
calculate the amount of own funds it must hold.
Where the Autorité de contrôle prudentiel considers that the
method chosen by the supervised institution is unsuited to the
risks arising from the institution’s activities or is liable to
adversely affect the quality of the institution’s supervision,
Selected French Banking and Financial Regulations – 2013
it may at any time require the institution to use another of
the methods provided for in Articles 29 to 31 of this order
to calculate the own funds requirements set forth in this
chapter.
The supervised institution may ask the Autorité de contrôle
prudentiel for permission to change the method for
calculating its own funds requirements so that they are
calculated according to one of the other two methods
provided for in Articles 29 to 31 of this order.
In support of its request, the supervised institution shall
provide the Autorité de contrôle prudentiel with all
information that will enable it to compare the results
obtained with the new method and those obtained with the
method used in the preceding two accounting periods and
to verify that the requested method is more relevant with
regard to the imperatives of prudential supervision.
Any change of method shall be applied as of the accounting
period following the one in which the Autorité de contrôle
prudentiel accepted the institution’s request or insisted on
it. The supervised institution may not ask to change method
again until three financial years have elapsed after the one
as of which the new method was applied.
d)
0.5% of the slice of PV above €100,000,000 up to
€250,000,000;
e)
0.25 % of the slice of PV above €250,000,000.
The scaling factor k shall be:
a)
0.5 where the supervised institution provides only the
payment service mentioned in Article L. 314-1-II-6 of
the Monetary and Financial Code;
b)
0.8 where the supervised institution provides the
payment service mentioned in Article L. 314-1-II-7 of
the Monetary and Financial Code;
c)
1 where the supervised institution provides one of the
payment services mentioned in Article L. 314-1-II, 1
to 5 of the Monetary and Financial Code.
Where the supervised institution has not completed a full
year’s business at the calculation date, the projections in its
business plans may be used, unless the Autorité de contrôle
prudentiel requires an adjustment to that plan.
Article 31
Article 29
Method C.
Method A.
The amount of own funds shall at all times be greater than
or equal to 10% of the previous year’s fixed overheads.
For the purposes of this chapter, overheads include
personnel costs, wage-related taxes, other taxes and outside
services as defined by the accounting rules applicable to
supervised institutions. The Autorité de contrôle prudentiel
may adjust this requirement if there is a significant change
in activity in comparison with the previous year.
Where the supervised institution has not completed a full
year’s business at the calculation date, the amount of own
funds must be at least equal to 10% of the corresponding
fixed overheads as projected in its business plan, unless the
Autorité de contrôle prudentiel requires an adjustment to
that plan.
Article 30
Method B.
The amount of own funds shall at all times be greater than
or equal to the sum of slices of the payment volume
calculated as set forth below and multiplied by the scaling
factor k defined below.
The payment volume represents one-twelfth of the total
amount of payment transactions performed by the
supervised institution in the previous year:
The amount of own funds shall at all times be greater than
or equal to the indicator defined in point (a), multiplied by
the factor p defined in point (b) and by the factor k defined
in Article 30 of this order.
a)
The relevant indicator is the sum of the following:
•
interest income;
•
interest expenses;
•
commissions and fees received, and
•
other operating income.
Each item as defined by the accounting rules applicable to
supervised institutions shall be included in the sum with its
positive or negative sign. Income from extraordinary or
irregular items may not be used in the calculation of the
relevant indicator. Expenditure on the outsourcing of
services rendered by third parties may reduce the relevant
indicator if it is incurred by another supervised institution
or by another payment services provider. The relevant
indicator is calculated on the basis of the twelve-monthly
observation at the end of the previous year. Where the
figures used are not taken from published financial
statements, estimates may be used unless the Autorité de
contrôle prudentiel requires an adjustment to them.
The amount of own funds calculated according to this
method may not fall below 80% of the average of the
previous three financial years for the relevant indicator.
a)
4.0% of the slice of PV up to €5,000,000;
b)
2.5% of the slice of PV above €5,000,000 up to
€10,000,000;
•
10% of the slice of the relevant indicator up to
€2,500,000;
c)
1% of the slice of PV above €10,000,000 up to
€100,000,000;
•
8% of the slice of the relevant indicator from
€2,500,000 up to €5,000,000;
Selected French Banking and Financial Regulations – 2013
b)
The multiplication factor p shall be:
19
•
6% of the slice of the relevant indicator from
€5,000,000 up to €25,000,000;
•
3% of the slice of the relevant indicator from
€25,000,000 up to €50,000,000;
•
1.5% of the slice of the relevant indicator above
€50,000,000.
Article 32
Where an evaluation of the supervised institution’s risk
management processes, loss risk data bases and internal
control mechanisms so warrant, the Autorité de contrôle
prudentiel may, under the conditions set forth in Article L.
613-16 of the Monetary and Financial Code, decide that the
supervised institution should be required to hold an amount
of own funds that is up to 20% higher than the amount that
would result from application of the method in accordance
with Articles 28 to 31.
accounts shall mention the allocation of the sums deposited
in them.
The funds may also be invested in financial instruments
kept in accounts opened specially for the purpose with a
person mentioned in Article L. 542-1, paragraphs 2 to 5 of
the Monetary and Financial Code. Such instruments may
only be securities issued by a qualifying money market
fund as defined by the order of 2 July 2007 relating to the
segregation of funds of investment firms’ customers.
It must be possible at any time to furnish proof of
compliance with this requirement.
Section 1
Protection of customers’ funds
Article 35
The cover required in Article L. 522-16-I-2 of the
Monetary and Financial Code results:
Under the same conditions and if the situation so warrants,
the Autorité de contrôle prudentiel may authorise the
payment institution to be subject to an own funds
requirement that may be up to 20% lower than the amount
that would result from application of the method in
accordance with Articles 28 to 31.
Section 2
Own funds relating to credit transactions
Article 33
Supervised institutions that grant the credit mentioned in
Article L. 522-2-II of the Monetary and Financial Code
must at all times hold an amount of own funds as
determined for the standard credit risk approach in the
order of 20 February 2007 relating to capital requirements
for credit institutions and investment firms, having regard
to the total amount of credit granted.
Chapter II
Protection of the funds of payment
institutions’ customers
Section 1
Segregation and investment rules
Article 34
Supervised institutions shall place funds received for the
execution of a payment transaction in one or more accounts
opened specially for the purpose, identified separately from
any other account used to hold funds belonging to the
supervised institution, with a credit institution authorised in
a Member State of the European Community or in another
State party to the agreement on the European Economic
Area.
The funds shall be placed in sight accounts. The title of the
20
•
either from a written undertaking from an
authorised credit institution that does not belong
to the same group as the payment institution;
•
or from a written undertaking from an insurance
company authorised for the purpose that does not
belong to the same group as the payment
institution.
Payment institutions shall provide the Autorité de contrôle
prudentiel with proof that such cover has been taken out
and of the amount thereof, and that it is updated annually.
The Autorité de contrôle prudentiel may require a
revaluation of the amount of the cover if it seems
insufficient in relation to the volume of the institution’s
business in the previous year or projected for the following
year.
The document certifying that cover has been taken out,
where it consists in an on-demand guarantee, shall comply
with the model contained in Annex 1 and, where it consists
in a suretyship undertaking, shall comply with the model
contained in Annex 2.
Chapter III
Use of agents
Article 36
I. ― Any supervised institution that intends to provide
payment services through an agent must submit an
application in accordance with the model declaration drawn
up by the Autorité de contrôle prudentiel and published in
the Official Bulletin of the Autorité de contrôle prudentiel,
containing the following information:
a)
the given name, customary name, first names, date
and place of birth of agents who are natural persons;
b)
the company name and, where relevant, SIREN
number of agents that are legal entities;
Selected French Banking and Financial Regulations – 2013
c)
the business address for natural persons or the
address of the registered office for legal entities and,
if different, the address where the activity is
exercised on the payment service provider’s behalf;
d)
the nature of the operations for which the agent is
mandated;
e)
for agents that are legal entities, the identity of the
natural persons empowered to manage or administer
the entity and, where such agent exercises an
activity other than payment services as a regular
business, the identity of the person to whom
responsibility for the agent activity is delegated;
f)
proof that the agents or individuals mentioned in (e)
are fit and proper persons;
g)
on a supervised institution’s first application to
register one or more agents, a description of the
internal control mechanism implemented to ensure
that agents comply with anti-money laundering and
anti-terrorist financing requirements. For subsequent
applications, the supervised institution must provide
a description of the internal control mechanism only
if there has been a material change.
For the purposes of (e), the supervised institution must
provide:
1
2
a curriculum vitae justifying that the agents or
persons mentioned at (e) are fit and proper to
exercise a payment services activity, either as a
result of training that enables them to perform
accounting or financial functions or at least two
years’ experience of such functions, or as a result
of having had trader status for two years;
a document in which the supervised institution
certifies that it has verified the accuracy of the
information in the curriculum vitae of the agents
or persons mentioned at (e) and the integrity of
such person or persons, in particular by having
received a certificate from the agent stating that
he is not liable to the prohibitions or sanctions set
forth in Article L. 523-2 of the Monetary and
Financial Code.
Agents who are natural persons and persons transmitted by
the supervised institution are presumed to be fit and proper
persons if they:
•
have money-changer status and have obtained the
authorisation mentioned in Article L. 524-3 of
the Monetary and Financial Code; or
•
are included in the register mentioned in Article
L. 512-1-I of the Insurance Code; or
•
have senior manager status as set forth in Articles
L. 511-13, L. 532-2, L. 522-6-II-b or L. 524-3-c
of the Monetary and Financial Code or are
managers of companies as set forth in Article L.
310-2, paragraphs 1, 3 and 4 of the Insurance
Code, of mutual societies or institutions as set
forth in Article L. 310-12-I, paragraph 1 of the
Insurance Code or of insurance intermediaries as
Selected French Banking and Financial Regulations – 2013
set forth in Article L. 511-1 of the Insurance
Code.
II. ― Where a supervised institution as mentioned in
Article 16 wishes to use an agent in order to provide
payment services in another Member State of the European
Community or another State party to the agreement on the
European Economic Area, it shall provide the information
set forth in point I of this article to the Autorité de contrôle
prudentiel, stating the type of payment services planned.
III. ― Where a supervised institution as mentioned in
Article 16 wishes to operate in another Member State or
another State party to the agreement on the European
Economic Area by using an agent that it has already
registered in the register of agents, it shall make an
additional change of activity declaration, stating the type of
payment services that the agent may provide in the State
concerned.
Such information shall be accompanied by a certified
translation into the official language of the host country.
Article 37
I. ― In the month after duly receiving the information
mentioned in Article 36-II or III from the supervised
institutions mentioned in Article 16, the Committee shall
transmit the following information to the host country
competent authority:
–
for an agent established in the host country in
question, the information mentioned in Article 36-I (a)
to (e) and (g), in addition to the declaration under the
freedom of establishment made by the payment
institution in accordance with Article 16;
–
for an agent not established in the host country in
question, the information mentioned in Article 36-I (a)
to (d), in addition to the declaration under the freedom
to provide services made by the payment institution in
accordance with Article 16.
II. ― After duly receiving the information, the Committee
has two months at most in which to register the agent or
one month in which to register the additional declaration
provided for in Article 36-III.
III. ― For agents of supervised institutions using the
procedure provided for in Article 16, the Committee may
take account, until expiry of the registration deadlines set
forth in the preceding paragraph, of the opinion of the host
country competent authority provided for in Article L. 52213-I-2 of the Monetary and Financial Code.
IV. ― The Autorité de contrôle prudentiel shall assign a
registration number to every agent on registration in the
agents register. No agent may have more than one
registration number.
V. ― Non-registration of the agent or of the abovementioned change of activity declaration by the Autorité de
contrôle prudentiel on expiry of the deadline set forth in
point II above is deemed to constitute a refusal. The
Committee shall refuse to register a person in the agents
register or to register the above-mentioned change of activity
declaration if the information mentioned in Article 36
21
proves to be incomplete, inconsistent, erroneous or
irrelevant, or on account of the information mentioned in
Article L. 522-13-I-2 of the Monetary and Financial Code
transmitted by the host country competent authorities.
Article 38
The agents register shall contain the following information:
a)
the agent’s registration number;
b)
the company name of the service provider(s) for
which the agent exercises his activity and whether
the service provider is authorised as a credit
institution or as a supervised institution;
c)
the information mentioned in Article 36-I (a) to (d)
and, where relevant, the type of payment services
that may be provided in the country or in each
country concerned.
Such information shall be placed online on the Autorité de
contrôle prudentiel website and shall be freely accessible to
the public, with the exception of the date and place of birth
of agents who are natural persons.
Article 39
Supervised institutions shall ensure that all their appointed
agents provide customers and the public, by all appropriate
means and in a visible and legible fashion, with the
following information:
•
the company name, address and trade name of the
appointing institution;
•
the registration number and the address of the
agents register where such registration can be
verified.
deemed to constitute a refusal.
Supervised institutions shall ask the Autorité de contrôle
prudentiel to strike their agent off the agents register:
•
if the agent ceases his activity for whatever
reason;
•
where they consider that an agent or person
mentioned in Article 36-I-e no longer meets the
fit and proper person conditions which they had
to justify on applying for registration.
If an agent struck off the register exercised activities in
other Member States or States party to the agreement on
the European Economic Area, the Autorité de contrôle
prudentiel shall promptly inform the relevant host country
competent authorities that the agent has been struck off.
Information removed from the register pursuant to the
preceding two paragraphs or amended as a result of
changes affecting the conditions of exercise of the agent’s
activity shall be kept on any lasting medium for ten years
as of the date of the striking-off or change.
Article 41
Pursuant to Article 38, paragraph 3 of Act 78-17 of 6
January 1978 (the French Data Protection Act), the right of
opposition does not apply to the agents register.
The rights of access and rectification provided for in
Articles 39 and 40 respectively of the aforementioned Act
may be asserted with the Autorité de contrôle prudentiel
and the supervised institutions that appointed the agents.
Chapter IV
Supervision on a consolidated basis
Article 40
The appointing institution shall promptly inform the
Autorité de contrôle prudentiel of any change to the
information mentioned in Article 36-I (a) to (d) and (g),
stating the date at which the change occurred.
The appointment of any new person as defined in Article
36-I-e and the information mentioned in Article 36-I-f must
be declared within five working days.
The Autorité de contrôle prudentiel shall inform the
competent authorities concerned under the conditions set
forth in Article 37-I of any change to the information
mentioned in Article 36-I (a) to (d) and (g) concerning an
agent authorised to operate in one or more other Member
States or States party to the agreement on the European
Economic Area. The Committee shall amend the agents
register if necessary.
For the changes mentioned in Article 36-I-e, the Committee
has two months at most in which to register the identity of
the new person.
Until expiry of the two-month deadline, the Committee
may take account, where relevant, of information
transmitted by the host country competent authority.
Non-registration on expiry of the two-month deadline is
22
Article 42
Payment institutions that are subsidiaries of a credit
institution, investment firm, financial holding company or
mixed financial holding company included within the scope
of consolidation as defined in Regulation 2000-03 aforesaid
are not required to comply on an individual or, where
relevant, sub-consolidated basis with the own funds
requirements defined in Article 28 of this order, provided
that they fulfil the conditions of Article 4.1 of said
regulation.
Chapter V
Activities other than payment services
exercised as a regular business and hybrid
institutions
Article 43
Payment services and the ancillary services mentioned in
Article L. 522-2 of the Monetary and Financial Code
provided by an institution exercising a hybrid activity are
subject to prudential supervision in accordance with
Chapters 1, 2 and 4 of this title. In accordance with Article
L. 613-8, the Autorité de contrôle prudentiel shall be
Selected French Banking and Financial Regulations – 2013
provided with the documents and information it needs to
perform its assignment under conditions set by an
instruction.
Article 44
Article 49
See Regulation 90-05 of 11 April 1990 as amended,
relating to the national database on household credit
repayment incidents.
Article 50
The control system for operations and internal procedures
defined in Article 5 of Regulation 97-02 aforesaid shall
include verification of the obligations provided for in
Article L. 522-3 of the Monetary and Financial Code and in
this chapter.
See Regulation 2000-03 of 6 September 2000 as amended,
relating to prudential supervision on a consolidated basis
and supplementary supervision is amended as follows:
Supervised institutions’ internal control mechanisms must
enable them to ensure compliance with the provisions of
this chapter at all times.
See Regulation 97-02 of 21 February 1997 as amended,
relating to internal control is amended as follows:
Article 51
Article 52
Article 45
For the purposes of Articles L. 522-14 and L. 522-17 of the
Monetary and Financial Code and Chapters 1 and 2 of this
title, supervised institutions exercising activities of a hybrid
nature shall evaluate the portion representing funds
received for the execution of future payment transactions
by constructing the ratio, on a quarterly basis, between the
amount of funds actually used to execute payment
transactions and the amount of funds received for the
execution of future payment transactions that can also be
allocated to services other than payment services. They
shall make the calculation on a revolving basis for the last
four quarters and use the highest figure.
Where the supervised institution has not completed a full
year’s business at the calculation date, it shall take, for the
first quarter to come, the figure in its business plan plus
30%, then the figure for the first elapsed quarter plus 20%,
then the highest of the figures for the first two quarters plus
20% and the highest of the figures for the first three
quarters plus 10%.
The Autorité de contrôle prudentiel may adjust these
requirements if the situation so warrants.
TITLE III
Miscellaneous provisions
CRBF Regulation 96-13 of 20 December 1996 as amended,
relating to the revocation of authorisation and the striking
off of credit institutions is amended as follows:
Article 53
Regulation 90-02 of 23 February 1990 as amended, relating
to own funds is amended as follows:
Article 54
See The order of 20 February 2007, relating to capital
requirements is amended as follows:
Article 55
See Regulation 99-09 of 9 July 1999, relating to transfers
made within the European Economic Area is revoked.
Article 56
This order shall take effect on 1 November 2009.
Article 57
This order shall be published in the Official Journal of the
French Republic.
Article 46
The provisions of Article 36-I, Article 37-II, IV and V,
Article 38, Article 39, Article 40 except for the third, fifth
and penultimate paragraphs and Article 41 of this order
shall apply where a credit institution authorised by the
Autorité de contrôle prudentiel uses an agent.
Article 47
See Regulation 2001-04 of 29 October 2001 as amended,
relating to cheque clearing.
Article 48
See Regulation 2002-01 of 18 April 2002 as amended,
relating to obligations of vigilance with regard to cheques
in order to combat money laundering and the financing of
terrorism.
Selected French Banking and Financial Regulations – 2013
23
Annex 1
to the order relating to the prudential regulation of
payment institutions setting out the model certificate for
constitution of a guarantee provided for in Article 35
where it consists of an on-demand guarantee
3.2. Renewal
The guarantee is renewed by tacit agreement on the same
terms as set forth herein, unless the Guaranteed Institution
serves notice of its intention to terminate the guarantee at
least ..... (7) months before the expiry date.
The institution ...... (1) registered in the ...... Trade and
Companies Register as no. ...... represented by ...... duly
authorised by virtue of ...... (2);
4. Article 4
Whereas it has been informed that: ...... (3), hereinafter
referred to as the "Guaranteed Institution", has asked the
above-mentioned institution, hereinafter referred to as the
"Guarantor" to give it its on-demand guarantee,
If the Guaranteed Institution is unable to meet its financial
obligations arising from its payment service activities, the
minister for the economy may call this guarantee by
registered letter with acknowledgment of receipt sent to the
Guarantor at the address given above.
Hereby declares, pursuant to Article L. 522-17 of the
Monetary and Financial Code and Article 35 of the order of
[date] relating to payment institutions, that it will act as
Guarantor, waiving benefit of division and discussion, for
the Guaranteed Institution under the terms and conditions
set forth below.
1. Article 1 of the annex to the order of [date]
Purpose of the guarantee
This guarantee is a purely financial undertaking. It excludes
any obligation to do and is granted up to the maximum
amount set forth in Article 2 with a view to covering the
funds received by the Guaranteed Institution in its capacity
as a payment institution, either from users of payment
services or through another payment services provider for
the execution of payment transactions, should the
Guaranteed Institution not be able to meet its financial
obligations.
This guarantee does not cover compensation payable by the
Guaranteed Institution to third parties that could suffer
harm as a result of poor performance or non-performance
of an obligation arising from the Guaranteed Institution’s
activity.
2. Article 2 of the annex to the order of [date]
Amount
2.1. Amount
The maximum amount of the guarantee is (4).
2.2. Updating
Calling the guarantee
5. Article 5
Governing law
This guarantee is governed by French law, jurisdiction
being attributed to the French courts.
Done at (8) on (9).
(1) Name, form, share capital and registered office of the
credit institution or insurance undertaking and, where
relevant, address of the branch subscribing the guarantee.
(2) Power of attorney or authorisation, stating the date. (3)
The future payment institution (full designation). (4)
Amount in figures and words. (5) Effective date of the
guarantee. (6) Expiry date of the guarantee. (7) Notice
period. (8) Place of issue. (9) Date.
Annex 2
to the order relating to the prudential regulation of
payment institutions setting out the model certificate for
constitution of a guarantee provided for in Article 35
where it arises from a suretyship undertaking
The institution or undertaking ...... (1) registered in the ......
Trade and Companies Register as no. ...... represented by
...... duly authorised by virtue of ...... (2);
Whereas it has been informed that: ...... (3), hereinafter
referred to as the "Secured Institution", has asked the
above-mentioned institution or undertaking, hereinafter
referred to as the "Surety" to stand surety for it,
3. Article 3 of the annex to the order of [date]
Hereby declares, pursuant to Article L. 522-17-2 of the
Monetary and Financial Code and Article 35 of the order of
[date] relating to payment institutions, that it will stand
surety, jointly and severally, within the meaning of Articles
2288 et seq. of the Civil Code, for the Secured Institution
under the terms and conditions set forth below.
Term
1. Article 1 of the annex to the order of [date]
3.1. Term
Purpose of the surety
This guarantee undertaking takes effect as of ..... (5). It
expires at 6.00 p.m. on (6).
This surety is a purely financial undertaking. It excludes
any obligation to do and is granted up to the maximum
amount set forth in Article 2 with a view to covering the
funds received by the Secured Institution in its capacity as
The maximum amount of the guarantee may be updated
annually in order to comply with the conditions relating to
the minimum amount of the guarantee stipulated in Article
35 of the order.
24
Selected French Banking and Financial Regulations – 2013
a payment institution, either from users of payment services
or through another payment services provider for the
execution of payment transactions, should the Secured
Institution not be able to meet its financial obligations.
This surety does not cover compensation payable by the
Secured Institution to third parties that could suffer harm as
a result of poor performance or non-performance of an
obligation arising from to the Secured Institution’s activity.
1.1.1.4. Electronic money and electronic
money institutions
REGULATION 2002-13 OF 21 NOVEMBER 2002,
RELATING TO ELECTRONIC MONEY AND
ELECTRONIC MONEY INSTITUTIONS
as amended by the Orders of 20 February 2007 and 29
October 2009
2. Article 2 of the annex to the order of [date]
TITLE I
Amount
2.1. Amount
The maximum amount of the surety is (4). Any payment
made by the Surety shall reduce the total amount of the
surety by the same amount.
3. Article 3 of the annex to the order of [date]
Term
3.1. Term
This suretyship undertaking takes effect as of ..... (5). It
expires at 6.00 p.m. on (6).
3.2. Renewal
The suretyship undertaking is renewed by tacit agreement
on the same terms as set forth herein, unless either party
serves notice of its intention to terminate the arrangement
at least ..... (7) months before the expiry date.
GENERAL PROVISIONS RELATING TO
ELECTRONIC MONEY
CHAPTER I
DEFINITIONS AND GENERAL PRINCIPLES
Article 1
Electronic money consists of units of value, called
electronic money units. Each unit constitutes a claim stored
on an electronic device and accepted as a means of
payment, within the meaning of Article L. 311-3 of the
Monetary and Financial Code, by third parties other than
the issuer.
Electronic money is issued against the remittance of funds.
It cannot be issued for a value in excess of that of the funds
received in exchange.
5. Article 5
Article 2
Within the meaning of this Regulation, a credit institution
that is the debtor of the claim stored on the electronic
device is deemed to be an institution issuing electronic
money, called an issuing institution. A credit institution
that offers its customers a charge, recharge or cashing
service is deemed to be a distributing institution, called a
distributing institution. Issuing and distributing institutions
are governed by the provisions of Title I of this Regulation
and, if they limit their activity to issuing, making available
to the public and administering electronic money, by the
provisions of Title II. Institutions that limit their activity to
issuing, making available to the public and administering
electronic money are called electronic money institutions.
Governing law
Article 3
This guarantee is governed by French law, jurisdiction
being attributed to the French courts.
1. − The issuing institution shall redeem unused electronic
money units during their entire period of validity under the
conditions set forth in the contract by which it is bound to
the bearer of electronic money.
4. Article 4
Calling the surety
If the Secured Institution is unable to meet its financial
obligations arising from its payment service activities, the
minister for the economy may call this surety by registered
letter with acknowledgment of receipt sent to the Surety at
the address given above.
Done at (8) on (9).
(1) Name, form, share capital and registered office of the
credit institution or insurance undertaking and, where
relevant, address of the branch giving the undertaking. (2)
Power of attorney or authorisation, stating the date. (3)
The future payment institution (full designation). (4)
Amount in figures and words. (5) Effective date of the
surety. (6) Expiry date of the surety. (7) Notice period. (8)
Place of issue. (9) Date.
The contract must set out clearly the conditions and time
limit for redemption of unused electronic money units. In
particular, the contract must state:
(i) that electronic money units are redeemed at par
value free of charges other than those strictly
necessary to carry out the operation;
(ii) the amount, nature and breakdown of such charges.
However, the contract may stipulate that electronic money
units with a value less than 10 euro will not be redeemed.
Selected French Banking and Financial Regulations – 2013
25
2. − Within two months at most of an application for
revocation of authorisation for cessation of activity sent by
an institution to the Autorité de contrôle prudentiel or of an
automatic revocation of authorisation decision issued by
the Committee or of a decision to strike off an institution
taken by said Autorité, the issuer shall redeem the unused
electronic money units held by each bearer of electronic
money. The issuer shall inform bearers of such cessation of
activity by means suited to the nature of its customers.
distinct transactions, the issuing institution shall ensure that
all transactions carried out are traceable for two years.
Distributing institutions shall provide the issuing institution
with the necessary support ensure such traceability.
On expiry of the two-month period, the issuing institution
shall continue to be required to reimburse funds received in
exchange for electronic money until they are transferred
under the conditions set forth in Regulation 96-13 aforesaid
to another authorised institution or to the Caisse des Dépôts
et Consignations, without prejudice to application of
Article L. 27 of the State Property Code.
Article 7
The internal control system set forth at Article 1(a) of
Regulation 97-02 aforementioned shall include verification
of the identification measures and the technical
characteristics set forth in this Title, the results of which
shall be included specifically in the report provided for at
Article 42 of the above-mentioned Regulation.
3. − The redemptions referred to at points 1 and 2 above
shall be made in coins and banknotes or by transfer to an
account at the bearer’s discretion.
Article 8
Issuing and distributing institutions shall introduce an
automatic system for monitoring unusual transactions that
use electronic money. Distributing institutions shall advise
the issuing institution of any identified anomalies
connected with the circulation of electronic money. The
issuing institution may take steps to ensure that distributing
institutions apply the defined standards of security and
vigilance.
4. − If a person who is not a customer identified by an
issuing institution or a distributing institution requests
redemption in cash of electronic money units for a value in
excess of 30 euro, the redeeming institution shall make a
note of the person’s identity and keep it at the disposal of
the other issuing or distributing institutions concerned, the
banking supervisory authorities and the department referred
to at Article L. 562-4 of the Monetary and Financial Code
for two years.
Article 4
The contracts referred at Article 3.1 shall include an
undertaking by bearers of electronic money to use the
devices entrusted to them to make payments or transfers of
electronic money solely to persons or undertakings bound
by contract to the issuing institution or distributing
institutions under the conditions set forth, where applicable,
in those contracts.
Article 5
The electronic money units stored on a device that does not
permit the bearer to be identified may not at any time
exceed 150 euro. The contracts concluded with bearers and
acceptors shall provide that unit or fractional payments
made using this type of instrument may not exceed 30 euro
per transaction. An issuing or distributing institution that
charges or recharges such an instrument for cash for an
amount in excess of 30 euro shall make a note of the
identity of the person requesting the operation, unless that
person is a customer of the institution in question. The
institution shall keep the note of the person’s identity at the
disposal of the issuing or distributing institutions
concerned, the banking supervisory authorities and the
department referred to at Article L. 562-4 of the Monetary
and Financial Code for two years.
Article 6
Issuing institutions shall ensure that uploads and downloads
of electronic money units are traceable for two years. They
shall ensure that they have the means to ensure the
traceability of suspect transactions in the event that the
security of all or some of the system should be
compromised. If the arrangements in place allow for the
same electronic money units to be used successively for
26
CHAPTER II
INTERNAL CONTROL AND ANTI-MONEY
LAUNDERING ARRANGEMENTS
Article 9
The written internal rules referred to at Article 2(a) of
Regulation 91-07 aforesaid shall stipulate the measures to
be taken when identified anomalies may be of interest with
regard to the prevention of money laundering, taking into
account the knowledge that each institution must have of its
customers.
The monitoring system referred to at Article 2(b) of
Regulation 91-07 aforesaid shall include verification of
these measures. A report of anomalies identified pursuant
to the provisions of the preceding paragraph shall be
prepared at least monthly and sent to the persons referred to
at Articles 2 and 5 of Decree 91-160 aforesaid.
TITLE II
PRUDENTIAL REQUIREMENTS OF
ELECTRONIC MONEY INSTITUTIONS
CHAPTER I
PRUDENTIAL REQUIREMENTS OF ELECTRONIC
MONEY INSTITUTIONS
Article 10
Except where this Regulation expressly provides otherwise,
Regulations 86-17, 86-21, 88-01, 88-10, 90-06, 91-05,
93-05 and 95-02 aforesaid and the Order of
20 February 2007 relating to own funds requirements
applicable to credit institutions and investment firms do not
apply to electronic money institutions.
Article 11
The commercial activities of electronic money institutions
are limited to the provision of services in connection with
issuing, making available to the public and administering
Selected French Banking and Financial Regulations – 2013
electronic money and with storing data on electronic media
on behalf of other legal persons.
Article 12
Without prejudice to the provisions of Article 11 of this
Regulation, an electronic money institution may not have
any holdings in other undertakings except where such
undertakings perform operational or other ancillary
functions related to the electronic money issued or
distributed by the institution concerned.
Article 13
The own funds of electronic money institutions within the
meaning of Regulation 90-02 aforesaid shall at all times be
equal to or more than 2% of the higher of the following two
amounts:
− the daily amount of financial liabilities related to
outstanding electronic money;
− the average amount, calculated on the basis of the daily
amounts for the preceding six months, of the total financial
liabilities related to outstanding electronic money.
Electronic money institutions that have not completed a
six-month period of business since the effective date of
authorisation shall calculate the average amount of their
financial liabilities related to electronic money according to
their programme of operations, subject to any adjustment
required by the Autorité de contrôle prudentiel.
Article 14
1 − Electronic money institutions shall have investments in
an amount no less than their financial liabilities related to
outstanding electronic money in the following assets only:
a) assets which according to the second indent of Article
4.2.2 and indents 1, 2 and 5 of Article 4.2.1 of Regulation
91-05 aforesaid attract a zero credit risk weighting and are
sufficiently liquid;
b) sight deposits held with Zone A credit institutions within
the meaning of Article 2 of Regulation 91-05 aforesaid;
the situation promptly. To this end, and for a temporary
period only, the Autorité de contrôle prudentiel may allow
the institution concerned to back its financial liabilities
related to outstanding electronic money by assets other than
those referred to in paragraph 1 up to an amount not
exceeding the lower of 5% of these liabilities or the
institution’s total amount of own funds.
Article 15
For the purpose of hedging market risk arising from the
issuance of electronic money and from the investments
referred to at Article 14.1 of this Regulation, electronic
money institutions may use sufficiently liquid interest-rate
and foreign-exchange-related off-balance sheet items in the
form of exchange-traded derivative instruments where they
are subject to daily margin requirements or foreignexchange contracts with an original maturity of fourteen
calendar days or less. In addition, such financial futures
must meet the conditions stated at Article 4 of Regulation
88-02 or at Article 2.1(b) or (c) or Regulation 90-15
aforesaid.
Article 16
The investments referred to at Article 14.1(b) and (c), net
of provisions assigned to the hedging thereof, if any, may
not exceed twenty times the electronic money institution’s
own funds.
Article 17
All electronic money institutions are required, under the
conditions set forth in Regulation 93-05 aforesaid, to
comply at all times with the maximum ratio of 25%
between all the weighted risk they incur on account of their
operations per beneficiary, net of the amount of provisions
assigned to the hedging thereof and the amount of pledges
or guarantees referred to at Articles 5 and 6 of Regulation
93-05 aforesaid, if any, and the amount of their own funds.
Article 18
The elements included in the calculations designed to
verify electronic money institutions’ compliance with
Articles 13, 14, 16 and 17 of this Regulation shall be taken
from electronic money institutions’ company accounts.
c) debt securities:
i) not covered by paragraph 1(a);
ii) that are eligible within the meaning of Article 2.2 of
Appendix II to Regulation 95-02 aforesaid;
iii) that are issued by undertakings other than
undertakings which have a qualifying holding, within
the meaning of Article 1 of Regulation 90-06 aforesaid,
in the electronic money institution concerned or which
must be included in the consolidated accounts of
undertakings that have such a qualifying holding.
2. For the purpose of applying paragraph 1, securities shall
be valued at their acquisition price, net of necessary
provisions, if any, or at their market value, whichever is the
lower.
3. If the value of the assets referred to in paragraph 1 falls
below the amount of financial liabilities relating to
outstanding electronic money, the electronic money
institution concerned must take appropriate steps to remedy
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CHAPTER II
EXEMPTIONS
Article 19
1. − See paragraph (d), Article 1 of Regulation 92-14.
2. − The electronic money institutions, the total amount of
whose financial liabilities related to outstanding electronic
money does not exceed 5 million euro under normal
circumstances and 6 million euro under any circumstances
may be exempted from the provisions of Articles 14 to 18
of this Regulation as well as Regulations 86-17 and 88-01
aforesaid. The exemption shall cease three months after the
Autorité de contrôle prudentiel finds that the conditions set
forth in this Regulation are no longer met.
3. − Exempt institutions may not carry on their business on
the territory of other States party to the agreement on the
European Economic Area pursuant to Articles L. 511-27
and L. 511-28 of the Monetary and Financial Code.
27
4. − The above-mentioned institutions shall provide the
Banque de France with at least an annual report on their
activities, stating in particular the total amount of financial
liabilities related to outstanding electronic money.
CHAPTER III
MISCELLANEOUS PROVISIONS
Article 20
Without prejudice to the provisions of Article 14.3, the
Autorité de contrôle prudentiel may grant a reporting
electronic money institution a temporary derogation from
the provisions of this Regulation, setting a time limit for
rectifying the situation.
Article 22
Credit institutions governed by this Regulation that were
authorised before it took effect shall have six months in
which to comply with its provisions.
Article 23
The provisions of this Regulation shall apply in the
principality of Monaco, with the exception of Article 9.
1.1.1.5 ASSOCIATIONS AND FOUNDATIONS
ORDER OF 18 JULY 2012 RELATING TO
ASSOCIATIONS AND FOUNDATIONS
AUTHORISED TO ADVANCE CERTAIN LOANS
AND IMPLEMENTED FOR THE APPLICATION OF
ARTICLES R. 518-59 AND R. 518-62 OF THE
MONETARY AND FINANCIAL CODE
Article 1 – The minimum number of credit files mentioned
in the third paragraph of Article R. 518-59 of the Monetary
and Financial Code is fixed at fifty.
Article 2 – The default rate on unprovisioned loan
outstandings mentioned in the second paragraph of Article
R. 518-62 of the Monetary and Financial Code is fixed at
30% in the absence of verifiable data on the average
statistical default rate observed on loans granted over the
previous three years.
If the association or the foundation possesses verifiable
statistical data for the previous three-year period, the rate
applied to reserve funds, as a percentage, is calculated
according to the following formula: 1.5 × the observed
default rate defined above. This default rate cannot be less
than 10% nor greater than 30%. The Autorité de contrôle
prudential may, where appropriate, raise this rate
depending on the specific situation of the association or
foundation concerned.
Article 3 – The percentage rate mentioned in the third
paragraph of Article R. 518-62 of the Monetary and
Financial Code must be at least 12%.
28
Article 4 – The own funds and similar resources mentioned
in the fourth paragraph of Article R. 518-62 of the
Monetary and Financial Code include own funds,
contributions and front-end fees, public and private
investment subsidies, gifts and donations as well the
reserve funds.
Article 5 – For compliance with the conditions related to
the maturity matching of resources mentioned in the last
paragraph of Article R. 518-62 of the Monetary and
Financial Code, the association or foundation shall ensure,
at all times, that the average maturity of the resources is
greater than or equal to the average maturity of the loans
granted in the framework of the authorisation delivered in
application of Article R. 518-58 of the same Code.
The average loan duration is calculated by dividing the
total amount of outstanding loans (after weighting each
loan for residual maturity expressed in days remaining) by
the total nominal amount of outstanding loans granted.
The average resource duration is calculated by dividing the
total amount of resources (after weighting each resource for
residual maturity expressed in days remaining) by the
aggregate nominal amount of total resources recorded on
the liability side of the balance sheet. Own funds and
resources without any defined maturity are considered
repayable after seven years. Public subsidies are considered
to have a residual maturity of seven years.
Article 6 – The Order of 3 July 2002 for the application of
Decree no. 2002-652 of 30 April 2002 relating to the
authorisation of the non-profit associations mentioned in
paragraph five of Article L. 511-6 of the Monetary and
Financial Code is abrogated.
Article 7 – This Order will be published in the Journal
officiel de la République française.
1.1.2. MINIMUM CAPITAL
1.1.2.1. CREDIT INSTITUTIONS
REGULATION 92-14 OF 23 DECEMBER 1992,
RELATING TO THE MINIMUM CAPITAL OF
CREDIT INSTITUTIONS
as amended by Regulations 94-04 of 8 December 1994,
98-06 of 7 December 1998, 2000-10 of 8 December 2000,
2002-13 of 21 November 2002
and the Orders of 9 February 2006
and 29 October 2009
Article 1
Credit institutions having their headquarters within the
territory of the French Republic shall have a paid-up capital
or paid-up endowment capital at least equal to:
Selected French Banking and Financial Regulations – 2013
a) 5 million euro for banks, mutual or cooperative banks,
savings and provident institutions, municipal credit
banks other than those referred to under b) and c)
below and specialised financial institutions. For the
purposes of this provision, the balance sheets of
regional or federal Crédit Agricole, Crédit Mutuel or
Crédit Mutuel Agricole et Rural banks shall be
consolidated with those of the local banks affiliated to
them or that are affiliated to the same regional
federation, pursuant to Article 14 of the
above-mentioned Decree of 24 July 1984; the balance
sheets of mutual or cooperative banks shall be
consolidated with that of the mutual guarantee
insurance companies, when they have been granted a
collective authorisation under the conditions referred to
in the above-mentioned Decree as amended by the
above-mentioned Decree of 25 June 1993; the balance
sheet of the Société Centrale de Crédit Maritime
Mutuel shall be consolidated with those of the regional
banks or the Union de Crédit Maritime Mutuel,
pursuant to Article 16 of the above-mentioned Decree
of 19 October 1976 as amended;
b) 2.2 million euro for municipal credit banks which
undertake under the terms of their articles of
association not to collect funds from the public and to
restrict their lending to the granting of loans secured by
tangible collateral and credits to individuals, and
financial companies other than those referred to under
c) and d) below;
c)
d)
1.1 million euro for those municipal credit banks
which confine their activity to lending against physical
collateral, financial companies whose authorisation is
confined to the provision of guarantees and those
financial companies whose banking activity is
confined to leveraged spot foreign-exchange
transactions.
1 million euro for electronic money institutions, as
defined by Article 2 of Regulation 2002-13. The value
of electronic money units stored on a device issued by
such institutions may not exceed 150 euro at any time
Article 2
For the application of the present Regulation, capital in
addition to the capital of institutions subject to the present
Regulation that are constituted in the form of commercial
companies, shall be deemed to include the sums that take
the place thereof or that are equivalent thereto, under the
legislation in force, in the accounts of the institutions
governed by special Articles of association, in particular
permanent endowments of funds or fixed or variable capital
represented by actually paid-up "parts sociales" or by
"certificats coopératifs d’investissement."
Reserves not eligible for distribution and funds of a similar
nature shall be added to the items referred to in the
preceding paragraph.
Article 3
a) Pursuant to Article L. 511-40, indent 2 of the Monetary
and Financial Code, credit institutions authorised prior
to 31 December 1992 and whose assets do not
effectively exceed their liabilities to third parties by an
amount at least equal to the minimum capital laid down
herein, may continue to pursue their business, subject
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to compliance with the provisions of the following
paragraph.
The actual surplus of assets over liabilities towards
third parties of the institutions referred to in the
preceding paragraph may in no circumstances remain
or fall below the highest amount reached by this
surplus in the period from 30 December 1989, nor
below the minimum capital applicable at 31 December
1992.
b) In the event of a merger between two or more
institutions referred in the first indent of this Article,
the resulting institution shall comply with Article 1
above.
However, the Autorité de contrôle prudentiel may
authorise this institution to pursue its business under
the conditions laid down in the second indent of point
a) of this Article. In that case, the actual surplus of the
said institution’s assets over its liabilities to third
parties may not, moreover, fall below the sum of the
surpluses of each of the merged institutions at the date
of the merger.
c) The institutions referred to in points a) and b) of this
Article shall cease to qualify for the foregoing
provisions as soon as the effective power of control is
no longer held by the shareholder or shareholders
which held it at 31 December 1992. In that case, they
must immediately hold the minimum capital laid down
under Article 1 above.
Article 4
In any case, credit institutions authorised prior to
31 December 1992 shall be required to comply with the
minimum capital requirement laid down in Article 1 of the
present Regulation as from 1 January 1998, with the
exception of financial companies whose authorisation is
limited to the provision of guarantees, in which case the
date shall be extended to 1 January 2000.
At the dates referred to in the preceding paragraph and in
Article 7 below, the Autorité de contrôle prudentiel may, in
exceptional and temporary cases, allow the institution a
further period for it to bring its situation into compliance.
Article 5
In the overseas territories, the collectivité départementale
de Mayotte or the Principality of Monaco, branches of
credit institutions with their headquarters in another
Member State of the European Communities shall be
required to show an endowment capital employed in France
of an amount at least equal to the minimum capital required
of comparable credit institutions governed by French law.
Article 6
Branches of credit institutions with their headquarters in
another State that is not a Member State of the European
Communities shall be required to show an endowment
capital employed in France of an amount at least equal to
the minimum capital required of comparable credit
institutions governed by French law.
Article 7
The branches referred to in Articles 5 and 6 of the present
Regulation having received their authorisation prior to
29
31 December 1992 are not required to comply with the new
requirements laid down herein until 1 January 1998. Until
that date, they shall be required to hold endowment capital
of an amount at least equal to that laid down by the
Regulations applicable to them at 31 December 1992.
Whatever the case, they shall be required to comply with
the new requirements as of such time as effective control of
the institutions concerned is no longer exercised by the
shareholder or shareholders which held such power at
31 December 1992.
Article 3
Institutions subject to this Regulation shall have paid-up
capital at least equal to EUR 1.1 million when they hold
funds belonging to their clients and carry out
Article 7 bis
As of the date of the entry into force of the Agreement on
the European Economic Area and for the purposes of
Articles 5, 6 and 7 of the present Regulation, credit
institutions with their headquarters in the other States that
are parties to the said Agreement shall have the same status
as those having their headquarters in another Member State
of the European Union.
This amount shall however be reduced to EUR 1.1 million
when the service provider holds neither funds nor securities
belonging to customers.
Article 8
The present Regulation shall apply as of 1 January 1993, at
which date the above-mentioned Regulations 84-05, 88-06
and 92-01 shall be repealed.
1.1.2.2. INVESTMENT SERVICE PROVIDERS
REGULATION 96-15 OF 20 DECEMBER 1996,
RELATING TO THE MINIMUM CAPITAL OF
INVESTMENT SERVICE PROVIDERS
as amended by Regulation 2000-10 of 8 December 2000
and Orders of 15 May 2006,
20 February 2007 and 16 January 2008
Article 1
Investment service providers defined in Article L. 531-1 of
the Monetary and Financial Code other than portfolio
management companies defined in Article L. 532-9 of said
Code and persons referred to in Article L. 440-2, point 4
and Article L. 542-1, point 5, of said Code hereinafter
referred to as institutions subject to this Regulation, must
prove they have minimum capital as provided herein.
Article 2
Institutions subject to this Regulation shall have paid-up
capital at least equal to EUR 3.8 million when they engage
in the business of custody and administration of financial
instruments.
Where the laws and regulations oblige an institution subject
to this Regulation to limit the scope of its business to the
custody and administration of financial instruments linked
to employee savings schemes, the paid-up capital shall be
at least equal to EUR 150,000, provided that the institution
subject to this Regulation is under the sole or joint control
of one or several institutions that are subject to the
requirements under the first indent of this article and have
given notice that they shall be jointly and severally liable
for the commitments of the subsidiary.
Institutions subject to this regulation shall have paid-up
capital at least equal to EUR 3.8 million when they engage
in the business of clearing financial instruments as a
member of a clearing house.
30
Trading for own account.
Underwriting.
Placing,
Article 3 a
Institutions subject to this Regulation shall have paid-up
capital at least equal to EUR 125,000 when they
exclusively provide one or more of the following
investment services:
•
Reception and transmission of orders on behalf of
third parties.
•
Execution of orders on behalf of third parties.
•
Portfolio management on behalf of third parties.
•
Investment advice.
This amount shall however be reduced to EUR 50,000
when the service provider holds neither funds nor securities
belonging to customers.
Article 3b
Institutions subject to this Regulation other than those
mentioned in Articles 2, 3, 3a shall paid-up capital at least
equal to EUR 730 000.
Article 4
For the purposes of this Regulation, capital shall be deemed
to include, in addition to the registered capital of the
institutions subject to this Regulation that are constituted in
the
form of
commercial companies (sociétés
commerciales), the sums that take the place thereof or that
are equivalent thereto, under the legislation in force, in the
accounts of the institutions governed by special Articles of
Association, in particular permanent endowments of funds
or fixed or variable capital represented by actually paid-up
"parts
sociales",
by
"certificats
coopératifs
d’investissement" or by "certificats coopératifs d’associés".
Reserves not eligible for distribution and funds of a similar
nature shall be added to the items referred to in the
preceding paragraph.
Article 5
Deleted.
Article 6
Deleted.
Article 7
Deleted.
Article 8
Deleted.
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1.1.3. CHANGES IN THE SITUATION OF
CREDIT INSTITUTIONS AND INVESTMENT
FIRMS OTHER THAN PORTFOLIO
MANAGEMENT COMPANIES
REGULATION 96-16 OF 20 DECEMBER 1996,
RELATING TO CHANGES IN THE SITUATION OF
CREDIT INSTITUTIONS AND OF INVESTMENT
FIRMS OTHER THAN PORTFOLIO
MANAGEMENT COMPANIES
as amended by Regulation 2001-05 of 29 October 2001
and Orders of 16 January 2008, 2 November 2009 and
25 August 2010
Article 1
The credit institutions and investment firms authorised by
the Autorité de contrôle prudentiel, hereafter referred to as
undertakings subject to this Regulation, are required to
submit to said Autorité the changes to be made to their
capital structure and to the other elements taken into
account when they were authorised, as provided herein.
CHAPTER I
CONDITIONS RELATING TO THE ACQUISITION OF
OR INCREASE IN A QUALIFYING HOLDING
EQUITY INTEREST IN AN UNDERTAKING
SUBJECT TO THIS REGULATION
Article 2
2.1. Any transaction that enables a person acting alone or in
concert with other persons, as defined at Article L. 23310 of the Commercial Code, to acquire, increase,
reduce or cease to have, directly or indirectly, as
defined at Article L. 233-4 of the Commercial Code, a
holding in an undertaking subject to this Regulation
must be notified by such person or persons to the
Autorité de contrôle prudentiel before it is concluded,
where either of the following two conditions is met:
― the fraction of voting rights held by such person or
persons exceeds or falls below one tenth, one
fifth, one third or half;
― the undertaking subject to this Regulation
becomes or ceases to be the subsidiary of such
person or persons.
2.2. Transactions to acquire or increase a qualifying
holding are subject to prior authorisation by the
Autorité de contrôle prudentiel under the following
conditions:
1. The Autorité de contrôle prudentiel shall give the
candidate acquirer written acknowledgment of receipt
within two working days of receiving notice and all the
requisite documents.
The Autorité de contrôle prudentiel then has sixty
working days at most as of the date of the written
acknowledgment of receipt within which to evaluate
the transaction.
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The written acknowledgment of receipt shall state the
date at which the evaluation period expires.
2. The Autorité de contrôle prudentiel may, during the
evaluation period, if necessary, and at the latest on the
fiftieth working day of the evaluation period, ask for
additional information it requires to complete the
evaluation. Requests shall be made in writing and state
the additional information required. The Committee
shall furnish the candidate acquirer with written
acknowledgment of receipt within two working days of
receiving the additional information.
The evaluation period is suspended during the period
between the date on which the Autorité de contrôle
prudentiel makes its information request and the date
on which it receives the candidate acquirer’s response
to the request. The suspension may not exceed twenty
working days. The Autorité de contrôle prudentiel may
make other requests for additional information or
clarifications but they may not cause the evaluation
period to be suspended.
3. The Autorité de contrôle prudentiel may increase the
suspension mentioned in the preceding paragraph to
thirty working days:
a)
if the candidate acquirer is established outside
the Community or is governed by nonCommunity regulations;
b)
or if the candidate is a person not subject to
supervision pursuant to European directives
2006/48/EC,
85/611/EEC,
92/49/EEC,
2002/83/EC, 2004/39/EC or 2005/68/EC.
4. If the Autorité de contrôle prudentiel decides, on
completing the evaluation, to oppose the planned
acquisition, it shall inform the candidate acquirer in
writing within two working days and without
exceeding the evaluation period, giving the reasons for
its decision. The undertaking subject to this Regulation
shall also be informed.
At the candidate acquirer’s request, the Committee
shall publish the reasons for its decision on the site
mentioned at Article R. 511-3-3 of the Monetary and
Financial Code.
5. If, on expiry of the evaluation period, the Autorité de
contrôle prudentiel has not opposed the planned
acquisition in writing, it is deemed to have been
approved. [This indent is not applicable to
6. The Autorité de contrôle prudentiel may set a deadline
for conclusion of the planned acquisition and extend it
where appropriate.
7. Where several of the notifications provided for at
Article L. 511-12-1 of the Monetary and Financial
Code concerning the same credit institution or the same
investment firm have been referred to the Autorité de
contrôle prudentiel, it shall consider them jointly under
conditions that ensure equal treatment for all the
candidates.
31
By way of an exception to the foregoing provisions,
transactions between companies placed directly or
indirectly by equity links under the effective control of
a single undertaking are merely brought to the
immediate attention of the Autorité de contrôle
prudentiel, unless the effect of such transactions is to
transfer effective power of control or ownership of all
or some of the above-mentioned rights to one or more
persons not governed by the law of a State party to the
agreement on the European Economic Area.
Where, by statute or by law, the number or distribution
of voting rights is limited in relation to the number or
distribution of shares to which they are attached, the
percentages provided for in this chapter and the
provisions set forth at Article 4 below are calculated
and implemented respectively in terms of shares.
2.3. Within two days of receiving notice of a disposal, the
Autorité de contrôle prudentiel shall give the
declarant written acknowledgment of receipt.
The Committee has sixty working days in which to
inform the declarant and the undertaking subject to
this Regulation that, in view of the need to guarantee
sound and prudent management, the transaction calls
into question the conditions on which authorisation
was granted.
2.4. Pursuant to Article L. 511-12 of the Monetary and
Financial Code, where an undertaking governed by the
law of a State that is neither a member of the European
Community nor a party to the agreement on the
European Economic Area seeks, under the terms of this
article, to take a qualifying holding in an undertaking
subject to this Regulation which has the effect of
making that undertaking its subsidiary, and where the
European Commission has found that credit institutions
or investment firms having their registered office in a
Member State do not have access to the market of the
third country in question or do not benefit from the
same treatment as credit institutions or investment
firms that have their registered office there, the Autorité
de contrôle prudentiel shall:
― inform the European Commission of the planned
acquisition submitted to it, if the Commission has
asked to be informed of any project originating in
the third country in question;
― where relevant, suspend or limit its decision at the
request of the Council or the European
Commission. The period provided for in Article
16 herein shall then also be suspended.
Article 3
In addition, the Autorité de contrôle prudentiel may request
that undertakings subject to this Regulation provide it with
the names of their partners or shareholders who have
declared that they hold a proportion of the voting rights that
is less than 5% but greater than 0.5% or a percentage that is
greater than the figure set by the Articles of Association
pursuant to Article L. 233-7 of the Commercial Code.
Article 4
For the purposes of this chapter, voting rights are
calculated according to the provisions of Article L. 233-7 I
and IV and Article L. 233-9 of the Commercial Code.
No account is taken of voting rights that credit institutions
or investment firms hold as a result of the underwriting or
placing of financial instruments as defined at Article D.
321-1-6-1 and 6-2 of the Monetary and Financial Code, as
long as such rights are not exercised or otherwise used to
intervene in the issuer’s management and provided that
they are disposed of within one year of acquisition.
Article 5
Undertakings subject to this Regulation, other than credit
institutions that are affiliated to a central body, are
required to file financial information on each person
owning at least 10% of their capital with the Autorité de
contrôle prudentiel each year. They shall also file the
same information on each of their partners when
constituted as a general partnership, or on each of the
general partners when constituted in the form of a limited
partnership. However, these obligations do not apply to
partners or shareholders that are themselves undertakings
subject to this Regulation, or that are credit institutions or
investment firms authorised by another State that is party
to the agreement on the European Economic Area.
For each partner or shareholder, the above-mentioned
financial information shall indicate:
a) in the case of a legal person making public offerings:
all of the documents covered by its public disclosure
obligations;
b) in the case of a legal person not making public
offerings: the certified corporate accounting
documents, where appropriate consolidated, for the last
completed financial year together with the appended
notes to the financial statements and all other
information pertaining to facts liable to have a
significant effect on its financial condition;
c) in the case of a natural person: all relevant information
regarding the person’s financial situation.
Article 6
The Autorité de contrôle prudentiel may ask any
undertaking subject to this Regulation to provide it with all
the financial information necessary for it to discharge its
duties pertaining to its ten largest partners or shareholders
each holding less than 10% but more than 0.5% of the
capital or more than the corresponding figure set by the
Articles of Association pursuant to Article L. 233-7 of the
Commercial Code.
CHAPTER II
OTHER ELEMENTS TAKEN INTO ACCOUNT
FOR THE GRANTING OF AUTHORISATION
Article 7
The prior authorisation of the Autorité de contrôle
prudentiel must be sought for changes to the situation of
undertakings subject to this Regulation affecting:
–
32
legal form,
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–
registered name,
–
trading name,
–
the type of banking operations that a credit institution is
authorised to conduct,
–
the investment services or financial instruments,
–
the membership of a general partnership,
–
the identity of the general partner(s) in a limited
partnership,
Article 8
The following shall be reported to the Autorité de contrôle
prudentiel within one month:
a) changes to:
–
the amount of the capital of fixed-capital companies,
–
the rules used to calculate voting rights,
–
the composition of boards of directors or supervisory
boards of undertakings subject to this Regulation other
than credit institutions affiliated to a central body,
–
the address of the registered office;
b) the signature or revision of any agreement made between
partners or shareholders relating to the items referred to in
Articles 4 and 9 herein;
c) the adoption of or changes to stipulations made in
application of Article L. 233-7 of the Commercial Code.
Investment firms intending to hold funds belonging to their
clients shall send notice to the CECEI, at least one month
prior to the date when they start business, and indicate the
measures taken in this respect, in particular those
concerning the internal control and the segregation of the
funds.
Investment firms that hold funds belonging to their clients
at the date when the Order of 16 January 2008 enters into
force, shall give notice to the CECEI. within three months
as from the entry into force of this Order, where their
authorisation does not mention such business.
CHAPTER III
APPOINTMENT AND REMOVAL OF MANAGERS
Article 9
The appointment of any new person called upon to be
responsible for the effective direction of the business policy
of an undertaking subject to this Regulation, under the
terms of Article L. 511-13 of the Monetary and Financial
Code or of Article L. 532-2 of said Code, shall be notified
immediately to the Autorité de contrôle prudentiel. This
notification shall be accompanied by all the documents and
information required to assess the integrity and experience
of the person concerned.
Where the undertaking subject to this Regulation is an
investment service provider, the Autorité de contrôle
prudentiel shall inform the Autorité des Marchés
Financiers within five working days. The Autorité des
Marchés Financiers shall notify the Autorité de contrôle
prudentiel and the undertaking subject to this Regulation
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within one month as from the report that the appointment
referred to in the first paragraph of this Article is not
compatible with the approval previously given to the
business programme.
Without prejudice to the provisions of the preceding
paragraph, when the undertaking subject to this Regulation
is a credit institution, the Autorité de contrôle prudentiel
shall also have a period of one month, as from either the
report made to it pursuant to the first paragraph of this
Article, or from the end of the period referred to in the
second paragraph of this Article, in which to notify the
supervised institution that the appointment is not
compatible with the authorisation granted previously.
Article 10
In any undertaking subject to this Regulation, the removal
or departure of persons discharging the duties referred to in
Article 9 above shall be immediately notified to the
Autorité de contrôle prudentiel Where relevant, the
Autorité shall immediately inform the Autorité des Marchés
Financiers.
Article 11
The amendment of the Articles of Association of a
supervised institution in the form of a public limited
liability company to insert or delete any stipulation relating
to the organisation of the powers of management and
control, entrusted to a management board and to a
supervisory board in accordance with the provisions of
Articles L. 225-57 to L. 225-93 of the Commercial Code,
shall immediately be reported to the Autorité de contrôle
prudentiel. This notification shall, where appropriate, be
accompanied by the information required under Article 9
above.
CHAPTER IV
GENERAL PROVISIONS
Article 12
Financial institutions other than investment firms and
payment institutions having their registered office in France
and that effectively control directly or indirectly one or
more credit institutions or investment firms subject to this
Regulation shall report immediately to the Autorité de
contrôle prudentiel changes to their situation relating to:
a)
registered name,
b)
the membership of a general partnership,
c)
the identity of the general partner(s) in a limited
partnership,
d)
the rules used to calculate voting rights,
e)
the agreements between partners or shareholders
relating to the items referred to in Article 4
herein,
f)
the stipulations made pursuant to Article L. 233-7
of the Commercial Code,
the address of the registered office.
33
Article 13
The branches of credit institutions having their registered
office abroad are not subject to the provisions of Chapters I
and II herein.
However, the branches of credit institutions having their
registered office in a State that is not party to the agreement
on the European Economic Area are subject to the
following provisions:
a) The identity of persons who have acquired or
relinquished effective control over the management of the
foreign undertaking or crossed the thresholds mentioned at
Article 2.1 of this Regulation in either direction shall be
notified to the Autorité de contrôle prudentiel within one
month, the Autorité de contrôle prudentiel may inform the
reporting undertaking that, given the need to guarantee
sound and prudent management of undertakings subject to
this Regulation, this operation is liable to entail a
re-examination of the authorisation granted for the branch
concerned.
b) The prior authorisation of the Autorité de contrôle
prudentiel is required for changes in their situation relating
to:
–
the type of banking operation authorised by the
Autorité,
–
the investment services or financial instruments that
were approved by the Autorité des Marchés Financiers.
c) The following changes shall be notified to the Autorité
de contrôle prudentiel within one month:
–
the business name of the foreign institution,
–
the trading name of the foreign institution,
–
the amount of its capital,
–
the addresses of registered office of the foreign credit
institution and of its principal business office in France.
Article 14
Applications for authorisation and the notifications
provided for herein shall contain all of the details necessary
to inform the Autorité de contrôle prudentiel and, where
relevant, the Autorité des Marchés Financiers of the
causes, aims and consequences of the changes to be made.
Article 15
The decisions of the Autorité de contrôle prudentiel made
pursuant to this Regulation shall be notified to the
applicants and to the undertakings concerned.
The authorisation of the Autorité de contrôle prudentiel
concerning a change to the situation of an investment
service provider relating to the investment services or
financial instruments having been approved by the Autorité
des Marchés Financiers shall be deemed to be granted two
months after these authorities, which shall have been
immediately notified by the Autorité de contrôle
prudentiel, have informed the Comité and the undertaking
subject to this Regulation that the change is compatible
with the programme of operations previously approved
pursuant to Articles L. 532-1 and L. 532-4 of the Monetary
and Financial Code. Where the Autorité des Marchés
Financiers remains silent for more than two months, the
said change shall be deemed to have been approved.
Article 17
The changes made to the composition of the boards of
directors and supervisory boards of credit institutions
affiliated to a central body must be reported to the Autorité
de contrôle prudentiel once a year though the central body.
The Autorité de contrôle prudentiel shall be notified
through the central body of changes made to the list of
local branches benefiting from a collective authorisation
granted pursuant to Article 14 of Decree 84–708 of 24 July
1984 aforesaid within one month.
Prior authorisation from the Autorité de contrôle prudentiel
is required for any change affecting the collective
authorisation granted to a mutual or cooperative bank for
itself and one or more mutual guarantee companies
pursuant to the amended Article of said Decree, or to the
Société Centrale de Crédit Maritime Mutuel for itself and
one or more mutual maritime credit unions or regional
branches pursuant to Article 16 of the amended
Decree 76-1011 of 19 October 1976 aforesaid.
Article 18
Regulation 90-11 of 25 July 1990 relating to changes in the
situation of credit institutions as amended by
Regulations 92-11 of 23 December 1992 and 94-11 of
8 December 1994 is hereby repealed.
In Article 11 of the amended Regulation 92-12 of
23 December 1992 relating to the provision of banking
services abroad by credit institutions and financial
institutions having their registered office in France, the
reference to Regulation 90-11 aforesaid is replaced by a
reference to this Regulation.
Undertakings subject to this Regulation shall ensure that
their partners or shareholders comply with the terms of this
Regulation, notably by requesting all relevant supporting
documents from them.
Article 16
Where an authorisation is required pursuant to this
Regulation and the Autorité de contrôle prudentiel remains
silent for more than three months concerning an application
made in compliance with Article 14 above, the said
authorisation is deemed to be granted, subject to the
provisions of Article 2 of this Regulation and of the
following paragraph.
34
Selected French Banking and Financial Regulations – 2013
1.1.4. IMPLEMENTATION OF THE SINGLE
MARKET
1.1.4.1. CREDIT INSTITUTIONS
REGULATION 92-12 OF 23 DECEMBER 1992,
REGARDING THE PROVISION OF BANKING
SERVICES ABROAD BY CREDIT INSTITUTIONS
AND FINANCIAL INSTITUTIONS HAVING THEIR
REGISTERED OFFICE IN FRANCE
as amended by Regulations 94-04 of 8 December 1994,
96–16 of 20 December 1996, 99–01 of 21 June 1999,
2002-03 of 15 July 2002,
and the Order of 20 February 2007
CHAPTER 1
CREDIT INSTITUTIONS
Article 1
A credit institution having its registered office within the
territory of the French Republic and wishing to establish a
branch in another Member State of the European
Communities for the purpose of providing banking
services, as defined in Article L. 511-21 of the Monetary
and Financial Code shall give prior notification of its plan
to the Autorité de contrôle prudentiel, and shall provide the
following information when effecting the said notification,
called a freedom of establishment notification:
1. the name of the Member State within territory of which
it plans to establish a branch,
2. a programme of operations setting out inter alia the
types of business envisaged and the structural
organisation of the branch,
3. the address of the branch to which the authorities of the
Member State referred to in point 1. above shall apply
for information in order to perform their appointed
tasks,
4. the names of those responsible for the management of
the branch.
The notification required in the preceding paragraph shall
be accompanied by all the relevant information for the
Autorité de contrôle prudentiel to assess the adequacy of
the administrative structure or financial situation of the
credit institution to the proposed plan, notably with respect
to the system of internal control of the branch and the
experience, fitness and properness of the managers placed
in charge of it. The Comité may also request details
regarding deposit-guarantee schemes intended to protect
depositors in the branch.
Article 2
When, pursuant Article L. 511-27 of the Monetary and
Financial Code and in the light of the plan submitted to it,
the Autorité de contrôle prudentiel has no grounds for
doubting the adequacy of the administrative structures or
financial situation of the institution concerned, it shall
communicate the information referred to in points 2.,3. and
4. of Article 1 to the competent authority of the Member
State referred to in point 1. within three months of due
receipt of the said information, and it shall inform the
institution concerned.
It shall further communicate the last available evaluation of
the capital and the solvency ratio of the credit institution,
together with details, where appropriate, regarding the
deposit-guarantee scheme intended to ensure the protection
of the depositors in the branch.
If the Autorité de contrôle prudentiel refuses to
communicate the information referred to in the first indent,
it shall inform the institution concerned of its reasons for
doing so within the time period specified in the first indent.
Article 3
Credit institutions with their registered office within the
territory of the French Republic that have branches in one
or more Member States of the European Communities
established prior to 1 January 1993, shall provide the
Autorité de contrôle prudentiel with the information
referred to in points 1.,2.,3. and 4. of Article 1 herein
relating to the said branches before 31 March 1993.
Article 4
In the event of an intention to change any of the
information or evaluation particulars communicated to the
Comité or brought to its knowledge, the institution
concerned shall notify the Autorité de contrôle prudentiel
of the said change at least one month before it takes effect.
The notification shall be accompanied by all relevant
details in order to enable the Comité to determine whether
the said change is consistent with the conditions laid down
in the second indent of Article L. 511-27 of the Monetary
and Financial Code.
Where necessary, the institution shall take such measures
as the Comité may deem necessary to ensure that its
administrative structures or financial situation remain
appropriate to the activities carried on or which it proposes
to conduct.
The freedom of establishment notification and the
information referred to in points 1. to 4. of this Article shall
be accompanied by certified authentic translations thereof
in the official language of the host Member State.
Article 5
A credit institution with its registered office within the
territory of the French Republic that wishes to provide
banking services under the freedom to provide services in
another Member State for the first time shall notify the
Autorité de contrôle prudentiel thereof, indicating the name
of the Member State and the nature of the banking services
that it proposes to provide.
For the application of this Regulation, any number of
places of business opened in a single Member State shall be
regarded as a single branch.
The said declaration shall be accompanied by a certified
authentic translation thereof in the official language of the
host Member State.
The credit institution shall, moreover, transmit to the
Autorité de contrôle prudentiel, at its request, all
Selected French Banking and Financial Regulations – 2013
35
information regarding procedures for the conduct of the
proposed activities under the freedom to provide services.
The Autorité de contrôle prudentiel shall transmit to the
Member State concerned the freedom to provide services
declaration mentioned in the first indent of this Article
within one month of its due receipt.
The Autorité de contrôle prudentiel shall be notified
immediately of any changes in the particulars previously
communicated to it.
Article 6
Credit institutions that already conduct business through
branches in one or more States that are not members of the
European Communities, with the exception of the
Principality of Monaco, prior to 1 January 1993, shall
inform the Autorité de contrôle prudentiel thereof before
31 March 1993.
A credit institution which commences or ceases an activity
in one of the States referred to in the preceding paragraph
shall notify the Autorité de contrôle prudentiel thereof.
Article 7
For the purpose of the application of Article 23, points 2 to
7 of the Directive of 20 March 2000, and to ensure fair
access to markets, credit institutions shall inform the
Autorité de contrôle prudentiel of any general difficulties
encountered by them in providing banking services in a
State that is not a member of the European Communities.
CHAPTER II
FINANCIAL INSTITUTIONS
Article 8
A financial institution as defined in Article L. 511-21 of the
Monetary and Financial Code must meet the following
conditions before it may establish a branch or carry on
business in other Member States of the Community under
the freedom to provide services, in accordance with the
mutual
recognition
procedures
laid
down
in
Article L. 511-28 of said Code:
–
–
–
at least 90% of the voting rights attached to the stock or
shares in the financial institution must belong to one or
more credit institutions authorised in France;
the parent undertaking must demonstrate that its
subsidiary is managed prudently and must, with the
approval of the Autorité de contrôle prudentiel, declare
that it jointly and severally guarantees the
commitments entered into by the said subsidiary;
the financial institution must effectively provide
banking services of the same nature within the territory
of the French Republic and it must be included, with
regard to these activities notably, in the supervision on
a consolidated basis of its parent undertaking.
When a financial institution meets these conditions, the
Autorité de contrôle prudentiel shall deliver a certificate to
that effect at its request.
36
Article 9
A financial institution that has obtained the certificate
mentioned in Article 8 herein and which wishes to establish
a branch in another Member State for the purpose of
providing banking services under the freedom of
establishment, shall follow the procedures laid down in
Articles 1 and 4 herein.
When, pursuant to Article L. 511-28 of the Monetary and
Financial Code, the Autorité de contrôle prudentiel has no
grounds, on the basis of the plan notified to it, for doubting
the adequacy of the administrative structures or financial
situation of the financial institution, it shall communicate
the information provided under Article 1 above, together
with the certificate referred to in Article 8, as laid down in
Article 2. The amount of the capital communicated shall be
that of the financial institution. The solvency ratio
communicated shall be the consolidated ratio of the parent
credit institution.
Article 10
A financial institution that has obtained the certificate
referred to under Article 8 herein and which wishes to carry
on business for the first time within the territory of another
Member State, under the freedom to provide services, shall
follow the procedure laid down in Article 5 herein.
The Autorité de contrôle prudentiel shall communicate the
declaration referred to in the said Article, together with the
certificate referred to in Article 8.
Article 11
Financial institutions having followed the procedures
stipulated herein for the provision of banking services in
other Member States of the European Communities shall be
subject to the following Regulations:
–
90-06 of 20 June 1990, relating to holdings in
undertakings;
–
90-07 of 20 June 1990, relating to the supervision of
interbank risks;
–
the Order of 20 February 2007, relating to own funds
requirements applicable to credit institutions and
investment firms.
–
93-05 of 21 December 1993 on controlling large
exposures
–
96-16 of 20 December 1996, relating to changes in the
situation of credit institutions and investment firms
other than portfolio management companies;
– 97-02 of 21 February 1997, relative to internal control
in credit institutions
Their capital resources may not fall below the minimum
amount required in order to commence their activities, as
required by their legal status.
CHAPTER III
MISCELLANEOUS PROVISIONS
Article 12
This Regulation does not apply to institutions having their
registered office in the French overseas territories, in
Nouvelle Calédonie, in the territorial unit (collectivité
Selected French Banking and Financial Regulations – 2013
territoriale) of Saint-Pierre-et-Miquelon or in the
departemental unit (collectivité départementale) of
Mayotte.
Article 12 bis
As from the date of entry into force of the Agreement on
the European Economic Area, the provisions of this
Regulation shall be extended to credit institutions and
financial institutions having their registered office within
the territory of the French Republic, other than those
referred to in Article 12 above, and wishing to conduct
their business through branches or the free provision of
services within the territory of States other than the
Member States of the European Union that are parties to
the Agreement.
The credit institutions referred to in the previous paragraph
that have opened branches in one or more States that are
parties to the Agreement on the European Economic Area,
other than the Member States of the European Union,
before the date of entry into force of the Agreement shall
communicate the information referred to in points 1, 2, 3
and 4 of Article 1 to the Comité des Établissements de
Crédit before 31 December 1994.
Article 13
This Regulation shall take effect from 1 January 1993
REGULATION 92-13 OF 23 DECEMBER 1992,
RELATING TO THE PROVISION OF BANKING
SERVICES IN FRANCE BY INSTITUTIONS
HAVING THEIR REGISTERED OFFICE IN OTHER
MEMBER STATES OF THE EUROPEAN UNION
as amended by Regulations 93-03 of 19 March 1993,
94-02 of 27 July 1994, 94-04 of 8 December 1994,
95-01 of 21 July 1995, 98-08 of 7 December 1998,
99-07 of 9 July 1999 2001-04 of 29 October 2001,
2002-01 of 18 April 2002, 2002-03 of 15 July 2002, 200402 of 15 January 2004
and the Order of 16 February 2005
Article 1
The Autorité de contrôle prudentiel must have received
prior communication of the following information from the
competent authority of the Member State concerned in
order that a credit institution having its headquarters in
another Member State of the European Communities may
open a branch for the purpose of providing banking
services within the territory of the French Republic, with
the exception of the overseas territories, the Nouvelle
Calédonie, the territorial unit (collectivité territoriale) of
Saint-Pierre-et-Miquelon and the departemental unit
(collectivité départementale) of Mayotte, as provided in
Article L. 511-22 of the Monetary and Financial Code:
1. a programme of activities setting out inter alia the types
of operations envisaged and the structural organisation
of the branch;
2. the address from which documents may be requested in
France;
3. the names of the managers responsible for the branch;
Selected French Banking and Financial Regulations – 2013
4. the amount of the own funds and the solvency ratio of
the credit institution;
5. details regarding any deposit-guarantee scheme
intended to ensure the protection of depositors.
Upon due receipt of the information, the Autorité de
contrôle prudentiel shall issue an acknowledgement of
receipt to the competent authority concerned and shall
inform the institution in question thereof. It shall also
communicate to the institution those measures taken in
application of the above-mentioned amended Act 84-46
[inserted in the Monetary and Financial Code], notably the
Regulations referred to in Article 5 herein, which it must
comply with.
The branch may commence its activities upon receipt of the
communication referred to in the preceding paragraph, or
when a period of time set by the Autorité de contrôle
prudentiel has elapsed, or in any event after a period of two
months from the date of due receipt of the said information
has elapsed.
For the purpose of application of the present Regulation, if
more than one place of business is opened within the
territory of the French Republic, with the exception of the
overseas territories, the Nouvelle Calédonie, the territorial
unit (collectivité territoriale) of Saint-Pierre-et-Miquelon
and the departemental unit (collectivité départementale) of
Mayotte, they shall be regarded as a single branch.
Article 2
In order that a credit institution having its headquarters in
another Member State of the European Communities may
provide services, under the freedom to provide services,
within the territory of the French Republic, with the
exception of the overseas territories, the Nouvelle
Calédonie, the territorial unit (collectivité territoriale) of
Saint-Pierre-et-Miquelon and the departemental unit
(collectivité départementale) of Mayotte, in accordance
with Article L. 511-22 of the Monetary and Financial
Code, the Autorité de contrôle prudentiel must have
received prior communication from the competent
authority of the Member State concerned of the notification
by the institution indicating its identity and the banking
services which it proposes to provide within the French
territory.
The Autorité de contrôle prudentiel shall immediately issue
an acknowledgement of receipt of the said communication
to the competent authority, and to the institution concerned.
The institution concerned may then commence its
activities.
Article 3
In order that a financial institution having its headquarters
in another Member State of the Communities may establish
branches for the provision of banking services or act under
the freedom to provide services within the territory of the
French Republic, with the exception of the overseas
territories, the Nouvelle Calédonie, the territorial unit
(collectivité territoriale) of Saint-Pierre-et-Miquelon and
the departemental unit (collectivité départementale) of
Mayotte, pursuant to Article L. 511-23 of the Monetary and
Financial Code, the Autorité de contrôle prudentiel must
have received prior communication, from the competent
authority of the Member State concerned, of a certificate to
37
the effect that the institution meets the conditions laid down
by it in order to qualify for the regime provided for credit
institutions.
maintained in
2 August 1984;
for the creation of a branch: the information required in
the first paragraph of Article 1 of the present
Regulation. The amount of capital communicated shall
be that of the financial institution. The solvency ratio
communicated shall be the consolidated ratio of the
parent credit institution.
The procedures referred to in second and third
paragraphs of Article 1 shall then apply;
–
for the exercise of the freedom to provide services, the
information required under Article 2.
The procedures referred to in the second paragraph of
Article 2 shall then apply.
by
Regulation
84-01
of
–
amended Regulation 85-01 relating to reserve
requirements in the French overseas departments1;
–
Regulation 85-17 relating to the interbank market;
–
amended Regulation 86-08 relating to the central
database on payment incidents;
–
amended Regulation 86-09 relating to the central
database on risks;
–
amended Regulation 86-13 relating to the interest on
funds received by credit institutions;
–
amended Regulation
requirements;
–
Regulation 86-20 relating to conditions governing the
opening of passbook accounts;
The said certificate shall be accompanied by:
–
force
86-14
relating
to
reserve
–
Regulation 86-21 relating to non-banking activities;
Article 4
Any proposed change in the particulars communicated to
the Autorité de contrôle prudentiel pursuant to Article 1,
with the exception of point 4, shall be notified, in French,
to the Committee by the headquarters or branch of the
institution concerned at least one month prior to the date
when it comes into effect.
–
amended Regulation 86-22 relating to the opening of
branches;
–
Regulation 87-09 relating to the hedging of transactions
in securities and financial products;
–
Regulation 87-11 amending the standard form for a
preliminary offer to lease;
Any modification in the information communicated to the
Autorité de contrôle prudentiel pursuant to Article 2 shall
immediately be notified, in French, to the said Committee.
–
amended Regulation 89-06 relating to the interest
margin required by clearing houses in regulated
markets;
–
Regulation 90-05 relating to the FICP;
–
Regulation 90-12 relating to the time-stamping of
orders;
–
Regulation 90-13 relating to the conditions governing
the receipt and execution of customer orders
transmitted via professional intermediaries;
–
Regulation 91-07 relating to vigilance with regard to
money laundering operations;
–
Amended Regulation 93-03 of 19 March 1993 relating
to securities account agreements between credit
institutions and their clients;
–
Regulation 94-02 relating to accounting of customers’
securities by credit institutions;
–
Regulation 98-08 relating to negotiable debt securities;
–
Regulation 99-07 relating to the guarantee of deposits
or other repayable funds received by the branches of
credit institutions;
–
Regulation 2001-04 relating to cheque clearing.
–
Regulation 2002-01 relating to obligations of vigilance
with regard to cheques in order to combat money
laundering and the financing of terrorism,
–
Order of 16 February 2005 taken in implementation of
Article 1 of decree 92-137 of 13 February 1992 as
amended relative to the issuance of negotiable debt
1
The Act 93-980 of 4 August 1993 as amended relating to the
Banque de France statute [inserted in the Monetary and
Financial Code] made these regulations null and void.
Article 5
The branches of credit institutions or financial institutions
referred to, respectively, in Articles 1 and 3 herein shall be
subject to amended Regulation 88-01 relating to liquidity
and Articles 31-1, 43 paragraph 3 and 44 of amended
Regulation 97-02 of 21 February 1997 relating to internal
control in credit institutions and investment firms.
Without prejudice to the laws and regulations applicable to
the activity carried on, credit and financial institutions
which conduct business in the form of a branch shall
comply with the following additional general interest
provisions:
–
–
the amended Conseil National du Crédit Decisions
69-02, 69-03, 69-04 and 69-05, relating to conditions
governing the receipt of funds by banks and financial
institutions in metropolitan France and the overseas
departments;
Conseil National du Crédit Decision 72-05 relating to
the conditions governing the payment of interest on
French-franc accounts opened by non-residents;
–
Conseil National du Crédit Decision 74-07 relating to
procedures for calculating interest on financial assets
offered to the public;
–
Conseil National du Crédit Decision 76-02 relating to
the management of securities redeemable by lot;
− Conseil National du Crédit Decision 79-05 relating to
the clearing of cheques: (abrogated since 30 June
2002)
38
Selected French Banking and Financial Regulations – 2013
securities by investment firms, credit institutions and
the Caisse des Dépôts et Consignations.
Institutions operating under the freedom to provide services
shall also be required to comply with the provisions
referred to in the preceding paragraph with regard to those
of their operations which are subject to mandatory
provisions of French law.
Article 6
Credit institutions having their headquarters in another
Member State of the European Communities and wishing
to provide banking services within the territory of the
Principality of Monaco must apply for authorisation in
accordance with the conditions laid down in
Article L. 511-10 of the Monetary and Financial Code and
shall be bound by all of the provisions of the said Act.
Article 6 bis
As from the date of entry into force of the Agreement on
the European Economic Area, credit institutions and
financial institutions having their headquarters in States
that are parties to the Agreement shall be considered to be
equivalent to credit institutions and financial institutions
having their headquarters in a Member State of the
European Union, other than France.
Article 7
The present Regulation
1 January 1993.
shall
take
effect
as
of
1.1.4.2. INVESTMENT SERVICE PROVIDERS
EXCERPT FROM MONETARY AND FINANCIAL
CODE:
ARTICLES R. 532-20 TO R. 532-29, RELATING TO
THE RIGHT OF ESTABLISHMENT AND
FREEDOM TO PROVIDE SERVICES FOR
INVESTMENT SERVICES PROVIDERS
IN OTHER STATES PARTY TO THE EUROPEAN
ECONOMIC AREA AGREEMENT
RIGHT OF ESTABLISHMENT AND FREEDOM
TO PROVIDE SERVICES IN FRANCE
Article R. 532-17
The Autorité des marchés financiers receives notifications
of free establishment and free provision of services by
investment service providers referred to in Articles L. 53218 and L. 532-18-1. It shall immediately inform the
Autorité de contrôle prudentiel.
The Autorité des marchés financiers also receives
notifications of free establishment and free provision of
services by management companies referred to in Article L.
532-20-1.
Article R. 532-18
The Autorité de contrôle prudentiel informs, where
appropriate, the investment service providers referred to in
Selected French Banking and Financial Regulations – 2013
Article L. 532-18-1 of the provisions in the general interest
they must comply with when providing banking services.
Right of Establishment and Freedom to provide
Services in other States that are Party to the
European Economic Agreement
Right of Establishment
Right of Establishment: services providers other than
portfolio management companies
Article R. 532-20
I. Any investment service provider, other than a portfolio
management company subject to Article L. 532-9 of the
Monetary and Financial Code, having its registered office
within metropolitan France or its overseas departments
ruled by Article 73 of the Constitution that intends to set up
a branch to provide investment services in another State
that is party to the European Economic Area Agreement
shall give prior notice of its plans to the Autorité de
contrôle prudentiel, which shall refer the matter to the
Autorité des marchés financiers within five working days.
The Autorité des marchés financiers transmits its comments
on this project to the Autorité de contrôle prudentiel within
one month.
The notification of establishment provided for in the
preceding paragraph shall be accompanied by the following
information:
1) the State within the territory of which the firm or
institution plans to establish a branch;
2) the programme of operations setting out inter alia the
types of investment and related services envisaged and
the organisational structure of the branch and
specifying whether the branch intends to have recourse
to related parties as referred to in Article L.545-1;
3) the address of the branch from which the authorities of
the State referred to under 1) may request documents in
order to exercise their powers;
4) the names of the senior managers of the branch.
At the request of the Autorité de contrôle prudentiel or the
Autorité des marchés financiers, the investment service
provider shall also supply all information necessary to
enable the authorities to assess the adequacy of its
administrative structure or financial position for the
activities envisaged, as well as any information regarding
the compensation or equivalent scheme intended to protect
the branch’s customers.
The notification of establishment provided for in the first
paragraph may be addressed by the firm to the Autorité de
contrôle prudentiel at the same time as its application for
authorisation.
Article R. 532-21
Unless the Autorité de contrôle prudentiel or the Autorité
des marchés financiers have decided that the administrative
structure or the financial position of the investment service
provider preclude the establishment of a branch, the
Autorité de contrôle prudentiel transmits the notification
and the information communicated under 2°, 3° and 4° of I
of Article R. 532-20 to the authority of the host State
39
referred to in 1° of Article R. 532-20 which has been
designated as contact point in the meaning of Article L.
532-23, within three months of receipt. The Autorité de
contrôle prudentiel also transmits to this authority
information on the compensation or equivalent scheme
intended to protect the branch’s customers. It shall inform
the Autorité des marchés financiers as well as the firm or
institution concerned of such transmission.
In addition to the information referred to in Article R. 53220, the Autorité de contrôle prudentiel shall provide the
authority of the host State designated as contact point with
detailed information on the investor compensation system
to which the investment service provider has subscribed in
accordance with Article L. 322-1. Should any of this
information change, the Autorité de contrôle prudentiel
shall notify that authority.
Where an investment service provider intends to exercise
its right to act as a global custodian under the freedom to
provide investment services in another State that is party to
the European Economic Area Agreement, it shall, without
prejudice of the conditions requested by the competent
authority of the host country, have been agreed to exercise
this service in France.
Article R. 532-22
Where the Autorité des marchés financiers, in the case of
the exercise of the service mentioned in 4° of Article L.
321-1, refuses to have the information referred to in Article
R. 532-21 transmitted to the competent authority of the
host State referred to in the 1° of Article R. 532-20, which
has been designated as contact point, it shall give the
reasons for its refusal to the Autorité de contrôle prudentiel
as well as to the firm or institution concerned within three
months as provided in Article R. 532-21.
Where the Autorité de contrôle prudentiel refuses to
transmit the information referred to in Article R. 532-21, it
shall inform the Autorité des marchés financiers as well as
the firm or institution concerned in the same conditions and
within the same deadline as specified in the preceding
paragraph.
Article R. 532-23
Where a change is planned to any of the particulars given
under points 2°, 3° and 4° of Article R. 532-20 or to any of
the information communicated to the Autorité de contrôle
prudentiel, the firm or institution concerned shall notify the
Autorité de contrôle prudential of this change at least one
month before it is implemented. The Autorité de contrôle
prudentiel shall within five working days refer the matter to
the Autorité des Marchés Financiers. It shall also inform
the authority of the host State which has been designated as
contact point.
Where the Autorité de contrôle prudentiel or, in the case of
the exercise of the service mentioned in Article L. 321-1,
4°, the Autorité des marchés financiers deem that the firm
or institution must take steps to adapt its administrative
structures or financial position to existing or planned
activities, they shall request the taking of such steps in a
registered letter sent to the firm with return receipt
requested.
Article R. 532-24
I. Any portfolio management company subject to
Article L. 532-9 of the Monetary and Financial Code and
having its registered office in metropolitan France or its
overseas departments of Saint Barthélemy and Saint
Martin, that wishes to establish a branch to provide
investment services or manage an investment fund
authorised under Directive 2009/65/EC of the European
Parliament and the Council of 13 July 2009 in another
State that is party to the European Economic Area
Agreement shall give prior notice of its plans to the
Autorité des marchés financiers.
The notification of establishment provided for in the
preceding paragraph shall be accompanied by the
information listed in the second paragraph of Article R.
532-20. The portfolio management company shall also
provide the information specified in the seventh paragraph
of said article if so requested by the Autorité des marchés
financiers.
For the management of investment funds authorised under
Directive 2009/65/EC of the European Parliament and the
Council of 13 July 2009, the programme referred to in 2° of
Article R. 532-20 also includes a description of the risk
management process set up by the portfolio management
company and a description of the procedures and
arrangements for handling complaints.
The portfolio management company may send to the
Autorité des marchés financiers the notification of
establishment provided for in the first paragraph and its
request for an agreement together.
II. Unless the Autorité des marchés financiers has
determined that the administrative structures or the
financial position of the portfolio management company
preclude the establishment of a branch, it shall transmit the
notification and the information communicated under 2°, 3°
and 4° of Article R. 532-20 to the competent authority of
the host State mentioned in 1° of the same article, which
has been designated as contact point, within three months
of receipt.
This timeframe is two months when the planned activity is
managing investment funds authorised under Directive
2009/65/EC of the European Parliament and the Council of
13 July 2009.
Where appropriate, the Autorité des marchés financiers
also transmits information on the compensation or
equivalent scheme intended to protect the branch’s
customers and informs the company concerned thereof.
III. Where the Autorité des marchés financiers refuses to
communicate the information referred to in Article R. 53221 to the competent authority of the host State mentioned
in 1° of Article R. 532-20, which has been designated as
contact point, it shall give reasons therefore to the
company concerned within the three month period provided
for in Article R. 532-21. This timeframe is two months
when the planned activity is managing investment funds
authorised under Directive 2009/65/EC of the European
Parliament and the Council of 13 July 2009.
Right of establishment: portfolio management companies
40
Selected French Banking and Financial Regulations – 2013
IV. Where a portfolio management company wishes to
manage investment funds authorised under Directive
2009/65/EC of the European Parliament and the Council of
13 July 2009, the Autorité des marchés financiers includes
in the documentation sent to the competent authorities of
the Member State hosting the portfolio management
company a certificate confirming that the said company has
been authorised in accordance with the provisions of this
directive, a description of the scope of the authorisation
granted and details on any restriction on the types of
investment funds that the company is authorised to manage.
The Autorité de contrôle prudentiel or the Autorité des
Marchés Financiers may request that the investment
service provider referred to in the first paragraph supply all
information on the conditions in which it intends to carry
out the activities concerned under the freedom to provide
services.
Article R. 532-25
Where a portfolio management company plans to change
any of the particulars referred to in 2°, 3° and 4° of Article
R. 532-20 and in the third paragraph of I of Article R. 53224 or any of the information transmitted to the Autorité des
marchés financiers, it shall inform the Autorité des
marchés financiers of this change at least one month before
it is implemented. The Autorité des marchés financiers
shall notify this to the authority of the host State that has
been designated as contact point.
II. The Autorité de contrôle prudentiel shall transmit the
notification of the provision of services provided for in the
first paragraph of I of this Article to the competent
authority of the host State, that has been designated as
contact point, within one month of its receipt. Where the
firm or institution has been requested to supply additional
information, this deadline is suspended until the
information has been received.
Should there be any changes to the information provided
under the first paragraph of II of Article R. 532-24, the
Autorité des marchés financiers shall notify the competent
authorities of the host Member State of the portfolio
management company accordingly.
The Autorité des marchés financiers shall update the
information contained in the certificate referred to in IV of
Article R. 532-24 and shall inform the competent
authorities of the host Member State of the portfolio
management company of any changes in the scope of the
authorisation granted to that company or in the particulars
concerning any restrictions on the types of investment
funds that the company is authorised to manage.
Where the Autorité des marchés financiers deems that the
portfolio management company must take steps to adapt its
administrative structures or financial position to its existing
or planned activities, it shall request the taking of such
steps in a registered letter sent to the company with return
receipt requested.
The notification of the provision of services referred to in
the first paragraph may be addressed by the applicant to the
Autorité de contrôle prudentiel at the same time as the
authorisation application.
Where an investment service provider intends to exercise
its right to act as a global custodian under the freedom to
provide investment services in another State that is party to
the European Economic Area Agreement, it shall, without
prejudice of the conditions requested by the competent
authority of the host country, have been agreed to exercise
this service in France.
Where the investment service provider intends to have
recourse to related parties, the Autorité de contrôle
prudentiel shall communicate, at the request of the
competent authority of the host Member State and within a
reasonable timeframe, the identity of the related parties that
the provider intends to use in that Member State.
Article R. 532-27
Any planned changes regarding the information notified
under the provisions of the first paragraph of I of Article R.
532-26 are communicated to the Autorité de contrôle
prudentiel before these changes become effective. The
Autorité de contrôle prudentiel shall notify the Autorité des
marchés financiers within five working days. It shall also
notify the authority of the host State that has been
designated as contact point.
Freedom to provide investment services
Freedom to provide services: services providers other than
portfolio management companies
Article R. 532-26
I. Any investment service provider having its registered
office in metropolitan France or the overseas departments,
of Saint Barthélemy and Saint Martin that intends to
exercise its right to provide investment services for the first
time in another State that is party to the European
Economic Area Agreement shall notify the Autorité de
contrôle prudentiel of its plans. It shall indicate the State
concerned and describe the type of investment services it
contemplates providing and whether it intends to have
recourse to related parties.
The Autorité de contrôle prudentiel shall within five
working days forward this notification to the Autorité des
marchés financiers.
Selected French Banking and Financial Regulations – 2013
Freedom to provide services: portfolio management
companies
Article R. 532-28
I. Any portfolio management company having its
registered office in metropolitan France or in overseas
departments of Saint Barthélemy and Saint Martin, that
intends to provide investment services or manage an
investment fund not governed by French law authorised
under Directive 2009/65/EC of the European Parliament
and the Council of 13 July 2009 for the first time under the
freedom to provide services in another State that is party to
the European Economic Area Agreement shall notify the
Autorité des Marchés Financiers of its plans. It shall
indicate the State concerned and describe the type of
investment services it intends to provide.
As regards the management of investment funds not
governed by French law authorised under Directive
2009/65/EC of the European Parliament and the Council of
41
13 July 2009, the notified project also includes a
description of the risk management process set up by the
portfolio management company and a description of the
procedures and arrangements for handling complaints.
At the request of the Autorité des Marchés Financiers, the
portfolio management company shall provide all
information on the conditions in which it carries out its
activities under the freedom to provide services.
The notification of freedom to provide services set out in
the first paragraph may be addressed, by the interested
portfolio management company, to the Autorité des
marchés financiers together with its application for
authorisation.
II. The Autorité des Marchés Financiers shall forward the
declaration of provision of services made pursuant to I of
this Article to the State concerned within one month of its
receipt.
III. Where a portfolio management company wishes to
manage one or more investment funds not governed by
French law authorised under Directive 2009/65/EC of the
European Parliament and the Council of 13 July 2009, the
Autorité des marchés financiers adds to the documentation
sent to the competent authorities of the host Member State
of the portfolio management company, a certificate
confirming that the company has been authorised in
accordance with the provisions of directive 2009/65/EC of
the European Parliament and the Council of 13 July 2009, a
description of the scope of the authorisation granted to the
portfolio management company and particulars regarding
any restriction on the types of investment funds that this
company is authorised to manage.
Article R. 532-29
The Autorité des Marchés Financiers and the authorities of
the relevant State party to the European Economic Area
Agreement must receive prior notice of any changes in the
particulars provided pursuant to the first paragraph of I of
Article R. 532-28.
The Autorité des marchés financiers shall update the
information contained in the certificate referred to in III of
R. 532-28 and inform the competent authorities of the host
Member State of the portfolio management company of
any changes in the scope of the authorisation granted to
that company or the particulars of any restriction on the
types of investment funds that the company is authorised to
manage.
1.1.5. DEPOSIT GUARANTEES
REGULATION 99-05 OF 9 JULY 1999, RELATING
TO THE GUARANTEE OF DEPOSITS AND OTHER
REPAYABLE FUNDS RECEIVED BY CREDIT
INSTITUTIONS HAVING THEIR HEADQUARTERS
IN FRANCE OR IN THE PRINCIPALITY OF
MONACO
As amended by Regulations-99-14
of 23September 1999 and 2002-04 of 15 July 2002
and Order of 29 September 2010
Article 1
The deposit guarantee fund referred to at Article L. 312-4
of the Monetary and Financial Code shall compensate,
under the conditions set forth herein, the deposits and other
repayable funds received by credit institutions authorised
by the Autorité de contrôle prudentiel.
Article 1.1 – Credit institutions having their headquarters
in metropolitan France or in the overseas departments and
regions shall be members of the deposit guarantee fund.
Credit institutions having their registered office in SaintPierre-et-Miquelon and Mayotte or in the Principality of
Monaco shall be members of the deposit guarantee fund.
Credit institutions having their registered office in French
Polynésie, in Nouvelle Calédonie and the islands of Wallis
and Futuna shall be members of the deposit guarantee fund.
TITLE I
GUARANTEED DEPOSITS AND OTHER
REPAYABLE FUNDS
Article 2
Deposits and other repayable funds guaranteed pursuant to
Article L. 312-4 of the Monetary and Financial Code and
this Regulation, hereinafter referred to as the "deposits",
shall mean any credit balance resulting from funds left in
an account or from temporary situations deriving from
normal banking transactions which a credit institution must
repay under the legal and contractual conditions applicable,
particularly in clearing arrangements. The deposits thus
defined shall include guarantee deposits, when they
become repayable, and sums due on production of
interest-bearing notes and payment media of any kind
issued by the institution and cash deposits, including those
made to guarantee or cover positions taken on a market in
financial instruments, when such deposits relate to an
investment service or to the clearing or custody of financial
instruments provided by such institution.
For the credit institutions referred to in the first paragraph
of Article 1.1, the deposits referred to in the preceding
paragraph shall include those in the books of their
secondary establishments located on the territory of the
French Republic or in the Principality of Monaco and in
those of their branches established in other States party to
the agreement on the European Economic Area.
For the credit institutions referred to in the second and third
paragraphs of Article 1.1, the deposits referred to in the
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Selected French Banking and Financial Regulations – 2013
first paragraph shall include those in the books of their
secondary establishments located on the territory of the
French Republic or in the Principality of Monaco.
f) deposits in currencies other than those of States
party to the agreement on the European Economic
Area, with the exception of the CFP franc.
Article 3
The following shall be excluded from repayment by the
guarantee fund:
Article 4
Deposits held when an institution’s authorisation is revoked
or when an institution is struck off shall continue to be
covered by the guarantee fund.
1. Deposits made by the following:
a) credit institutions and investment firms on their
own behalf and for their own account,
b) insurance undertakings,
c) collective investment organisations,
d) pension organisations and funds,
e) persons referred to in Article L. 518-1 of the
Monetary and Financial Code,
f) members with personal liability and limited
partners holding at least 5% of the credit
institution’s capital, directors, members of the
executive board and supervisory board, managers
and statutory auditors of the institution and any
depositor having similar status in other companies
in the same group,
g) third parties acting on behalf of the persons referred
to in f) above,
h) companies which have direct or indirect
shareholding links giving one of the linked
undertakings effective control over the others,
i) other financial institutions within the meaning of
Article L. 511-21, point 4 of the Monetary and
Financial Code;
2. Deposits arising out of transactions in connection with
which the depositor has been convicted for the crime of
money laundering under the terms of Articles 222-38,
324-1 or 324-2 of the Penal Code or Article 415 of the
Customs Code;
3. Deposits for which the depositor has, on an individual
basis, obtained from the same credit institution rates
and financial concessions which have helped to
aggravate its financial situation;
TITLE II
MAXIMUM COMPENSATION
Article 5
5.1 - The limit on compensation for each depositor shall be
€ 100,000.
5.2 - For the credit institutions referred to in the first
paragraph of Article 1.1, this limit shall apply to all of the
same depositor’s deposits with the same credit institution,
irrespective of the number of deposits, the location on the
territory of the French Republic, in the Principality of
Monaco or in the European Economic Area and, subject to
the provisions of Article 3.4(f), the currency concerned.
5.3 – For the credit institutions referred to in the second
paragraph of Article 1.1, this limit shall apply to all of the
same depositor’s deposits with the same credit institution,
irrespective of the number of deposits, the location on the
territory of the French Republic or in the Principality of
Monaco and, subject to the provisions of Article 3.4(f), the
currency concerned.
5.4 - The limit on compensation for depositors who are
customers of the credit institutions referred to in the third
paragraph of Article 1.1 is equal to the equivalent value in
CFP francs of the amount set forth at Article 5.1, obtained
by applying the parity defined pursuant to Article L. 712-2
of the Monetary and Financial Code.
This limit shall apply to all of the same depositor’s deposits
with the same credit institution, irrespective of the number
of deposits, the location on the territory of the French
Republic or in the Principality of Monaco and, subject to
the provisions of Article 3.4° f), the currency concerned.
4. Because of their specific nature:
a) deposits made by government
administrative authorities,
and
central
b) liabilities forming part of the institution’s own
funds as defined in Regulation 90-02 of 23
February 1990 as amended on own funds,
c) non-nominative deposits other than sums due
against payment media of all types issued by the
institution,
d) the negotiable debt securities referred to at
Article L. 213-1 of the Monetary and Financial
Code as amended containing various economic and
financial provisions,
e) other debt securities issued by the same credit
institution and liabilities arising out of own
acceptances and promissory notes,
Selected French Banking and Financial Regulations – 2013
Article 6
The share of each depositor in a joint account shall be taken
into account in calculating the limit mentioned in the
preceding Article. In the absence of special provisions,
such account shall be divided equally amongst the
depositors.
Deposits in an account to which two or more persons are
entitled as shareholders or members of an association or
any similar grouping not having legal personality shall be
aggregated and treated as if made by a single depositor for
the purpose of calculating the same limit.
When the depositor is not entitled to the sums deposited in
the account, it is the person entitled to them who is covered
by the guarantee, provided that such person has been
identified or is identifiable before the date on which it is
determined that the deposits are unavailable. If several
43
persons are entitled, the share of each under the
arrangements subject to which the sums are managed shall
be taken into account when the limit referred to in the
preceding Article is calculated.
TITLE III
TERMS AND TIME LIMITS FOR
COMPENSATION
Article 7
Except in cases where reorganisation or liquidation
proceedings are initiated, the Autorité de contrôle
prudentiel, determines that deposits are unavailable five
working days at the latest after first having established that
a credit institution has not repaid a due and payable deposit
for reasons that may be related to its financial situation and
that it appears unlikely that repayment will be made soon.
The Autorité de contrôle prudentiel brings immediately the
matter before the deposit guarantee fund under the terms of
the first paragraph of Article L. 312-5 of the Monetary and
Financial Code and shall notify the credit institution that it
has been struck off.
Article 8
The credit institution concerned shall transmit to the
deposit guarantee fund any necessary information and
document as soon as possible and at the latest five days as
from the date at which the Autorité de contrôle prudentiel
sets out the observations of facts mentioned at Article 7 of
this regulation. On the basis of such information and
documents, the guarantee fund shall verify depositors’
claims in respect of the unavailable deposits and shall
promptly inform them by registered letter with
acknowledgment of receipt that the deposits are
unavailable. On the basis of this letter, the deposit
guarantee fund shall inform each depositor of the amount
and nature of deposits covered by the deposit guarantee and
of claims that are excluded from compensation under the
terms of Articles 3 and 5 of the present Regulation.
It shall inform depositors that they have seven days in
which to make known all remarks relevant to their
compensation or to challenge the proposed breakdown and,
where relevant, to choose the currency in which they wish
the compensation to be paid. On expiry of this deadline, the
guarantee fund shall begin paying compensation under the
conditions set forth at Article 9.
The letter mentioned in the first paragraph shall inform
depositors of the terms and conditions and of the
procedures to be followed, if reorganisation or liquidation
proceedings have been initiated with respect to the
defaulting credit institution, in order to submit claims
excluded from compensation by the deposit guarantee fund
to the creditors’ representative or to the liquidator
appointed by the commercial court.
The guarantee fund may not invoke the time limits laid
down in the second and fourth paragraphs above to deny
benefit of the guarantee to any depositor.
Article 9
9.1 – The compensation of the depositors of the credit
institutions referred to in the first and second paragraphs of
Article 1.1 shall be paid in euro.
Deposits in CFP francs shall be converted into euro at the
parity in effect on the date on which the deposits became
unavailable.
Deposits in foreign currency shall be converted into euro at
the rate applying on the date on which the deposits became
unavailable.
Depositors domiciled in the geographical zones referred to
in the third paragraph of Article 1.1 may ask to be
compensated in CFP francs.
9.2 – The compensation of depositors of the credit
institutions referred to in the third paragraph of Article 1.1
shall be paid in CFP francs.
Deposits in euros shall be converted into CFP francs at the
parity in effect on the date on which the deposits became
unavailable.
Deposits in foreign currency shall be converted into CFP
francs at the rate applying on the date on which the deposits
became unavailable.
Depositors domiciled in the geographical zones referred to
in the first paragraph of Article 1.1 may ask to be
compensated in euros.
9.3 – Notwithstanding the time limits laid down in the fifth
paragraph of Article 8, when the depositor or any other
person having entitlement to or an interest in sums held in
an account is under investigation on suspicion of money
laundering under the terms of Articles 222-38, 324-1 or
324-2 of the Penal Code or Article 415 of the Customs
Code, the guarantee fund shall suspend the corresponding
payments pending the court’s final decision.
Article 10
If a reorganisation or liquidation procedure has been
initiated with respect to a credit institution and the deposit
guarantee fund has intervened with respect to the same
credit institution, the fund shall provide the creditors’
representative or the liquidator appointed by the
commercial court with a detailed list for each depositor of
the claims it has paid and of claims that have not been paid
under the terms of Articles 3 and 5 of the present
Regulation.
The fund shall compensate the claims it has admitted in
respect of the guarantee within twenty days of the action
brought before it by the Autorité de contrôle prudentiel.
When the circumstances so warrant, the guarantee fund
may apply to the Autorité de contrôle prudentiel for an
extension of this time limit, which may not exceed ten
working days.
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Selected French Banking and Financial Regulations – 2013
TITLE IV
INFORMATION PROVIDED TO
DEPOSITORS
Article 11
Credit institutions subject to the present Regulation shall
furnish depositors and any other person making such
request with all relevant information about the deposit
guarantee mechanism, including in particular the level and
scope of the cover provided.
Depositors shall be informed of any changes.
Credit institutions subject to the present Regulation may
not use such information for advertising purposes.
Article 12
Depositors may obtain further information about terms or
time limits for compensation and about the formalities for
obtaining compensation from the guarantee fund on
request.
Article 13
Information intended for depositors and documents relating
to the conditions to be met and formalities to be
accomplished in order to benefit from a payment under the
deposit guarantee arrangements shall be provided in
French, in a detailed manner that is readily comprehensible
to any depositor.
TITLE V
SUNDRY PROVISIONS
Article 14
Credit institutions that manage a mutual guarantee fund
shall inform persons asked to participate in such fund of the
conditions under which their contributions will be repaid.
The institutions shall also inform the depositor when such
sums become repayable, under the terms of the guarantee
fund’s by-laws.
Managing institutions shall state the conditions under
which such sums are covered by the deposit guarantee
fund, and in particular shall specify that contributions are
covered by the above-mentioned fund only when they have
become repayable.
Article 15
Notwithstanding the provisions of Article 9 of the present
Regulation, until 31 December 2001 depositors may ask to
be compensated in French francs.
Article 16
The present Regulation shall take effect immediately.
Until the guarantee fund has been finally put in place, in
the event of an incident the Autorité de contrôle prudentiel
shall cause the credit institution concerned to take
appropriate steps to identify and verify claims. In
accordance with Article 75-III of the above-mentioned Act
of 25 June 1999, the Autorité de contrôle prudentiel shall
Selected French Banking and Financial Regulations – 2013
decide how to allocate the contributions it has called up;
compensation shall be paid on behalf of the guarantee fund,
under the conditions laid down in the present Regulation,
by the Treasury, which is responsible for collecting and
managing the above-mentioned contributions. All elements
of the calculation specific to each member are covered by a
professional secrecy obligation.
REGULATION 99-06 OF 9 JULY 1999, RELATING
TO THE RESOURCES AND OPERATION OF THE
DEPOSIT GUARANTEE FUND
as amended by Regulations 2000-07 of 6 September
2000,
2002-04 of 15 July 2002, 2002-08 of 21 November 2002,
2003-04 of 12 November 2003 and by the
Orders of 20 February 2007,
19 October 2007, 7 March 2008
and 29 September 2010
TITLE I
THE FUND’S FINANCIAL RESOURCES
Article 1
Credit institutions that belong to the deposit guarantee fund
provided for at Article L. 312-4 of the Monetary and
Financial Code and that are authorised in France must
subscribe a certificate of association before 31 December
1999 and pay a contribution in two equal parts, one before
that date and the other before 31 December 2000, the
amount of which shall be determined using the calculation
method described in the appendix to the present
Regulation. At 31 December 1999, the total overall amount
of the certificates of association subscribed in this way
shall be five hundred million euro. It shall be increased by
the contributions of institutions authorised after that date
and reduced by the repayments provided for at Article 9.
Article 2
The certificates of association shall be remunerated at an
annual rate determined by the deposit guarantee fund when
it closes its accounts. Such rate may not exceed the average
yield as determined by the Banque de France on ten-year
government bonds issued in the calendar year in which the
certificates are subscribed. The rate shall be replaced at
ten-year intervals by the rate for the bonds issued during
the year in which the previous reference stock is
reimbursed.
Such remuneration shall be cancelled if the fund finds that
members’ contributions will be insufficient to cover
charges resulting from the interventions provided for at
Article L. 312-5 of the Monetary and Financial Code. The
fund shall inform the Minister for Economic Affairs and
the Governor of the Banque de France, acting as chairman
of the Autorité de contrôle prudentiel, of this situation.
Article 3
The amount of contributions shall be determined in such a
way as not to endanger the stability of the banking system.
The Autorité de contrôle prudentiel shall transmit to the
Minister the total amount of the eligible deposits as well as
the amount of the deposits covered within the meaning of
45
Articles 2, 3 and 5 of Regulation 99-05 of the CRBF, at 31
December of each year. Contributions, apportioned
between the members as set forth in the appendix to this
Regulation, shall be paid in a single annual instalment
unless it is necessary to increase the contribution during a
calendar year by augmenting the annual contribution or
calling up an exceptional contribution.
Article 4
The guarantee fund shall collect the amount of
contributions due. Member institutions must pay
contributions or make deposits fifteen days at the latest
after receiving notice to do so as set forth in the appendix
to the present Regulation. The fund shall inform the
Autorité de contrôle prudentiel of any delay or difficulty in
collecting a contribution.
Article 5
New members authorised in France must subscribe a
certificate of association and pay a supplementary
contribution, in addition to the amount of the annual
contribution, for five years in accordance with the
provisions of the appendix to the present Regulation.
Article 6
A member institution is not required to pay one hundred
per cent of the total amount of an annual contribution
provided that the institution:
-
-
undertakes to pay at the fund’s request the unpaid
fraction of contributions for five years from the due
date for payment of the contribution. To execute this
commitment, the guarantee fund shall deduct such
amount from the guarantee deposit constituted in
accordance with the conditions defined hereinafter and
notify the institution concerned of this;
constitutes in the fund’s books at the due date for
payment of the contribution a guarantee deposit frozen
for five years, in an amount equal to the unpaid fraction
of the contribution. The remuneration of guarantee
deposits may not exceed the yield on government
bonds with a maturity of five years at issue as
determined by the Banque de France on 16 October, the
date as of which members are liable for payment of the
amount of the contribution for which the deposit is
constituted, or on the next working day as applicable.
Such remuneration shall be cancelled if the resources
obtained by investing the fund’s assets on behalf of the
deposit guarantee prove insufficient to cover charges
resulting from the interventions provided for at
Article L. 312-5 of the Monetary and Financial Code.
Should an institution cease to be a member, the amounts
contained in the guarantee deposit constituted by this
member shall be transformed, as of right and without any
other formality, into contributions. Guarantee deposits may
be remunerated until the date of such transformation as of
right. Such remuneration shall be equal to the interest paid
on a hypothetical interbank deposit constituted on the first
day of the year during which the decision takes effect and
for which an interbank rate is ascertained, maturing at the
date closest to the date of such transformation unless,
before that date, the Autorité de contrôle prudentiel has
asked or proposed that the deposit guarantee fund should
intervene.
46
Article 6-1
Once the fund’s operating costs, the remuneration of the
certificates of association, as well as any remuneration on
the guarantee deposits have been covered, recoveries of all
types on claims on incidents settled by the fund on behalf
of the deposit guarantee, as well as the income from
investing all the assets held on behalf of the deposit
guarantee, shall be set aside for the deposit guarantee fund.
Article 7
The losses shall first be charged against the amounts set
aside on behalf of the deposit guarantee then against the
amount of contributions paid up till the end of the current
year for an amount equal to € 200 million or the available
amount if it is lower. Beyond such amount, the fund shall
call up unpaid fractions or contributions up to half the
amount of the uncovered losses, by order of priority
according to the due date for the payment of the
contribution. The remainder of the losses shall be charged
first against the balance of contributions paid, then against
the balance of the unpaid fractions of the contributions, in
the same order, before being charged against the
remuneration then against the par value of the certificates
of association.
The fund may not call up unpaid fractions of the
contribution after five years have elapsed from the time the
above-mentioned guarantees are constituted. As of such
date, institutions may freely dispose of their guarantee
deposits.
The present Regulation shall consider as losses the fraction
of charges, including calculated charges, which exceed all
income of the current year, before any remuneration of the
guarantee deposits.
Article 8
If the fund finds that the losses exceed all the fund’s
resources other than the certificates of association, it shall
reduce the par value of each certificate of association in
proportion.
The guarantee fund’s auditors shall decide on the amount
of the provisions taken into account in order to make such
reduction. The fund’s decision shall be notified to members
within fifteen days.
Article 9
When the decision to revoke an institution’s authorisation
takes effect, its certificate of association shall be
reimbursed, at the latest by the end of the month following
the notification to the deposit guarantee fund by the
Autorité de contrôle prudentiel of the date at which the
revocation of authorisation takes effect, at its par value
minus any reductions made under the terms of Article 8.
This reimbursement is made at par value plus any accrued
remuneration as at the date of such reimbursement. Such
remuneration shall be equal to the interest paid on an
interbank deposit which, on the one hand, shall be
constituted on the first day of the year in the course of
which the decision takes effect and for which an interbank
rate is found and which, on the other hand, shall fall due at
the date closest to the reimbursement date of the certificate,
unless the fund, prior to this date, has found that the
resources, described in Article 2, are insufficient and does
Selected French Banking and Financial Regulations – 2013
not then, under the terms of said article, have to pay such
remuneration.
On the take-over of one member institution by another
member institution or the transfer of the business of one
member institution to another member institution entailing
a revocation of authorisation without the transferor
institution being dissolved, the income from the
reimbursement of the certificate shall be added to the
amount of the certificate of the institution which has carried
out the take-over or to the transferee institution. In these
cases, the remuneration is not reimbursed, but the new
amount of the certificate serves as a basis for the
calculation of the remuneration accruing to the institution
which has carried out the take-over or to the transferee
institution, as from the start of the year under consideration.
However, if the deposit base of the institution taken over or
of the institution whose entire business has been
transformed is nil, the income from the reimbursement of
his certificate is paid to the institution which has carried out
the take-over institution or to which the business is
transferred under the terms and conditions set forth in the
first paragraph of the present article.
By way of an exception to the last paragraph of Article 6,
the guarantee deposit of the institution taken over or of the
institution whose entire business has been transferred shall
also be added to the guarantee deposit of the institution
which has carried out the take-over (transferee institution).
TITLE II
APPOINTMENT OF MEMBERS OF THE
SUPERVISORY BOARD
Article 10
The members of the fund’s supervisory board shall be
individuals who are accountable managers within the
meaning of Article L. 511-13 of the Monetary and
Financial Code of one or more member institutions. They
shall be either appointed directly by an institution referred
to in Article 13-1 or elected on the proposal of a member
institution in accordance with the provisions of Article 132.
Article 11
The members of the supervisory board shall be appointed
or elected for a four-year term of office.
Should a member of the supervisory board resign or be
prevented from carrying out his duties, the member
institution which appointed him or put him forward may
appoint another individual to replace the indisposed or
resigned person until his term of office expires. Such
person must also be a manager, as defined by
Article L. 511-13 of the Monetary and Financial Code, of
one or more member institutions. Should a member of the
supervisory board cease to occupy a managerial post in an
institution affiliated to the same network or a part of the
same mixed or financial group, within the meaning of
Article L. 511-20 of the Monetary and Financial Code, he
shall be deemed by the present Regulation to be prevented
from carrying out his duties, unless said institution
confirms his appointment or the maintenance of his
Selected French Banking and Financial Regulations – 2013
representative mandate at the latest by the end of the month
in which the member was prevented from carrying out his
duties. The member’s appointment or authority may be
confirmed only in the event of the member continuing to
hold a managerial position in one or more member
institutions.
Article 11-1
Within the meaning of this Article, a directly represented
institution is an institution that has appointed a member of
the supervisory board or put forward a candidate who has
been elected. If an institution directly represented on the
supervisory board loses it right to be represented, a new
appointment shall be made under the following conditions
for the remainder of the member’s term of office, unless the
institution in question has lost its right as a result of
restructuring without a change of control.
The management board of the deposit guarantee fund shall,
within three months at most, call a meeting of the college
comprising all the credit institutions concerned except for
those represented directly or automatically under the terms
of Article 13.1 of this regulation. The election shall take
place on a relative majority basis. Credit institutions that
are members of the college may, within one month
following the election, advise the deposit guarantee fund if
they wish the newly elected member to represent them.
However, if the event giving rise to a new appointment
occurs within a 12-month period preceding the expiry of a
term of office, the supervisory board shall, within three
months at most, choose the institution that appoints a new
member from among the institutions forming the college
referred to in the preceding paragraph. The new member
shall dispose of the votes of the institution he represents.
Article 12
Members shall have the right to exercise a number of votes
proportionate to the sum of the certificates of association
they hold, contributions actually paid during the ten years
preceding the year of the election of members of the
supervisory board and the outstanding amount of guarantee
deposits actually constituted in the Deposit Guarantee
Fund’s books at the end of the preceding year.
The voting rights of all members belonging to the same
consolidation scope are aggregated and exercised by the
member parent company or failing which, by the central
body if the consolidation scope includes institutions
affiliated to this central body. The parent company or
central body automatically represents all of the member
institutions that belong to their consolidation scope. When
the parent company of a financial or mixed group is
affiliated to a network, the aggregation of the group’s
voting rights is added to that of the network.
The Autorité de contrôle prudentiel shall inform the
Deposit Guarantee Fund of the composition, at 31
December of each year, of each consolidation scope
mentioned in the preceding Article, such as declared by the
parent company.
Article 13-1
The right to appoint an ex officio member of the
supervisory board is acknowledged on the basis of the total
of votes that might be aggregated, as stipulated in Article
47
12, and which a member, a member parent company or a
central body has at their disposal.
In the three months that precede the appointment of ex
officio members, and at the latest one month before the
date set for their appointment, the Autorité de contrôle
prudentiel shall notify members that have the highest
aggregated votes, as stipulated in Article 12, of their
capacity to appoint ex officio members. At the same time,
the Autorité de contrôle prudentiel shall inform the French
Association of Credit Institutions and Investment Firms
(Association française des établissements de crédit et des
entreprises d’investissement – AFECEI) and the Deposit
Guarantee Fund.
These members shall notify the Deposit Guarantee Fund of
the name of their representative one month before they are
due to take office, at the latest. The voting rights held by
members who have not given this notification are exercised
by the appointed or elected member of the supervisory
board with the highest number of votes.
Article 13-2
The other members of the supervisory board are elected by
the college of member institutions that are automatically
not represented, as stipulated in Article 12.
Candidatures are presented to the Deposit Guarantee Fund
by the member institutions of this college that wish to, at
the latest by 31 January of the year the election of members
is to take place.
The college of member institutions, mentioned in the first
paragraph, is convened by the Deposit Guarantee Fund’s
executive board before 1 March of the same year. The
convocation comprises the list of candidates and the
number of votes that each member has the right to exercise.
The ballot is public. The candidates who obtain the greatest
number of votes shall be deemed to have been elected. On
the supervisory board, they represent the members that
have voted for them.
Members that have not taken part in the election or have
not voted for an appointed or elected candidate are
informed of the electoral results by the executive board.
These members may inform the executive board, within
two weeks, of the name of the elected or appointed
candidate that they have chosen to represent them when the
supervisory board votes, during his term of office.
The voting rights of members who have not given this
notification are exercised by the appointed or elected
member of the supervisory board with the highest number
of votes.
The representation mandate can only be revoked in the
event of a change of control of the institution that has
appointed or presented the representative member’s
candidature. In this case, the Deposit Guarantee Fund shall
notify the institutions concerned that they have one month
in which to appoint a new representative chosen amongst
the other appointed or elected members of the supervisory
board, with the absence of an appointment being as good as
an acceptance of the member replacing the previous one as
representative.
48
For each year, the votes that the members of the
supervisory board have the right to exercise are those
ascertained at
31 December preceding the year in question, pursuant to
the provisions of Article 12.
Article 14-1
Within the meaning of this Article, a directly represented
institution is an institution that has appointed a member of
the supervisory board or put forward a candidate who has
been elected. If an institution directly represented on the
supervisory board loses its right to be represented, a new
appointment shall be made under the following conditions
for the remainder of the member’s term of office, unless the
institution in question has lost its right as a result of
restructuring without a change of control.
The Deposit Guarantee Fund’s executive board shall,
within three months, call a meeting of the college of
member institutions mentioned in Article 13, by stating the
name of the candidate/s and the number of votes held by
each member.
The ballot is public and the election shall take place on a
relative majority basis. If there is only one candidate, this
candidate is declared elected.
The college member credit institutions have the right,
within one month of the election, to notify the Deposit
Guarantee Fund of the name of their new representative
chosen amongst the other appointed or elected members of
the supervisory board, with the absence of notification
being as good as an acceptance of the newly elected
member as representative.
However, if the event giving rise to a new appointment
occurs within a 12-month period preceding the end of a
term of office, the supervisory board shall, within three
months, choose the institution that shall appoint a new
member from among the institutions forming the college
referred to in Article 13-2. The new member has the right
to exercise the votes of the institution he represents.
Article 14-2
Member institutions or the central bodies that have
appointed an ex oficio member or put forward a candidate
who has been elected but has recently been prevented from
fulfilling his mandate or has resigned, can appoint, within
one month, as a replacement for the duration of the initial
mandate, a senior manager of an institution pursuant to
Article L511-13 of the Monetary and Financial Code. The
replacement can be the same person as long as he is no
longer the manager of an institution, as ascertained at the
outset, the institution or the central body that has appointed
him or put him forward as candidate, confirms, within one
month, the upholding of the appointment or representation
by this person who is manager of another member
institution.
If, one month following the request for a replacement by
the Deposit Guarantee Fund, nobody has been appointed
pursuant to the preceding paragraph, the election of a new
member shall be conducted, pursuant to Article 14-1.
Selected French Banking and Financial Regulations – 2013
Article 14-3
Institutions whose membership is established during a
mandate are represented by the elected or appointed
member of whom the Deposit Guarantee Fund has been
notified upon their first contribution payments.
Member institutions that no longer belong to a
consolidation scope referred to in Article 12, shall
announce the allocation of their voting rights to an elected
or appointed member of the supervisory board, within one
month of the request from the Deposit Guarantee Fund
when the latter is informed of their withdrawal from the
consolidation scope.
If the institutions mentioned in the first and second
paragraphs of the present Article have not informed the
Deposit Guarantee Fund, within the stipulated period, of
the allocation of their votes, the latter shall be exercised by
the elected or appointed member of the supervisory board
with the highest number of votes. »
and Futuna or in Mayotte will be asked to make a single
contribution in the second half of 2002.
The amount of the subscription, calculated as set forth in
the Appendix to this Regulation on the basis of data as at
30 June 2002, shall be doubled for that instalment.
These institutions shall subscribe a certificate of
association, calculated as set forth in the present Appendix
to this Regulation on the basis of data as at 30 June 2002.
By way of an exception to Article 5 of the present
Regulation, credit institutions having their headquarters in
French Polynésie, in Nouvelle Calédonie and the islands of
Wallis and Futuna or in Mayotte that were authorised
before 1 January 2002 are not required to pay the additional
subscription.
APPENDIX
CALCULATING THE APPORTIONMENT
OF CONTRIBUTIONS BETWEEN MEMBERS
TITLE III
TRANSITIONAL PROVISIONS
Article 15
The Autorité de contrôle prudentiel shall make the first
calculation relating to the subscription of certificates of
association and the payment, in a single instalment, of the
first annual contribution to the guarantee fund one month at
the latest after the present Regulation takes effect, on the
basis of the data provided for in the appendix to the present
Regulation available at such date, established as at 31
December 1998. Authorised institutions dispensed from
providing documents drawn up as at that date shall
immediately pay the minimum contribution and subscribe a
certificate of association in the minimum amount. Where
appropriate, they shall subsequently pay contributions
adjusted to take account of any sums they ought to have
paid, under the conditions set forth in the appendix to the
present Regulation.
The Autorité de contrôle prudentiel shall call the first
meeting of fund members. Called to appoint the
supervisory board, it shall be held two months at the latest
after notification of the results of the initial calculation. The
appointments shall be made by applying the provisions of
Article 12 to the amount of certificates of association and
contributions due for 1999. The term of office of the
members appointed in this way shall expire on 31 March
2004.
Funds earmarked for the paid-up share in 1999 of the
subscription to certificates of association and for the annual
contribution for 1999 must have been paid before the first
meeting into a special account opened for the purpose with
the Banque de France. Certificates of association shall be
deemed to have been subscribed and may bear interest as
set forth at Article 2 of the present Regulation once the
fund’s rules of procedure have been approved.
Article 16
For 2002, credit institutions authorised by the Autorité de
contrôle prudentiel having their registered office in French
Polynésie, in Nouvelle Calédonie or in the islands of Wallis
Selected French Banking and Financial Regulations – 2013
1.
Principles
The amount of certificates of association and annual
contributions, hereinafter referred to as "members’
contributions", shall be calculated in accordance with the
provisions of this Appendix.
1.1 Calculating ordinary contributions
Each member’s contribution shall be equal, for each
instalment, to the product of the variable overall amount of
the instalment and the net share of risk attributed to it for
such instalment; however, the contribution may not be less
than 4,000 euro for the contribution and 4000 euro for the
subscription of certificates of association.
The variable overall amount of each instalment is equal to
the overall amount of the instalment minus the product of
the minimum contribution multiplied by the number of
members whose deposit base is nil.
The deposit base is equal to the amount of deposits and
other repayable funds. The calculation includes the
following euro- or CFP francs-denominated liabilities with
regard to non-financial customers payable on the territory
of the French Republic and in the Principality of Monaco:
demand deposits, available factoring accounts, regulated
savings accounts, time deposits, interest bearing notes and
savings certificates and all liabilities relating to the
accounts of non-financial customers. The accounts of credit
institutions and investment firms, insurance and
capitalization undertakings, unit trusts and of the persons
mentioned at Article L. 518-1 of the Monetary and
Financial Code are deducted from this total, the same
applies to the companies which have direct or indirect
capital links with the credit institution that confer on one of
the linked undertakings effective control over the others, as
well as deposits made by central governments, social
security bodies and other financial establishments within
the meaning of Article L. 511-21-4 of the Monetary and
Financial Code. Liabilities forming part of the institution’s
own funds as defined in Regulation 90-02 of 23 February
1990 amended on own funds.
49
A member’s net share of risk is the ratio between its net
risk amount and the sum of all members’ net risk amounts.
Each member’s net risk amount is equal to the deposit base,
increased or reduced according to the financial situation
indicators described in point 2 of the present Appendix.
If the deposit base cannot be calculated on the basis of
reliable information established at the scheduled date
because member institutions are late or deficient in
providing the necessary information, the base calculated for
the previous instalment shall be increased, for each
instalment where such deficiencies exist, by 10% for the
fraction of the gross base below three billion euro and by
5% for the fraction of the gross base above three billion
euro, unless the institution can prove that it was prevented
from duly providing the necessary information by reasons
of force majeure. In such case, the deposit base shall be the
average of the three preceding bases.
In the event of a member institution taking over another
member institution or acquiring the business of another
member institution, entailing a revocation of authorisation
without the transferor institution being dissolved between
the date at which information necessary for calculating the
contribution is established and the date at which the
contribution is due, such institution shall pay the
contribution owed by the institution that has been taken
over or by the institution whose entire business justifying
membership of the guarantee fund has been transferred,
unless the deposit base of the latter is nil.
By way of an exception to the provisions of the first
paragraph, member institutions struck off pursuant to
Article L. 312-5 I of the Monetary and Financial Code are
exempted from contributing.
1.2 New members’ specific contributions
1.2.1 Certificate of association
The amount of the certificate of association of institutions
authorised after the present Regulation takes effect shall be
equal to the product of the total amount of certificates of
association and the member’s net share of risk, calculated
for the first instalment after joining the fund for which the
documents used to calculate contributions must be
provided. The certificate must be paid up in full at the latest
at the same time as the contribution for the corresponding
instalment.
indicator of another member institution, a new member’s
supplementary contribution shall be reduced by the share
attributable to the amount of the assets concerned if the
member makes such request and provides the Autorité de
contrôle prudentiel with the data for the calculation of this
reduction at the latest by the end of the sixth month
following the date at which the data for the calculation of
the contribution instalment is established.
1.3 The increases relating to the supplementary
contributions of new members, which are linked to
mistakes in declarations referred to in point 4 of the
Appendix, as well as those arising on the minimum amount
of the contribution shall be added to the overall yearly
amount of the contribution
2. Indicators of the financial situation, calculation of
the net risk amount
In order to calculate the net risk amount, the deposit base
shall first be increased where relevant by the gross risk
indicator described in point 2.1 of the present Appendix,
then weighted by a minimum factor of 0.75 and a
maximum factor of 1.25 by a linear transformation of the
synthetic risk indicator described in point 2.2 of the present
Appendix. The minimum and maximum factors shall be
0.85 and 1.15 respectively for calculations made in 1999.
2.1 Gross risk indicator
The gross risk indicator shall be equal to one third of
outstanding loans, up to a ceiling equal to the amount of the
deposit base. It shall include the net amount of provisions
for loans to non-financial customers held in France,
including leasing and similar transactions, non-allocated
securities, bad debts and related receivables.
If the deposit base cannot be calculated on the basis of
reliable information established at the scheduled date
because member institutions are late or deficient in
providing the necessary information, the base calculated for
the previous instalment shall be increased by 10% for each
instalment where such deficiencies exist, unless the
institution can prove that it was prevented from duly
providing the necessary information by reasons of force
majeure. In such case, the gross risk indicator shall be the
average of the three preceding bases. The increase shall be
5% for the fraction of the gross indicator in excess of one
billion euro.
2.2 Synthetic risk indicator
1.2.2 Supplementary contributions
New members must pay a supplementary contribution in
addition to the contribution set forth at point 1.1 of the
present Appendix for five instalments after joining the
fund. The amount of the supplementary contribution is
equal, for each instalment, to 20% of the product of the
total amount, net of any charges, of contributions actually
paid to the fund by the other members up to the instalment
in question multiplied by the new member’s net share of
risk. This supplementary contribution shall be paid only if
it is above or equal to 100 euro.
In the event of a merger, scission, total or partial business
takeover or any other transaction that entails the transfer of
assets previously included in the deposit base or gross risk
50
A synthetic risk indicator shall be calculated for all
institutions whose deposit base is not nil at the closing date
used as a basis for calculating a contribution. The synthetic
risk indicator shall be the arithmetic mean of the following
scores:
-
a score relating to solvency,
-
a score relating to risk diversification,
-
a score relating to operating profitability,
-
a score relating to maturity transformation, where
relevant.
Scores shall be given on a scale of 1 to 3; the higher the
score, the lower the quality.
Selected French Banking and Financial Regulations – 2013
If it is not possible to calculate one or more of these scores
because member institutions are late or deficient in
providing the necessary information, a score of 3 shall
automatically be assigned in each case, unless the
institution can prove that it was prevented from duly
providing the necessary information by reasons of force
majeure. In such case, the Autorité de contrôle prudentiel
shall use the average of the three preceding scores for the
score or scores concerned.
If a credit institution is required to comply with the
above-mentioned Regulation 93-05 exclusively on a
consolidated basis, the score shall be calculated, for all
institutions included in the scope of consolidation, on the
basis of own funds and risks established on a consolidated
basis. If an institution is also required to comply with such
regulations on an individual or sub-consolidated basis, the
score shall be calculated on an individual or
sub-consolidated basis.
2.2.1 Score relating to solvency
2.2.3 Score relating to operating profitability
A score of 1 shall be assigned to institutions whose original
own funds as defined by the above-mentioned
Regulation 90-02, from which shall be deducted, to the
extent of the portion which exceeds the supplementary own
funds, the equity holdings and subordinated claims as
defined by Article 6 of said Regulation are at least equal to
112.5% of the total capital adequacy requirements set forth
in Article 2-1 of the Order of 20 February 2007.
A score of 1 shall be assigned to institutions whose
operating coefficient is lower than 65%.
A score of 2 shall be assigned to institutions whose original
own funds as defined by the above-mentioned
Regulation 90-02, from which shall be deducted, to the
extent of the portion which exceeds the supplementary own
funds, the equity holdings and subordinated claims as
defined by Article 6 of said Regulation are at least equal to
75% of the total capital adequacy requirements set forth in
Article 2-1 of the Order of 20 February 2007.
A score of 2.5 shall be assigned to institutions whose
operating coefficient is greater than or equal to 75% but
lower than 85%.
A score of 3 shall be assigned to all other institutions.
If a credit institution is required to comply with the
solvency ratio exclusively on a consolidated basis, the
score shall be calculated, for all institutions included in the
scope of consolidation, on the basis of own funds and risks
established on a consolidated basis. If an institution is also
required to comply with such regulations on an individual
or sub-consolidated basis, the score shall be calculated on
an individual or sub-consolidated basis.
2.2.2 Score relating to risk diversification
A score of 1 shall be assigned to institutions for which the
sum of the ten largest exposures not eligible for refinancing
by the European system of central banks is less than 30%
of original own funds as defined by the above-mentioned
Regulation 90-02, from which shall be deducted, to the
extent of the portion which exceeds the supplementary own
funds, the equity holdings and subordinated claims as
defined by Article 6 of said Regulation.
A score of 2 shall be assigned to institutions for which the
sum of the ten largest exposures not eligible for refinancing
by the European system of central banks is less than 60%
of original own funds within the meaning of Article 2 of
the above-mentioned Regulation 90-02.
A score of 3 shall be assigned to all other institutions.
Large exposures taken into account for calculating these
scores shall be calculated in accordance with the provisions
of the above-mentioned Regulation 93-05; the ten largest
exposures shall be used irrespective of the proportions in
relation to own funds set forth in Article 1 of the
above-mentioned regulation.
Selected French Banking and Financial Regulations – 2013
A score of 1.5 shall be assigned to institutions whose
operating coefficient is lower than 70%.
A score of 2 shall be assigned to institutions whose
operating coefficient is lower than 75%.
A score of 3 shall be assigned to all other institutions.
The operating coefficient within the meaning of the present
Regulation is the ratio between the sum of overheads,
depreciation provisions and net provisions for tangible and
intangible assets on the one hand and the sum of income
from banking operations, ancillary income and sundry
other income minus charges from banking operations,
interest on bad debts and sundry charges. Overheads shall
include personnel costs, taxes and outside services
appearing on the profit and loss account.
The sum of the following items is included in the
denominator: income from banking operations, recoveries
of provisions for depreciation of investment securities,
ancillary income and reinvoiced expenses and the share of
non-banking operations carried out jointly. Charges from
banking operations, provisions for depreciation of
investment securities, interest on bad debts and income
paid back to co-suppliers are deducted from the
above-mentioned sum. Shares of non-banking operations
carried out jointly and headquarters expenses attributable to
institutions shall be added to income, shares attributable to
other participants shall be deducted.
The reinvoiced expenses attributable to the items included
in the numerator shall be deducted from the numerator and
the denominator of the operating coefficient as from the
first half-yearly instalment of 2001.
2.2.4 Score relating to maturity transformation
The score relating to maturity transformation shall be
calculated for institutions for which the assets and
liabilities used to calculate the indicator represent at least
20% of the institution’s total assets and liabilities, adjusted
for suspense accounts and sundry debtors and creditors.
For the purposes of the present Regulation, the maturity
transformation indicator is the ratio between, in the
numerator, the actual transformation, and, in the
51
denominator, the own funds referred to at Article 2 of the
above-mentioned
Regulation
91-01.
The
actual
transformation is the difference between the amount of part
of the assets with a residual maturity of more than one year
plus bad debts and other capitalised securities and part of
the signature commitments on the one hand, and the
amount of liabilities with a residual maturity of more than
one year plus part of the sight deposits and the amount of
own funds.
−
the deposit base is the sum of the affiliated
institutions’ deposit bases;
−
the gross risk indicator is the sum of the affiliated
institutions’ gross indicators;
−
the synthetic risk indicator is the arithmetic mean of
the network’s overall scores calculated for each of the
items set forth at point 2 of the present Appendix;
−
the network’s overall score shall be calculated, for
each item included in the calculation of the scores
described in point 2 of the present Appendix, by
regarding all the members of the network as defined in
Articles L. 511-30 and L. 511-31 of the Monetary and
Financial Code (Code monétaire et financier) as a
single entity, by summing up their individual data,
where necessary after adjustment to make them
homogenous and eliminating reciprocal transactions.
Nevertheless, up till the closing of accounts on 31
December 2004, the overall score may be established
by summing up and eliminating the reciprocal items
without carrying out the necessary adjustments to
make them homogeneous;
−
for the score relating to risk diversification, the ten
largest exposures non eligible for the refinancing of
the European system of central banks of the network
shall not include commitments on non-affiliated
subsidiaries consolidated under the terms of
Regulation 93-05 aforesaid; the central body shall
ensure that the Autorité de contrôle prudentiel is
informed of all of the ten largest exposures determined
as such and common to all the institutions affiliated to
the network;
−
the numerator derived from calculating the network’s
overall solvency score is used to calculate the maturity
transformation indicator;
−
when institutions affiliated to a central body collect
reimbursable funds entirely or partially on behalf of
the central body, the deposit base is increased by
advances received from such central body in respect of
deposits collected on its behalf. The central body’s
deposit base is similarly reduced by the total amount
of such advances.
−
to determine the network’s synthetic indicator of
overall risk, the scores relating to solvency and risk
diversification shall be calculated on a consolidated
basis according to the method set forth in points 2.2.1
and 2.2.2 of the present Appendix, the consolidating
body being the single body defined in the fourth
indent. The central body shall inform the Autorité de
contrôle prudentiel of this choice, which shall then be
applied, without distinction, to the two scores
mentioned above, at the latest by the closing of the
accounts serving as a basis for calculating the next
instalment.
The following are included in assets with a residual
maturity of more than one year: the time deposits and
fixed-term loans of institutions referred to at Article 5 of
the above-mentioned Regulation 88-01, the time deposits
and fixed-term loans of financial customers, financial loans
and repurchase agreements, loans with an initial term of
more than one year, the financial outstanding of leasing and
similar transactions and financial rental transactions, and
subordinated loans.
The following are included in liabilities with a residual
maturity of more than one year: the time accounts and
fixed-term borrowings of institutions referred to at Article
5 of the above-mentioned Regulation 88-01, the time
deposits and fixed-term borrowings of financial customers,
reverse repurchase agreements, securitised debt, housing
savings plans and savings deposits with saving-lending
institutions, people’s savings plans, time deposits,
interest-bearing notes and savings certificates, earmarked
public funds, net latent reserves and subordinated debt.
The part of signature commitments shall be 50% for
financing commitments in favour of customers, 5% for
guarantee commitments given on behalf of customers and
20% of financing commitments in favour of other credit
institutions.
The part of sight deposits shall be equal to 70% of the
following: demand deposits, available factoring accounts
and regulated savings accounts other than people’s savings
plans and accounts, "A" passbook savings accounts,
housing savings plans and savings deposits with
saving-lending institutions.
A score of 1 shall be assigned to institutions for which the
average maturity transformation indicator established on
the basis of data for the last three instalments is less than or
equal to 100%.
A score of 2 shall be assigned to institutions for which the
average maturity transformation indicator established on
the basis of data for the last three instalments is greater than
100% but no more than 200%.
A score of 3 shall be assigned to other institutions for
which such score is calculated.
3.
Institutions affiliated to a central body
For institutions affiliated to a central body, an overall
contribution for the network shall first be calculated. For
the purposes of calculating this contribution, all affiliated
institutions are regarded as a single institution to which the
provisions of points 1 and 2 of the present Appendix are
applied, with the following amendments:
52
The network’s overall contribution is then apportioned
between the affiliated institutions in proportion to their
contribution to the network’s overall exposure, defined as
the quotient of its net risk amount and the sum of the net
risk amounts of all affiliated institutions.
4.
Notification of calculations
The Autorité de contrôle prudentiel shall make all the
calculations provided for in the present Regulation on the
Selected French Banking and Financial Regulations – 2013
basis of data established as at 31 December. It shall notify
member institutions of the amount of their contributions
due as from 16 October, together with the elements used to
make the calculations described in points 1 and 2, by
ordinary mail at the latest by 15 October of each year. It
shall notify member institutions of the amount of their
contributions due as from 26 May and 26 November,
together with the elements used to make the calculations
described in points 1 and 2, by ordinary mail respectively at
the latest by 26 May and
26 November of each year
Any credit institution may ask the Autorité de contrôle
prudentiel to rectify the calculation of its contribution
within two months following receipt of notification. The
Autorité de contrôle prudentiel may also rectify its
calculation during the five years following payment of the
contribution in the light of information brought to its
knowledge subsequent to the date on which the calculations
were sent, after seeking the institution’s comments. As long
as the Autorité de contrôle prudentiel does not rectify the
calculation, the fund shall use it to collect outstanding
contributions.
The Autorité de contrôle prudentiel shall rectify the
calculation if there seem to be grounds for changing an
institution’s contribution by more than 10% of the sums it
has paid. The fund shall make such rectification on
notification from the Autorité de contrôle prudentiel.
If a rectification entails a change of more than 1.5% of
total amount of the half-yearly contribution or if
algebraic sum of all changes exceeds this amount in
contribution of the institution making the request,
Autorité de contrôle prudentiel shall recalculate
outstanding contributions and charge the differences to
next instalment.
the
the
the
the
all
the
If a member institution has made a mistake in declaring its
assessment base or elements used to determine its synthetic
risk indicator, the rectified contribution shall be increased
by 10% of the amount of the variation in the contribution.
If the mistake alone has entailed a general recalculation, the
supplement shall be 20%.
The Autorité de contrôle prudentiel shall inform the
guarantee fund of the amount of each member’s
contribution by ordinary mail before 1 November of each
year. The fund shall issue payment notices to members
before 15 November of each year.
5.
Transitional provisions
For the first calculation relating to the certificates of
association subscribed in 1999 and to the contribution for
that year, the score described in point 2.2.2 of the present
Appendix shall not be calculated. It shall not be calculated
for the half-yearly instalment based on data established as
at 31 December 1999, nor for the half-yearly instalment
based on data established as at 30 June 2000.
As from the calculation of the first half-yearly instalment of
2001, the score described in point 2.2.2 of the present
Appendix shall be incorporated into the synthetic risk
indicator for each member. The amount of their certificates
of association set forth in point 1 of the Appendix of the
present Regulation shall be recalculated at this due date
Selected French Banking and Financial Regulations – 2013
taking into account the net share of risk determined for this
instalment. For each member, the difference between the
amount thus calculated and the amount of the certificates of
association released on its behalf shall, if it is negative, be
reimbursed by the guarantee fund, or if it is positive, be
paid by the member together with its contribution for the
first half-yearly instalment of 2001 and under the same
terms and conditions. The remuneration of a member’s
certificate of association shall be calculated as from 30
June 2001 based on the new amount of said certificate.
For each member, the total amount of contributions called
up starting from the first instalment of contributions which
said member pays shall be recalculated on the basis of the
net share of risk set for the first half-yearly instalment of
2001. The difference between the amount thus calculated
and the amounts actually paid or lodged as collateral under
the terms of Article 6 of the present Regulation, by the
member concerned, shall, if it is negative be deducted
from the sum due from this member for the first half-yearly
instalment of 2001, or if it is positive, added to this sum
and settled under the terms and conditions governing the
rest of the contribution. The maximum rates set forth at
Articles 2 and 6 of this Regulation shall be, for the amounts
called up from September 1999 to June 2001, those
applicable to the contributions called up in the first halfyear of 2001.
REGULATION 99-07 OF 9 JULY 1999, RELATING
TO THE GUARANTEE OF DEPOSITS OR OTHER
REPAYABLE FUNDS RECEIVED BY THE
BRANCHES OF CREDIT INSTITUTIONS
as amended by Regulations 2002-05 of 15 July 2002,
2002-08 of 21 November 2002,
2003-04 of 12 November 2003 and
the Orders of 20 February 2007
and 29 September 2010
Article 1
The deposit guarantee fund referred to at Article L. 312-4 of
the Monetary and Financial Code shall compensate, under
the conditions set forth in this Regulation, the deposits and
other repayable funds received by the branches of credit
institutions authorised by the Autorité de contrôle
prudentiel and, in the situations set forth in Title II below,
by the branches established in metropolitan France and in
the overseas departments and regions of credit institutions
having their registered office in another State of the
European Economic Area.
TITLE I
BRANCHES REQUIRED TO JOIN THE DEPOSIT
GUARANTEE FUND
Article 2
Branches of credit institutions having their headquarters in
a State that is not party to the agreement on the European
Economic Area, established on the territory of the French
Republic or in the Principality of Monaco shall be
governed by the provisions of the above-mentioned
Regulations 99-05 and 99-06, without prejudice to the
provisions of Articles 4 and 5 of the present Regulation.
53
Article 3
Branches of credit institutions having their headquarters in
a State party to the agreement on the European Economic
Area other than France, established in French Polynésie,
Nouvelle Calédonie and in the islands of Wallis and
Futuna, in Saint-Pierre-et-Miquelon or Mayotte or in the
Principality of Monaco shall be governed by the provisions
of the present Regulation under the same conditions as the
branches referred to in the preceding Article.
Article 4
If a branch referred to at Article 2 or 3 above benefits
through its headquarters from coverage at least equivalent
in scope and amount to the coverage offered by the deposit
guarantee fund on the territory of the French Republic, the
deposit guarantee fund may define, by way of an agreement
with the system of the country of origin, the conditions
under which the French fund compensates the depositors of
the branch in accordance with the provisions of the
above-mentioned Regulation 99-05.
If an agreement has been concluded within the framework
set forth in the preceding paragraph, the branch is
dispensed from contributing to the deposit guarantee fund.
Failing such an agreement, for the purposes of the
above-mentioned Regulation 99-06, contributions shall be
calculated on the basis of information concerning the
branches’ financial situation provided to the Autorité de
contrôle prudentiel. However, if pursuant to a decision of
the Autorité de contrôle prudentiel the above-mentioned
branches are not required to comply with the Order of
20 February 2007 relating to the own funds requirements
applicable to credit institutions and investment firms, and
the competent authorities of the country of origin agree to
provide the Autorité de contrôle prudentiel re with
information concerning the own funds and exposure of the
institution as a whole, assessed on a company or
consolidated basis according to the standards of the country
of origin, the elements relating to solvency shall be
calculated on the basis of the data thus provided. If the
information needed to make such calculation is not
available to the Autorité de contrôle prudentiel, the
synthetic risk indicator referred to in the Appendix to the
above-mentioned Regulation 99-06 shall be equal to 3.
Article 5
The Autorité de contrôle prudentiel shall assess the
equivalence referred to at Article 4 of the present
Regulation at the guarantee fund’s request.
TITLE II
BRANCHES THAT ARE MEMBERS OF
THE DEPOSIT GUARANTEE SCHEME ON A
SUPPLEMENTARY BASIS
Article 6
Branches established in metropolitan France and in the
overseas departments and regions by credit institutions
having their headquarters in another State party to the
agreement on the European Economic Area may, insofar as
the guarantee system in their country of origin is less
favourable, join the deposit guarantee fund on a
supplementary basis.
54
Branches that avail themselves of the option provided for in
the preceding paragraph shall be governed by the
provisions of the above-mentioned Regulations 99-05 and
99-06, without prejudice to the provisions of Articles 8, 9
and 10 of the present Regulation.
Branches that do not avail themselves of the option shall
nevertheless be governed by the provisions of Title IV of
the above-mentioned Regulation 99-05.
Article 7
Branches established in metropolitan France and in the
overseas departments and regions by credit institutions
having their headquarters in another State party to the
agreement on the European Economic Area shall notify the
Autorité de contrôle prudentiel of any change in the
coverage extended to them.
Article 8
If a branch referred to at Article 6 above applies to join the
deposit guarantee fund with a view to benefiting from a
supplementary guarantee, the guarantee fund shall define
terms and conditions for compensating depositors with the
system to which the credit institution belongs in the State
where it has its headquarters.
The deposit guarantee fund shall allow applications for
supplementary compensation on the basis of a statement of
non-availability of funds issued by the competent
authorities of the State where the institution has its
headquarters.
Article 9
If a branch that has availed itself of the supplementary
membership option set forth at Article 6 of the present
Regulation fails to fulfil its obligations as a member of the
deposit guarantee fund intervening on a supplementary
basis, the Autorité de contrôle prudentiel shall inform the
competent authorities that authorised the branch of the fact
so that, in cooperation with the guarantee fund, they can
take all appropriate steps to ensure compliance with such
obligations.
If, despite such steps, the branch fails to comply with the
obligations referred to in the preceding paragraph, the
guarantee fund intervening on a supplementary basis may
exclude the branch, with the consent of the authorities that
authorised it and with not less than one year’s notice.
Deposits made before the exclusion date shall continue to
benefit from the supplementary cover until their due date.
The branch shall immediately inform depositors that the
supplementary cover has been revoked.
Article 10
For the purposes of the above-mentioned Regulation 99-06,
the amount of contributions shall be proportional to the
ratio between the supplementary cover provided and the
total cover provided by the French system, without
prejudice to any provisions to the contrary contained in an
agreement with the guarantee system of the country of
origin. Data concerning own funds shall relate to the
institution as a whole, assessed on a company or
consolidated basis according to the standards of the country
of origin, and may be provided or confirmed by the
Selected French Banking and Financial Regulations – 2013
competent authorities of the country of origin. Data
concerning exposure shall relate to the business in
metropolitan France and in the overseas departments and
regions of the institution in question, without prejudice to
any provisions to the contrary contained in an agreement
with the guarantee system of the country of origin. If the
Autorité de contrôle prudentiel does not have the
information it needs to calculate the synthetic risk indicator
referred to in the Appendix to the above-mentioned
Regulation 99-06, it shall be equal to 3.
TITLE III
AUTHORISATION FOR THE DEPOSIT
GUARANTEE FUND TO CONCLUDE
AGREEMENTS WITH THE GUARANTEE
SYSTEMS OF OTHER STATES CONCERNING
THE COVERAGE OF FOREIGN BRANCHES OF
CREDIT INSTITUTIONS HAVING THEIR
HEADQUARTERS ON THE TERRITORY OF THE
FRENCH REPUBLIC OR IN THE PRINCIPALITY
OF MONACO
Article 11
The deposit guarantee fund may conclude an agreement
setting out the conditions governing its compensation of the
depositors of a branch established in a State not party to the
agreement on the European Economic Area by a credit
institution having its registered office on the territory of the
French Republic or the Principality of Monaco, in liaison
with the guarantee system to which the above-mentioned
branch belongs.
Article 12
The deposit guarantee fund may conclude an agreement
setting out the conditions governing its compensation of the
depositors of a branch established in another State party to
the agreement on the European Economic Area by a credit
institution having its registered office in French Polynésie,
in Nouvelle Calédonie and in the islands Wallis and
Futuna, in Saint-Pierre-et-Miquelon or Mayotte as well as
in the Principality of Monaco, in liaison with the guarantee
system to which the above-mentioned branch belongs.
Article 13
The conclusion of such agreements is subject to the
condition that the cover afforded by the deposit guarantee
fund is at least equivalent in both amount and scope to the
cover afforded by the guarantee system of the country
concerned, and that the foreign guarantee system bears the
cost, if any, of compensating the depositors of branches
established on the territory of the French Republic or in the
Principality of Monaco by the members of such system
under the conditions set forth at Article 4 of the present
Regulation.
The gross deposit base within the meaning of
Regulation 99-06 shall include the deposits covered within
the framework of the above-mentioned agreements.
TITLE IV
SUNDRY AND TRANSITIONAL PROVISIONS
Article 14
The deposit guarantee fund may represent, in France, a
foreign deposit guarantee scheme and act on behalf of its
principal under the terms of a cooperation agreement made
with this purpose. The fund may authorise the foreign
deposit guarantee scheme to represent it and to act on its
behalf under the terms of said agreement.
Article 15
For as long as they are not covered by a guarantee system
in their State of origin in accordance with the
above-mentioned directive 94/19/EC, the branches in
metropolitan France and in the overseas departments of
credit institutions having their headquarters in a State party
to the agreement on the European Economic Area other
than France are required to join the deposit guarantee fund
under the same conditions as credit institutions authorised
in France.
The branches referred to in the first paragraph above shall
inform the Autorité de contrôle prudentiel and the deposit
guarantee fund as soon as they are covered by the
guarantee system of their State of origin.
Article 16
Until 31 December 1999, neither the level nor the scope of
cover proposed by the branches in France of credit
institutions that have their headquarters outside France and
are members of a guarantee system in their country of
origin may exceed the maximum level and scope of the
cover proposed by the deposit guarantee fund.
Article 16.1
For contributions relating to 2002, the branches referred to
at Articles 2 and 3 are subject to the provisions of Article
16 of Regulation 99-06 aforesaid.
Article 17
The present regulation shall take effect immediately.
ORDER OF 6 NOVEMBER 2012, RELATING TO
THE TOTAL AMOUNT OF CONTRIBUTIONS TO
THE DEPOSIT GUARANTEE FUND
Article 1
The total amount of the annual contribution for 2012 is
EUR 300 million.
Article 2
This Order shall be published in the Journal officiel de la
République française.
The Autorité de contrôle prudentiel shall assess the
equivalence and reciprocity referred to in the first
paragraph above at the guarantee fund’s request.
Selected French Banking and Financial Regulations – 2013
55
ORDER OF 29 SEPTEMBER 2010, RELATING TO
SPECIAL CONTRIBUTIONS TO THE DEPOSIT
GUARANTEE FUND
Article 1er. – A special contribution of 270 million euro
shall be paid by the members of the deposit guarantee
Fund.
This contribution is payable in instalments of 90 million
euro in 2010, 2011 and 2012 under the terms of Regulation
99-06 of 9 July 1999 relating to the resources and operation
of the deposit guarantee scheme, with the exception of
Article 6.
Article 2. – This Order shall be published in the Journal
officiel de la République française.
1.1.6 SECURITIES GUARANTEES
REGULATION 99-14 OF 23 SEPTEMBER 1999,
RELATING TO THE GUARANTEE OF SECURITIES
held on the behalf of investors by credit institutions and
investment firms, intermediaries authorised by the
Conseil des Marchés Financiers
[read:
Autorité de contrôle prudentiel,
Article L. 542-1 of the Monetary and Financial Code]
and members of clearing houses having their registered
office on the territory of the French Republic
as amended by Regulation 2002-07 of 21 November
2002
and the Orders of 15 May 2006 and 18 December 2009
Article 1
The investor guarantee mechanism referred to at Article L.
322-1 of the Monetary and Financial Code shall
compensate, under the conditions set forth in the present
Regulation, claims arising from the inability of one of its
members to return to investors financial instruments held
on their behalf or their cash deposits when they relate to an
investment service or to the clearing or custody of financial
instruments provided by the member institution, and do not
fall within the scope of the deposit guarantee fund
established by Article L. 312-4 of the Monetary and
Financial Code.
Article 1.1
Investment services providers other than portfolio
management companies and intermediaries authorised by
the Autorité de contrôle prudentiel to have custody of and
administer financial instruments or members of a clearing
house, having their registered office in metropolitan France
or the overseas departments and territories shall be
members of the investor guarantee mechanism.
Credit institutions or investment services providers and
intermediaries authorised by the Autorité de contrôle
prudentiel to have custody of and administer financial
instruments or members of a clearing house, having their
registered office in the territorial unit (collectivité
56
territoriale) of Saint-Pierre-et-Miquelon or in the
departmental unit (collectivité départementale) of Mayotte
or in the principality of Monaco shall be members of the
investor guarantee mechanism.
Credit institutions or investment services providers,
intermediaries authorised by the Autorité de contrôle
prudentiel to have custody of and administer financial
instruments or members of a clearing house, having their
registered office in the overseas territories or in New
Caledonia (Nouvelle Calédonie) shall be members of the
investor guarantee mechanism.
Credit institutions or investment services providers,
intermediaries authorised by the Autorité de contrôle
prudentiel to have custody of and administer financial
instruments or members of a clearing house having their
registered in French Polynésie, in New Caledonia or in the
Wallis and Futuna islands shall be referred to hereinafter as
"member institutions".
TITLE I
SCOPE OF THE GUARANTEE
Article 2
The claims of investors guaranteed under the terms of
Article L. 322-1 of the Monetary and Financial Code and
the present Regulation, hereinafter referred to as the
"securities", are those relating to any financial instrument
referred to in Article L. 211-1 of the Monetary and
Financial Code held on an investor’s behalf that the
member institution is required to return under the legal and
contractual conditions that apply, especially with regard to
clearing.
Subject to the provisions of Article 3, point 4 (b) of the
present Regulation, the securities defined in this way shall
include cash deposits with a member institution that is not a
credit institution, including deposits made to guarantee or
cover positions taken on a market in financial instruments,
when such deposits relate to an investment service or to the
clearing or custody of financial instruments provided by
such institution.
For credit institutions, investment firms and financial
institutions referred to in Article L. 511-28 of the Monetary
and Financial Code and mentioned in the first paragraph of
Article 1.1, for the persons referred to at Article L. 442-2,
point 4 of said Code and for the persons referred to in
Article L. 542-1, point 5 of said Code, the securities thus
defined shall include those in the books of their secondary
establishments located on the territory of the French
Republic and in those of their branches established in other
Member States party to the agreement on the European
Economic Area.
For the member institutions referred to in the second and
third paragraphs of Article 1.1, the securities thus defined
shall include those in the books of their secondary
establishments located on the territory of the French
Republic.
Selected French Banking and Financial Regulations – 2013
TITLE II
MAXIMUM COMPENSATION
Article 3
The following are excluded from the guarantee:
1.
Securities deposited by the following:
a) credit institutions, investment firms, the persons
referred to at Article L. 440-2, points 3 and 4 of
the Monetary and Financial Code and the persons
referred to at Article L. 542-1, points 4 and 5 of
said Code,
b) insurance undertakings,
c) collective investment organisations,
d) pension organisations and funds,
e) persons referred to in Article L. 518-1 of the
Monetary and Financial Code,
f) members with personal liability and limited
partners holding at least 5% of the member
institution’s capital, directors, members of the
executive board and supervisory board, managers
and statutory auditors of the institution and any
investor having similar status in other companies
in the same group,
g) third parties acting on behalf of the persons
referred to in f) above,
h) companies which have direct or indirect
shareholding links with the member institution
giving one of the linked undertakings effective
control over the others,
i) other financial institutions within the meaning of
Article L. 511-21, point 4 of the Monetary and
Financial Code;
2.
Securities arising out of transactions in connection
with which the investor has been convicted for the
crime of money laundering under the terms of
Articles 222-38, 324-1 or 324-2 of the Penal Code or
Article 415 of the Customs Code;
3.
Securities held on behalf of an investor who, on an
individual basis, has taken advantage of facts
concerning the member institution which have
caused its financial difficulties or helped to aggravate
its financial situation;
4.
Because of their specific nature:
a) securities held on behalf of supranational
institutions,
governments
and
central
administrative authorities;
b) cash deposits in a currency other than those of
States party to the agreement on the European
Economic Area, with the exception of the CFP
franc.
Article 4
Securities held when authorisation is revoked, an
investment services provider is struck off or an institution
loses its authorisation to have the custody, the
administering or the clearing of financial instruments shall
continue to be covered by the securities guarantee
mechanism.
Selected French Banking and Financial Regulations – 2013
Article 5
5.1 The limit on compensation per investor shall be 70,000
euro as regards the financial instruments mentioned in the
first paragraph of Article 2 and 70,000 euro as regards the
deposits mentioned in the second paragraph of Article 2.
5.2 For the member institutions referred to in the first
paragraph of Article 1.1, each of these limits shall apply to
all of the same investor’s assets with the same member
institution, irrespective of the number of accounts, their
location on the territory of the French Republic or in the
European Economic Area and, subject to the provisions of
Article 3, point 4 (b), the currency concerned.
5.3 For the member institutions referred to in the second
paragraph of Article 1.1, each of these limits shall apply to
all of the same investor’s assets with the same member
institution, whatever the number of accounts, their location
on the territory of the French Republic and, without
prejudice to the provisions of Article 3, point 4 (b), the
currency concerned.
5.4 The limits on compensation of investors who are
customers of the member institutions referred to in the
fourth paragraph of Article 1.1 shall be equal to the
equivalent value in CFP francs of the amounts stated in
Article 5.1 above, obtained by applying the parity defined
pursuant to Article L. 712-2 of the Monetary and Financial
Code.
Each of these limits shall apply to all of the same investor’s
assets with the same member institution, whatever the
number of accounts, their location on the territory of the
French Republic and the Principality of Monaco, without
prejudice to the provisions of Article 3, point 4 (b), the
currency concerned.
Article 6
The share of each investor in a joint investment shall be
taken into account in calculating the limit mentioned in the
preceding Article. In the absence of special provisions, the
account shall be divided equally amongst the investors.
Claims on a joint investment to which two or more persons
are entitled as shareholders or members of an association or
any similar grouping not having legal personality shall be
aggregated and treated as if made by a single investor for
the purpose of calculating the same limit.
When the investor in whose name the account has been
opened is not entitled to the securities held by a member
institution, it is the person entitled to them who is covered
by the guarantee provided that such person has been
identified or is identifiable before the date on which it is
determined that the securities are unavailable. If several
persons are entitled, the share of each under the
arrangements subject to which the securities are managed
shall be taken into account when the limit referred to in the
preceding Article is calculated.
57
TITLE III
TERMS AND TIME LIMITS FOR
COMPENSATION
Article 7
Except in cases where reorganisation or liquidation
proceedings are initiated, the Autorité de contrôle
prudentiel, after determining that securities are unavailable
because a member institution is unable to return securities
held for reasons that may be related to its financial situation
and that it appears unlikely that the securities will be
returned soon, shall, after seeking the opinion of the
Autorité des Marchés Financiers, ask the deposit guarantee
fund to intervene under the terms of the first paragraph of
Article L. 322-2 of the Monetary and Financial Code and
shall notify the member institution that it has been struck
off.
Article 8
On the basis of documents furnished by the member
institution concerned or, where reorganisation or
liquidation proceedings have been initiated, those furnished
for the purposes of Article L. 431-6 of the Monetary and
Financial Code, the guarantee fund shall verify investors’
claims in respect of the unavailable securities and shall
promptly inform them by registered letter with
acknowledgment of receipt of the amount and nature of
securities covered by the securities guarantee mechanism
and of claims that are excluded from compensation under
the terms of Articles 3 and 5 of the present Regulation.
It shall inform investors that they have fifteen days in
which to make known all remarks relevant to their
compensation or to challenge the proposed breakdown,
established on the basis of the market value of the financial
instruments covered as at the date they became unavailable,
and to choose, where applicable, the currency in which the
compensation will be paid. On expiry of this deadline, the
guarantee fund, on behalf of the investor guarantee
mechanism, shall begin paying compensation under the
conditions set forth at Article 9.
The letter mentioned in the first paragraph shall inform
investors of the terms and conditions and of the procedures
to be followed, if reorganisation or liquidation proceedings
have been initiated with respect to the defaulting member
institution, in order to submit claims excluded from
compensation under the securities guarantee to the
creditors’ representative or to the liquidator appointed by
the commercial court.
The fund shall compensate the claims it has admitted in
respect of the securities guarantee mechanism within three
months of the request made by the Autorité de contrôle
prudentiel. When the circumstances so warrant, the deposit
guarantee fund may apply to the Autorité de contrôle
prudentiel for an extension of this time limit, which may
not exceed three months.
Article 9
9.1 – The compensation of investors who are customers of
the member institutions referred to in the first and second
paragraphs of Article 1.1 shall be paid in euros. Securities
denominated in CFP francs shall be converted into euros at
the parity in effect on the date on which the securities
become unavailable. Securities denominated in foreign
currency shall be converted into euros at the rate applying
on the date on which the securities become unavailable.
Investors having their domicile in the geographical zones
referred to in the third paragraph of Article 1.1 may ask to
be compensated in CFP francs.
9.2 – The compensation of investors who are customers of
the member institutions referred to in the third paragraph of
Article 1.1 shall be paid in CFP francs. Deposits in euros
shall be converted into CFP francs at the parity in effect on
the date on which the deposits become unavailable.
Investors having their domicile in the geographical zones
referred to in the first paragraph of Article 1.1 may ask to
be compensated in euros.
9.3 – The deposit guarantee fund may also offer all
investors compensation in securities identical to those
whose unavailability has been determined under the
conditions set forth in Article L. 431-6 of the Monetary and
Financial Code, within the maximum limit set forth at
Article 5 above and on the basis of their market value at the
date they became unavailable. Investors shall inform the
fund whether or not they accept the offer within the 15-day
time limit mentioned in Article 8 above. Investors who fail
to reply before such deadline shall be deemed to have
refused the offer, without prejudice to the provisions of the
last paragraph of Article 8 above.
9.4 – Notwithstanding the time limits laid down in the fifth
paragraph of Article 8, when the investor or any other
person having entitlement to or an interest in securities held
in an account is under investigation on suspicion of money
laundering under the terms of Articles 222-38, 324-1 or
324-2 of the Penal Code or Article 415 of the Customs
Code, the guarantee fund shall suspend the corresponding
payments pending the court’s final decision.
Article 10
If a reorganisation or liquidation procedure has been
initiated with respect to a member institution and the
deposit guarantee fund has intervened with respect to the
securities guarantee mechanism, the fund shall provide the
creditors’ representative or the liquidator appointed by the
commercial court with a detailed list for each investor of
the claims it has paid and of claims that have not been paid
under the terms of Articles 3 and 5 of the present
Regulation.
The deposit guarantee fund may not invoke the time limits
laid down in the preceding paragraphs above to deny
benefit of the securities guarantee mechanism to any
investor who furnishes proof that he was unable to assert in
time his claim to payment under a guarantee.
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Selected French Banking and Financial Regulations – 2013
TITLE IV
INFORMATION PROVIDED TO
DEPOSITORS
Article 11
Member institutions shall furnish investors and any other
person making such requests with all relevant information
about the securities guarantee mechanism, including in
particular the level and scope of the cover provided. They
shall also state that the purpose of the securities guarantee
mechanism is to compensate claims resulting from the
unavailability of financial instruments deposited with a
member institution and not to guarantee the value of such
instruments.
Depositors shall be informed of any changes.
Member institutions subject to the present Regulation may
not use such information for advertising purposes.
Article 12
Investors may obtain further information about terms or
time limits for compensation and about the formalities for
obtaining compensation from the deposit guarantee fund on
request.
Article 13
Information intended for investors and documents relating
to the conditions to be met and formalities to be
accomplished in order to benefit from a payment under the
securities guarantee mechanism shall be provided in
French, in a detailed manner that is readily comprehensible
to any depositor.
TITLE V
SUNDRY PROVISIONS
Article 14
See Regulation 99-05, Article 2.
Article 15
Notwithstanding the provisions of Article 9 of the present
Regulation, until 31 December 2001 depositors may ask to
be compensated in French francs.
Article 16
Chapter IV, Title I of the General Regulation of the Conseil
des Bourses de Valeurs is rescinded.
Until the deposit guarantee fund has been finally put in
place, in the event of an incident the Autorité de contrôle
prudentiel shall cause the member institution concerned to
take appropriate steps to identify and verify claims. In
accordance with Article 75-III of the above-mentioned Act
of 25 June 1999, the Autorité de contrôle prudentiel shall
decide how to allocate the contributions it has called up;
compensation shall be paid on behalf of the securities
guarantee mechanism, under the conditions laid down in
the present Regulation, by the Treasury, which is
responsible
for
collecting
and
managing
the
above-mentioned contributions.
Selected French Banking and Financial Regulations – 2013
REGULATION 99-15 OF 23 SEPTEMBER 1999,
RELATING TO THE RESOURCES AND
OPERATION OF THE SECURITIES GUARANTEE
SCHEME
as amended by Regulations 2000-08 of 6 September
2000, 2002-09 of 21 November 2002, 2003-05 of 12
November 2003, 2004-03 of 15 January 2004 and by the
Orders of 20 February 2007 and 7 March 2008
TITLE I
THE FINANCIAL RESOURCES OF THE
SCHEME
Article 1
Institutions that belong to the securities guarantee
mechanism provided for at Article L. 322-1 of the
Monetary and Financial Code and that are subject to the
provisions of Regulation 99-14, hereinafter referred to as
the "members", must subscribe a certificate of association,
as soon as the fund decides to issue them, payable in two
instalments, one of 25% upon subscription and the other
before 31 December 2000, the amount being determined
using the calculation method described in the appendix to
the present Regulation. At 31 December 1999, the total
amount of the certificates of association subscribed in this
way may be ten million euros. It shall be increased by the
contributions of institutions joining after that date and
reduced by the repayments provided for at Article 10.
Article 2
The certificates of association shall be remunerated at an
annual rate determined by the deposit guarantee fund on
behalf of the guarantee mechanism when it closes its
accounts. Such rate may not exceed the average yield as
determined by the Banque de France on ten-year
government bonds issued in the calendar year in which the
certificates are subscribed. The rate shall be replaced at
ten-year intervals by the rate for bonds issued during the
year in which the previous reference stock is reimbursed.
Such remuneration shall be cancelled if the fund finds that
the contributions of members of the securities guarantee
fund will be insufficient to cover charges resulting from the
interventions provided for at Article L. 322-2 of the
Monetary and Financial Code. The fund shall inform the
Minister for Economic Affairs and the Governor of the
Banque de France, acting as chairman of the Autorité de
contrôle prudentiel, of this situation.
Article 3
The total amount of contributions shall be determined in
such a way as not to endanger the stability of the banking
and financial system. Contributions, apportioned between
the members as set forth in the appendix to this Regulation,
shall be paid in a single annual instalment unless it is
necessary to increase the contribution during a calendar
year by augmenting the annual contribution or calling up an
exceptional contribution. All elements of the calculation
specific to each member are covered by a professional
secrecy obligation.
59
Article 4
The guarantee fund shall collect the amount of
contributions due. Members of the mechanism must pay
contributions or make guarantee deposits fifteen days at the
latest after receiving notice to do so as set forth in the
appendix to the present Regulation. The fund shall inform
the Autorité de contrôle prudentiel of any delay or
difficulty in collecting a contribution.
Article 5
New members must subscribe a certificate of association
and pay a supplementary contribution, in addition to the
amount of the annual contribution, for five years in
accordance with the provisions of the appendix to the
present Regulation.
Members not authorised for the administration and custody
of financial instruments are exempted from the
supplementary contribution referred to in the preceding
paragraph.
Article 6
A member institution is not required to pay the total
amount of an annual contribution provided that the
institution:
−
−
undertakes to pay at the fund’s request the unpaid
fraction of contributions for five years from the due
date for payment of the contribution. To carry out this
commitment, the guarantee fund can withdraw this
amount from the deposit in guarantee constituted
under the conditions mentioned hereafter. It notifies
the concerned institution;
constitutes in the fund’s books at the due date for
payment of the contribution a guarantee deposit frozen
for five years, in an amount equal to the unpaid
fraction of the contribution. The remuneration of
guarantee deposits may not exceed the yield on
government bonds with a maturity of five years at
issue as determined by the Banque de France on 16
October, the date as of which members are liable for
payment of the amount of the contribution for which
the deposit is constituted, or on the next working day
where applicable. Such remuneration shall be
cancelled if the resources obtained by investing the
assets of the securities guarantee mechanism prove
insufficient to cover charges resulting from the
interventions provided for at Article L. 322-2 of the
Monetary and Financial Code.
In the event of an institution no longer qualifying as
member, the amount of contributions collected by the
guarantee fund are transformed into contribution as of right
and without any further formalities. Guarantee deposits
may be remunerated until the date of such transformation
as of right. Such remuneration shall be equal to the interest
paid on a hypothetical interbank deposit constituted on the
first day of the year during which the decision takes effect
and for which an interbank rate is ascertained, maturing at
the date closest to the date of such transformation unless,
before that date, the Autorité de contrôle prudentiel has
asked or proposed that the guarantee fund should intervene
on behalf of the securities guarantee mechanism
60
Article 7
Pecuniary sanctions imposed by the Conseil des Marchés
Financiers shall be paid into the fund under the terms of
Article L. 622-16, III of the Monetary and Financial Code,
for which they shall constitute income set aside in a reserve
earmarked for the mechanism as well as the return on
investment of all assets held under the securities guarantee
scheme, once the operating costs have been covered and
the remuneration of the certificates of association and, if
need be, that of the guarantee deposits. Recoveries on
claims paid by the fund on behalf of the mechanism shall
also be set aside in a reserve earmarked for the mechanism.
Article 8
Losses are charged against the amounts set aside in a reserve
earmarked for the securities guarantee scheme, then against
the contributions paid up to the amount of € 30 millions or
the available amount if it is lower. Beyond this amount, the
fund shall call up unpaid fractions up to half of the amount of
the losses to be covered, by order of priority according to the
due date for payment of the contribution. The remaining
losses are charged against the contributions paid, then against
the unpaid fractions, in the same order of priority, before any
charge is made against the remuneration, then against the par
value of the certificates of associations.
The fund may not call up unpaid fractions of the contribution
after five years have elapsed from the time the
above-mentioned guarantees are constituted. As of such date,
institutions may freely dispose of their guarantee deposits.
Losses within the meaning of the present Regulation are the
fraction of charges, including calculated charges, which
exceeds the total income from operating the securities
guarantee scheme, prior to the remuneration of guarantee
deposits.
Article 9
If the fund finds that the losses exceed all the mechanism’s
resources, other than the certificates of association, it shall
reduce the par value of each certificate of association in
proportion. The guarantee fund’s auditors shall decide on the
amount of the provisions taken into account in respect of the
mechanism in order to make such reduction. The fund’s
decision shall be notified to members within fifteen days.
Article 10
When a decision to revoke a member’s authorisation takes
effect, its certificate of association shall be reimbursed, at
the latest by the end of the month following the notification
to the deposit guarantee fund by the competent authority of
the date at which the decision takes effect, at its par value
minus any reductions made under the terms of article 9.
Repayment is at par value, plus any remunerations due as at
the date of reimbursement. Such remuneration is equal to
the interests accruing to an interbank deposit, which on the
one hand would be set up the first day of the year in which
the decision takes effect and for which an interbank rate is
determined, on the other, would fall due as close as
possible to the date of reimbursement of the certificate,
except if the fund has ascertained prior to this date that
resources referred to at Article 2 are insufficient and is not
required to pay a remuneration under the terms of the said
Article.
Selected French Banking and Financial Regulations – 2013
On the take-over of one member by another or the transfer
from one member to another of the business justifying
membership of the mechanism, entailing a revocation of
authorisation or approval without the transferor institution
being dissolved, the income from the reimbursement of the
certificate is added to the amount of the certificate of the
member carrying out the take-over or to which the business
is transferred. In such cases, the remuneration is not
reimbursed, but the new amount of the certificate is used as
a basis for calculating the remuneration due to the member
carrying out the take-over or to which the business is
transferred from the start of the year under consideration.
Should the assessment base of the member being taken
over or of the member whose total business justifying
membership of the mechanism has been transferred be nil,
the income from the reimbursement of his certificate is paid
to the institution carrying out the take-over or to which the
business is transferred, in accordance with provisions in
paragraph 1 of the present Article.
By way of an exception to the last paragraph of Article 6,
the guarantee deposit of the member being taken over or of
the member whose entire business justifying membership
of the mechanism has been transferred is also added to the
guarantee deposit of the member carrying out the take-over
or of the member to which the business is transferred.
TITLE II
Appointment of the Supervisory Board
members (Order of 7 March 2008)
Article 11
The two representatives on the supervisory board of the
deposit guarantee fund of non-credit institution investment
firms that are members of the investors’ guarantee
mechanism are natural persons with senior manager status
as defined in Article L. 532-2 of the Monetary and
Financial Code in one or more member institutions. They
shall be elected after being proposed by a member
institution, in accordance with the provisions of Article 13.
Article 11.1
The members of the supervisory board mentioned in
Article 11 shall be elected for four years.
Article 12
The number of a member’s voting rights shall be based on
the sum, on the previous 31 December, of certificates of
association held, of contributions actually paid during the
ten years preceding the year in which the election of the
supervisory board members is scheduled and of the
outstanding amount of guarantee deposits actually
constituted in the deposit guarantee fund’s books.
When two or more non-credit institution members belong
to the same consolidation scope, their voting rights are
aggregated and exercised by the member with the highest
number of voting rights. They are represented by the
supervisory board member to whom the aggregated voting
rights are allocated.
Selected French Banking and Financial Regulations – 2013
The voting rights of a credit institution member of
investors’ guarantee mechanism are attributed
accordance with the same rules as those pursuant to
amended CRBF Regulation 99-06 of 9 July 1999
deposit guarantee fund operations and resources.
the
in
the
on
The Autorité de contrôle prudentiel shall inform the deposit
guarantee fund of the composition, at 31 December of each
year, of each consolidation scope mentioned in the second
paragraph of this Article, as declared by the member with
the highest number of votes.
Article 13
The two supervisory board members mentioned in Article
11 above shall be elected by the college of member
investment firms that are not credit institutions. The
members of this electoral college called upon to vote are
member investment firms that do not belong to any
consolidation scope or, if they do, that have the highest
number of votes, pursuant to the second paragraph of
Article 12 above.
Candidacies are proposed to the deposit guarantee fund by
the member institutions of this college that wish to do so, at
the latest by 31 January of the year in which the election of
members of the supervisory board is to take place.
The electoral college mentioned in the first paragraph
above is convened by the deposit guarantee fund’s
executive board before 1 March of the same year. The
convocation shall include a list of candidates and the
number of votes held by each member of the electoral
college.
The election shall be conducted by means of an open ballot.
The two candidates who receive the highest number of
votes shall be declared elected. On the supervisory board,
they shall represent the members that have voted for them.
Members that did not take part in the election or did not
vote for one of the elected candidates shall be informed of
the electoral results by the executive board. These members
then have two weeks to notify the executive board of the
candidate elected or appointed (pursuant to the aforementioned CRBF Regulation 99-06 or elected in
application of Article 13 of this regulation) to represent
them when the supervisory board votes during its term of
office.
The voting rights of member institutions belonging to the
electoral college mentioned in the first paragraph who do
not make this notification shall be exercised, pursuant to
this Article, by the elected member of the supervisory
board representing the largest number of voting rights.
The representation mandate can only be revoked in the
event of a change of control of the institution that has
proposed the representative supervisory board member’s
candidacy. In this case, the deposit guarantee fund shall
notify the institutions concerned that they have one month
to appoint a new representative from amongst the other
appointed or elected members of the supervisory board, and
that the absence of any further appointment shall be
interpreted as acceptance of the already elected member as
the new representative.
61
Pursuant to the provisions of Article 12, the supervisory
board members’ voting rights for each year are calculated
on the basis of their situation on the previous 31
December..
Article 14.1
Within the meaning of the present Article, a directlyrepresented non-credit institution member of the electoral
college is an institution that has presented the candidature
of an elected member. If a directly-represented electoral
college member on the supervisory board loses its right to
be represented, a new appointment shall be made under the
following conditions for the remainder of the member’s
term of office, unless the institution in question has lost its
right to be represented as a result of a restructuring
operation that did not involve a change of control.
Within three months of the loss of the institution’s right to
be represented, the deposit guarantee fund’s executive
board shall convene a meeting of the college of member
institutions, mentioned in Article 13, stating the name of
the candidate/s and the number of votes held by each
member.
The election shall be conducted by means of an open ballot
and the election result is decided on a relative majority
basis. If there is only one candidate, this candidate shall be
declared elected.
The electoral college member institutions referred to in the
first paragraph of Article 13 have one month from the date
of this election to notify the deposit guarantee fund of the
name of their representative chosen from the two members
elected (pursuant to Article 13 of the present Regulation) of
the supervisory board. The absence of any such notification
shall be interpreted as acceptance of the already elected
member as the new representative.
However, if the event that would normally justify a new
election occurs within a 12-month period preceding the end
of a term of office, the supervisory board shall designate,
within three months of that event, one of the institutions
from among those forming the electoral college referred to
in the first paragraph of Article 13 to appoint a new
member. This new member is entitled to exercise the
voting rights of the institution he represents.
Article 14.2
Non-credit institution members that have proposed an
elected candidate who subsequently resigns or is prevented
from pursuing his duties, may, within one month, appoint a
replacement senior manager of an institution (as defined in
4 of Article L532-2 of the Monetary and Financial Code)
for the residual term of the unfinished mandate. If the
original elected candidate became ineligible by ceasing to
be an Accountable Manager of a member institution, the
institution that proposed his original candidature may,
within one month, designate the same person as their
replacement representative if that person becomes eligible
after becoming an Accountable Manager of another
member institution.
If, one month following the deposit guarantee fund’s
request for a replacement representative to be designated,
62
no-one has been appointed pursuant to the preceding
paragraph, the election of a new member shall be
conducted, pursuant to Article 14-1.
Article 14.3
Non-credit institution members whose membership is
established during the course of a mandate and which do
not belong to a consolidation scope mentioned in the
second paragraph of Article 12, shall be represented by one
of the members elected under the terms of Article 13
above, whose name they shall notify to the deposit
guarantee fund at the moment of payment of their first
contributions.
Members that no longer belong to a consolidation scope
mentioned in Article 12 above shall announce the
allocation of their voting rights to one of the two
supervisory board members elected under the terms of
Article 13 above within one month of the request
formulated by the deposit guarantee fund following the
latter’s cognisance of their withdrawal from the
consolidation scope.
If the institutions mentioned in the first and second
paragraphs of this Article do not inform the deposit
guarantee fund within the stipulated period of the allocation
of their voting rights, the latter shall be exercised by the
member elected of the supervisory board with the highest
number of votes, pursuant to Article 13 above (Order of 7
March 2008).
TITLE III
TRANSITIONAL PROVISIONS
Article 15
The Autorité de contrôle prudentiel shall make the first
calculation relating to the subscription of certificates of
association and the payment, in a single instalment, of the
first annual contribution to the fund in respect of the
securities guarantee mechanism as soon as the present
Regulation takes effect, on the basis of the data provided
for in the appendix to the present Regulation available at
such date.
By way of an exception to Article 6, the fraction of the
contribution that it is possible for members not to pay
under the terms of the above-mentioned Article shall be
75%. The data serving as the basis for the calculation shall
be those as at 30 June 1999, for the assessment base, and
those as at 31 December 1998 for the elements constituting
the synthetic risk indicator set forth at Point 2 of the
appendix.
Members dispensed from providing documents drawn up as
at 31 December 1998, or those for which the Autorité de
contrôle prudentiel does not have the information required
to calculate the assessment base, shall immediately pay the
minimum contribution and subscribe a certificate of
association in the minimum amount. For 2000, such
members shall, where appropriate, pay contributions
adjusted to take account of any sums they ought to have
paid, under the conditions set forth in the appendix to the
present Regulation. Contributions for 2000 shall be paid in
a single instalment on the basis of data as at 30 June 2000.
Selected French Banking and Financial Regulations – 2013
Article 16
The Autorité de contrôle prudentiel shall call the first
meeting of members, to appoint the representatives of the
securities guarantee mechanism on the supervisory board of
the deposit guarantee fund, as soon as it has carried out the
calculations set forth at Article 15. The appointments shall
be made by applying the provisions of Article 13 to the
amount of certificates of association and contributions paid
for 1999. The term of office of the members appointed in
this way shall expire on 31 March 2001. The term of office
of the members elected in 2001 shall expire on
31 March 2004.
Members not represented by a member of the supervisory
board must designate their representatives two weeks at the
latest after the members have been elected. Until such
designation, the voting rights of members that are not credit
institutions and not represented shall be exercised by the
member of the supervisory board who represents the largest
contribution or contributions to the securities guarantee
mechanism. The voting rights of members that are credit
institutions but are not represented shall be exercised by the
ex officio member who represents the largest contribution
or contributions.
Funds earmarked for the annual contribution for 1999 must
be paid before the meeting of members called by the
Autorité de contrôle prudentiel into a special transactions
account opened in the name of the Treasury with the
Banque de France until the rules of procedure of the
deposit guarantee fund have been approved. They shall
subsequently be paid into an account indicated by the
chairman of the fund’s management board. Sums
earmarked for the paid-up share in 1999 of the certificates
of association shall be paid, after the guarantee fund has
decided to issue the certificates, into an account opened for
the purpose with the Banque de France. Certificates of
association issued by the fund and subscribed by members
and guarantee deposits may bear interest as set forth at
Articles 2 and 6 of the present Regulation once the fund’s
rules of procedure have been approved.
Article 17
The fund shall be authorised to receive resources
originating with guarantee funds prior to the current system
established by the above-mentioned Act of 25 June 1999
[inserted in the Monetary and Financial Code] as soon as
the present Regulation takes effect.
Article 18
For institutions authorised by the Conseil des Marchés
Financiers at 1 January 2002 to have custody of and
administer financial instruments having their registered
office in the overseas territories, in Nouvelle Calédonie or
in the departmental unit of Mayotte, the amount of the
contribution due in respect of the second half of 2002 shall
be equal to half the amount of the contribution due in
respect of 2003 and shall be notified by the Autorité de
contrôle prudentiel at the latest by 15 October 2003. By
way of an exception to Article 5 of the present Regulation,
these institutions shall not be required to pay the
supplementary contribution.
The institutions referred to in the preceding paragraph shall
subscribe a certificate of association calculated on the basis
Selected French Banking and Financial Regulations – 2013
of data as at 31 December 2002 in accordance with the
provisions of the Appendix to the present Regulation.
For investment services providers with the exception of
portfolio management companies which, at 3 August 2003,
were not authorised for the administration and custody of
financial instruments, the amount of the contribution for
2003 is equal to half the amount of the contribution for
2004. The Autorité de contrôle prudentiel will notify the
members concerned of the amount thus calculated and the
amount of the certificate of association to be subscribed by
15 October 2004 at the latest.
Article 19
By way of an exception to Article 13, paragraph 3 of this
Regulation, for 2004 the number of votes available to each
member having the status of investment firm but not
authorised for the administration and custody of financial
instruments with regard to the election of the two
representatives of members that are not credit institutions
to the deposit guarantee fund’s supervisory board is
deemed to be equal to 1200.
APPENDIX
CALCULATING THE APPORTIONMENT
OF CONTRIBUTIONS BETWEEN MEMBERS
1.
Principles
The amount of certificates of association and annual
contributions, hereinafter referred to as "members’
contributions", shall be calculated in accordance with the
provisions of this Appendix.
1.1 Calculating ordinary contributions
Each member’s contribution shall be equal, for each
instalment, to the product of the variable overall amount of
the instalment and the net share of risk attributed to it for
such instalment; however, the contribution may not be less
than 800 euro for the contribution and 800 euro for the
subscription of certificates of association. However, for
institutions that are also members of the deposit guarantee
fund, such minimum contribution shall be 200 euro for the
half-yearly contribution and 400 euro for the subscription
of certificates of association.
The variable overall amount of each instalment is equal to
the overall amount of the instalment minus the product of
the minimum contribution multiplied by the number of
members whose assessment base is nil.
The assessment base is equal to half the value of financial
instruments within the meaning of the above-mentioned
Act of 2 July 1996 [inserted in the Monetary and Financial
Code] held by the member on behalf of customers and
covered by the securities guarantee mechanism plus, for
members that are not credit institutions, the amount of
deposits and other liabilities with regard to customers
covered by the mechanism. The assessment base shall not
include financial instruments issued and held by the
member, or financial futures that cannot be traded on a
regulated market.
63
Financial instruments in the assessment base other than
financial futures are valued on the basis of market value;
the value of financial instruments traded on a regulated
market is the value resulting from the closing price on the
date at which the data used in the calculation are
established. For financial futures other than options bought
by customers, the value of the guarantee deposit constituted
by the customer is used. Options bought by customers are
valued like financial instruments other than futures.
A member’s net share of risk is the ratio between its net
risk amount and the sum of all members’ net risk amounts.
Each member’s net risk amount is equal to the assessment
base, weighted by the synthetic risk indicator set forth in
point 2 of the present Appendix.
If the assessment base cannot be calculated on the basis of
reliable information established at the scheduled date
because member institutions are late or deficient in
providing the necessary information, the base calculated for
the previous instalment shall be increased by 10% per
instalment where such deficiencies exist, unless the
institution can prove that it was prevented from duly
providing the necessary information by reasons of force
majeure. In such case, the assessment base shall be the
average of the three preceding bases. The rate of increase
shall be 5% for the fraction of the assessment base that
exceeds one billion euro.
Should a member have taken over another member or
acquired from another member the entire business
justifying membership of the mechanism, entailing a
revocation of authorisation or approval without the
transferor institution being dissolved between the date at
which the data used in the calculation of the contribution
are established and the date at which the contribution is
due, it shall pay the contribution of the member being taken
over or the member whose entire business as set forth
above has been transferred, except if the assessment base is
nil.
By way of an exception to the provisions of the first
paragraph, member institutions struck off pursuant to
Article L. 322-2 of the Monetary and Financial Code are
exempted from contributing to the securities guarantee
mechanism. Members not authorised for the administration
and custody of financial instruments pay a contribution
equivalent to the minimum amount. Such institutions
subscribe a certificate of association having the same
amount.
1.2 New members’ specific contributions
1.2.1 Certificate of association
The amount of the certificate of association of institutions
joining after 31 December 1999 shall be equal to the
product of the total amount of certificates of association
and the member’s net share of risk, calculated for the first
instalment after joining. The certificate must be paid up in
full at the same time as the contributions for the first
instalment after joining.
64
1.2.2 Supplementary contributions
New members must pay a supplementary contribution in
addition to the contribution set forth at point 1.1 of the
present Appendix for ten instalments after joining. The
amount of the supplementary contribution is equal, for each
instalment, to 20% of the product of the total amount, net
of any losses, of contributions actually paid to the fund by
the other members up to the instalment in question
multiplied by the new member’s net share of risk. For
purposes of these provisions, the sole instalment in 2000 is
equivalent to two instalments. The amount of the
supplementary contribution shall only be paid if it is greater
or equal to € 100.
In the event of a merger, scission, total or partial business
takeover or any other transaction that entails the transfer of
assets previously included in the assessment base of
another member institution, a new member’s
supplementary contribution shall be reduced by the share
attributable to the amount of the assets concerned. if the
member makes a request and transmits to the Autorité de
contrôle prudentiel the data used for calculating this
reduction at the latest by the end of the sixth month after
the date at which the data used in the calculation of the
instalment are established.
1.3. The increments linked to the new members’
supplementary contributions, to the mistakes in
declarations referred to in point 4 of the appendix, as well
as those resulting from the minimum amount of the
contribution, are added to the total annual amount of the
contribution
2. Indicator of the financial situation, calculation of
the net risk amount
In order to calculate the net risk amount, the assessment
base shall be weighted by a minimum factor of 0.75 and a
maximum factor of 1.25 by a linear transformation of the
synthetic risk indicator described in point 2.1 of the present
Appendix. The minimum and maximum factors shall be
0.85 and 1.15 respectively for calculations made in 1999.
2.1 Synthetic risk indicator
A synthetic risk indicator shall be calculated for all
institutions whose assessment base is not nil at the closing
date used as a basis for calculating a contribution. The
synthetic risk indicator shall be the arithmetic mean of the
following scores:
-
a score relating to the own funds requirement,
-
a score relating to operating profitability.
Scores shall be given on a scale of 1 to 3; the higher the
score, the lower the quality.
If one or both of these scores cannot be calculated because
member institutions are late or deficient in providing the
necessary information, a score of 3 shall automatically be
assigned, unless the institution can prove that it was
prevented from duly providing the necessary information
by reasons of force majeure. In such case, the Autorité de
contrôle prudentiel shall use the average of the three
preceding scores for the score or scores concerned.
Selected French Banking and Financial Regulations – 2013
2.2 Elements constituting the synthetic risk indicator
taxes and outside services appearing on the profit and loss
account.
2.2.1 Score relating to capital adequacy
A score of 1 shall be assigned to institutions whose original
own funds as defined by the above-mentioned
Regulation 90-02, from which are deducted, for the part in
excess of the additional own funds, the equity holdings and
subordinated claims as defined in Article 6 of the
aforementioned Regulation are at least equal to 112.5% of
the total own funds requirement set forth in Article 2-1 of
the Order of 20 February 2007.
A score of 2 shall be assigned to institutions whose original
own funds within the meaning of the above-mentioned
Regulation 90-02, from which are deducted, for the part in
excess of the additional funds, the equity holdings and
subordinated claims as defined in Article 6 of the
aforementioned Regulation, are at least equal to 75% of the
total own funds requirement set forth in Article 2-1 of the
Order of 20 February 2007.
A score of 3 shall be assigned to all other institutions.
If a member is subject to the own funds requirements set
forth at the second indent of Article 3-1 of the Order of 20
February 2007, the score shall be calculated by replacing
the overall own funds requirements set forth in Article 2.1
of the Order of 20 February 2007 with the own funds
requirements set forth in the second indent of Article 3-1 of
said Order.
If a member is required to comply with the solvency ratio
or capital adequacy requirement exclusively on a
consolidated basis, the score shall be calculated, for all
institutions included in the scope of consolidation, on the
basis of own funds and risks established on a consolidated
basis. If an institution is also required to comply with such
regulations on an individual or sub-consolidated basis, the
score shall be calculated on an individual or
sub-consolidated basis.
The sum of the following items is included in the
denominator: income from operations, recoveries of
provisions for depreciation of investment securities,
ancillary income and reinvoiced expenses and the share of
operations carried out jointly. Charges from operations,
provisions for depreciation of investment securities, interest
on bad debts and income paid back to co-suppliers are
deducted from the above-mentioned sum. Shares of
operations carried out jointly and headquarters expenses
attributable to institutions shall be added to income, shares
attributable to other participants shall be deducted.
The reinvoiced expenses attributable to the elements in the
numerator are deducted from the numerator and the
denominator of the operating coefficient as from the first
half-yearly instalment of 2001.
3.
For institutions affiliated to a central body, an overall
contribution for the network shall first be calculated. For
the purposes of calculating this contribution, all affiliated
institutions, whether members or not, are regarded as a
single institution to which the provisions of points 1 and 2
of the present Appendix are applied, with the following
amendments:
−
the assessment base is the sum of the affiliated
institutions’ assessment bases;
−
the synthetic risk indicator is the arithmetic mean of
the network’s overall scores calculated for both items
set forth at point 2 of the present Appendix;
−
the network’s overall score is calculated, for each item
included in the calculation of the scores described in
point 2 of the present appendix, by considering all the
network’s members, as defined in Articles L. 511-30
and L. 511-31 of the Monetary and Financial Code as
a single entity, by summing their individual data after
processing them to homogenise them and eliminate
the reciprocal operations. However, up till the closing
of accounts on 31 December 2004, the overall score
can be calculated by summing and eliminating the
reciprocal operations, without processing them to
make them homogeneous;
2.2.2 Score relating to operating profitability
A score of 1 shall be assigned to institutions whose
operating coefficient is lower than 65%.
A score of 1.5 shall be assigned to institutions whose
operating coefficient is lower than 70%.
A score of 2 shall be assigned to institutions whose
operating coefficient is lower than 75%.
A score of 2.5 shall be assigned to institutions whose
operating coefficient is greater than or equal to 75% but
lower than 85%.
A score of 3 shall be assigned to all other institutions.
The operating coefficient within the meaning of the present
Regulation is the ratio between the sum of overheads,
depreciation provisions and net provisions for tangible and
intangible assets on the one hand and the sum of income
from operations, ancillary income and sundry other income
minus charges from operations, interest on bad debts and
sundry charges. Overheads shall include personnel costs,
Selected French Banking and Financial Regulations – 2013
Institutions affiliated to a central body
−
to calculate the network’s overall synthetic risk
indicator, the score relative to the own funds
requirement can be calculated on a consolidated basis
in accordance with the provisions in point 2.2.1 of the
present Appendix, the consolidating entity being the
single entity defined in the third indent. The central
body informs the Autorité de contrôle prudentiel of
this choice at the latest by the accounting date used as
a basis for calculation at the next instalment.
The network’s overall contribution is then apportioned
between member affiliated institutions in proportion to
their contribution to the network’s overall exposure,
defined as the quotient of its net risk amount and the sum
of the net risk amounts of all member affiliated institutions.
4.
Notification of calculations
The Autorité de contrôle prudentiel shall make all the
calculations provided for in the present Regulation on the
65
basis of data established as at 31 December. It shall notify
member institutions of the amount of their contributions
due as of
16 October, together with the elements used to make the
calculations described in points 1 and 2, by ordinary mail at
the latest by 15 October of each year.
The maximum rates set forth at Articles 2 and 6 of this
Regulation shall be, for the amounts called up from
November 1999 to June 2001, those applicable to the
contributions called up in the first half-year of 2001
Any member may ask the Autorité de contrôle prudentiel to
rectify the calculation of its contribution within two months
following receipt of notification. The Autorité de contrôle
prudentiel may also rectify its calculation during the five
years following payment of the contribution in the light of
information brought to its knowledge subsequent to the
date on which the calculations were sent, after seeking the
institution’s comments. As long as the Autorité de contrôle
prudentiel does not rectify the calculation, the fund shall
use it to collect outstanding contributions.
REGULATION 99-16 OF 23 SEPTEMBER 1999,
RELATING TO THE GUARANTEE OF SECURITIES
HELD ON BEHALF OF INVESTORS BY A BRANCH
ESTABLISHED ON THE TERRITORY OF THE
FRENCH REPUBLIC AND OF THE PRINCIPALITY
OF MONACO OF A CREDIT INSTITUTION OR
INVESTMENT FIRM HAVING ITS
HEADQUARTERS IN ANOTHER COUNTRY.
The Autorité de contrôle prudentiel shall rectify the
calculation if there seem to be grounds for changing an
institution’s contribution by more than 10% of the sums it
has paid. The fund shall make such rectification on
notification from the Autorité de contrôle prudentiel.
If a rectification entails a change of more than 1.5% of the
total amount of the half-yearly contribution or if the
algebraic sum of all changes is greater than this amount in
the contribution of the institution making the request, the
Autorité de contrôle prudentiel shall recalculate all
outstanding contributions and charge the differences to the
next instalment.
If a member institution has made a mistake in declaring its
assessment base or elements used to determine its synthetic
risk indicator, the rectified contribution shall be increased
by 10% of the amount of the variation in the contribution.
If the mistake alone has entailed a general recalculation, the
supplement shall be 20%
The Autorité de contrôle prudentiel shall inform the
guarantee fund of the amount of each member’s
contribution by ordinary mail before 1 November of each
year. The fund shall issue payment notices to members
before 15 November of each year.
5. Transitional provisions
As soon as it has made the calculation referred to at
Article 15, the Autorité de contrôle prudentiel shall inform
member institutions by ordinary mail of the amount of their
contributions and of the amount of the certificates of
association, including the data referred to in points 1 and 2
used to make the calculation. In the absence of more
accurate information, it may use the value of the securities
kept by the central securities depository on the member’s
behalf as the basis for calculating the contribution.
When calculating the annual instalment for 2000, the
instalment for 1999 is recalculated on the basis of the net
shares of risk as at 30 June 2000. The amount of the
certificates of association is rectified accordingly.
If applying such calculation produces negative
contributions, the fund shall reimburse excess contributions
and, where relevant, shall release the guarantee deposits
corresponding to them, then allocate any residual balances
to future contributions.
66
as amended by Regulation 2002-06 of 15 July 2002 and
by the Orders of 20 February 2007 and
18 December 2009
Article 1
The securities guarantee mechanism referred to at
Article L. 322-1 of the Monetary and Financial Code shall
compensate, under the conditions set forth in this
Regulation, claims arising from the inability of a branch of
a credit institution having its registered office in a State
other than the Principality of Monaco that is not party to
the agreement on the European Economic Area, to return to
investors financial instruments held on their behalf and, in
the situations set forth in Title II below, claims arising from
the unavailability of financial instruments held on behalf of
investors by a branch of a credit institution or investment
firm having its registered office in a State other than France
that is party to the agreement on the European Economic
Area.
TITLE I
BRANCHES REQUIRED TO JOIN THE
SECURITIES GUARANTEE MECHANISM
Article 2
Branches of credit institutions having their registered office
in a State that is not party to the agreement on the European
Economic Area, established on the territory of the French
Republic or of the Principality of Monaco shall be
governed by the provisions of the above-mentioned
Regulations 99-14 and 99-15, without prejudice to the
provisions of Articles 4 and 5 of the present Regulation.
Article 3
Branches of credit institutions having their registered office
in a State party to the agreement on the European
Economic Area other than France, established in the
territorial
unit
(collectivité
territoriale)
of
Saint-Pierre-et-Miquelon or the departemental unit
(collectivité départementale) of Mayotte, in the overseas
territories or in Nouvelle Calédonie shall be governed by
the provisions of the present Regulation under the same
conditions as the branches referred to in the preceding
Article.
Selected French Banking and Financial Regulations – 2013
Article 4
If a branch referred to at Article 2 or 3 above benefits
through its registered office from coverage at least
equivalent in scope and amount to the coverage offered by
the securities guarantee mechanism on the territory of the
French Republic or of the Principality of Monaco, the
deposit guarantee fund may define, by way of an agreement
with the system of the country of origin, the conditions
under which the French fund compensates the investor
customers of the branch in respect of the securities
guarantee mechanism and, where appropriate, the deposit
guarantee, in accordance with the provisions of the
above-mentioned Regulation 99-14.
If an agreement has been concluded within the framework
set forth in the preceding paragraph, the branch is
dispensed from contributing to the securities guarantee
mechanism.
Failing such an agreement, for the purposes of the
above-mentioned Regulation 99-15, contributions shall be
calculated on the basis of information concerning the
branches’ financial situation provided to the Autorité de
contrôle prudentiel. However, if pursuant to a decision of
the Autorité de contrôle prudentiel the above-mentioned
branches are not required to comply with the Order of
20 February 2007 relating to own funds requirements
applying to credit institutions and investment firms, and the
authorities of the country of origin agree to provide the
Autorité de contrôle prudentiel with information
concerning the own funds and exposure of the institutions
as a whole, assessed according to the standards of the
country of origin, the elements relating to solvency shall be
calculated on the basis of the data thus provided. If the
information needed to make such calculation is not
available to the Autorité de contrôle prudentiel, the
synthetic risk indicator referred to in the Appendix to
Regulation 99-15 shall be equal to 3.
Article 5
The Autorité de contrôle prudentiel shall assess the
equivalence referred to at Article 4 of the present
Regulation at the guarantee fund’s request.
TITLE II
BRANCHES THAT ARE MEMBERS OF THE
SECURITIES GUARANTEE MECHANISM ON
A SUPPLEMENTARY BASIS
Article 6
Branches established in metropolitan France and in the
overseas departments by credit institutions and investment
firms having their registered office in another State party to
the agreement on the European Economic Area, or by a
financial institution referred to at Article L. 511-23 of the
Monetary and Financial Code may, insofar as the
guarantee system in their country of origin is less
favourable, join the deposit guarantee fund on a
supplementary basis. An application for membership on a
supplementary basis of the securities guarantee mechanism
submitted by a branch of a credit institution shall imply an
application for membership on a supplementary basis of the
deposit guarantee fund.
Selected French Banking and Financial Regulations – 2013
Branches that avail themselves of the option provided for in
the preceding paragraph shall be governed by the
provisions of the above-mentioned Regulations 99-14 and
99-15, without prejudice to the provisions of Articles 8, 9
and 10 of the present Regulation and, where relevant, to the
provisions of the above-mentioned Regulation 99-07.
Branches that do not avail themselves of the option shall
nevertheless be governed by the provisions of Title IV of
the above-mentioned Regulation 99-14.
Article 7
Branches established in metropolitan France and in the
overseas departments by credit institutions or investment
firms having their registered office in another State party to
the agreement on the European Economic Area, or by a
financial institution referred to at Article L. 511-23 of the
Monetary and Financial Code, shall notify the Autorité de
contrôle prudentiel of any change in the coverage extended
to them.
Article 8
If a branch referred to at Article 6 above applies to join the
securities guarantee mechanism with a view to benefiting
from a supplementary guarantee, the deposit guarantee
fund shall define terms and conditions for compensating
depositors with the system to which the credit institution
belongs in the State where it has its registered office.
The deposit guarantee fund shall allow, on behalf of the
securities guarantee mechanism, applications for
supplementary compensation on the basis of a statement of
non-availability of securities, within the meaning of Article
2 of the above-mentioned Regulation 99-14, issued by the
competent authorities of the State where the institution has
its registered office.
Article 9
If a branch that has availed itself of the supplementary
membership option set forth at Article 6 of the present
Regulation fails to fulfil its obligations as a member of the
securities guarantee mechanism intervening on a
supplementary basis, the Autorité de contrôle prudentiel
shall inform the competent authorities that authorised the
branch of the fact so that, in cooperation with the guarantee
mechanism, they can take all appropriate steps to ensure
compliance with such obligations.
If, despite such steps, the branch fails to comply with the
obligations referred to in the preceding paragraph, the
guarantee mechanism intervening on a supplementary basis
may exclude the branch, with the consent of the authorities
that authorised it and with not less than one year’s notice.
Securities, within the meaning of Article 2 of the
above-mentioned Regulation 99-14, held on behalf of an
investor before the exclusion date shall continue to benefit
from the supplementary cover. The branch shall
immediately inform depositors that the supplementary
cover has been revoked.
Article 10
For the purposes of the above-mentioned Regulation 99-15,
the amount of contributions shall be in proportion to the
ratio between the supplementary cover provided and the
67
total cover provided by the French system, without
prejudice to any provisions to the contrary contained in an
agreement with the guarantee system of the country of
origin. Data concerning capital adequacy and profitability
shall relate to the institution as a whole, assessed on a
company or consolidated basis according to the standards
of the country of origin, and may be provided or confirmed
by the authority of the country of origin. The assessment
base shall comprise securities held in metropolitan France
or in the overseas departments and, for investment firms
and financial institutions, deposits located in metropolitan
France and in the overseas departments.
If the Autorité de contrôle prudentiel does not have
information needed to calculate the assessment base or
synthetic risk indicator, it shall apply the increases or
indicator 3 provided for in the Appendix to
above-mentioned Regulation 99-15.
the
the
the
the
TITLE III
AUTHORISATION FOR THE DEPOSIT
GUARANTEE FUND, ON BEHALF OF THE
SECURITIES GUARANTEE MECHANISM,
TO CONCLUDE AGREEMENTS WITH THE
GUARANTEE SYSTEMS OF OTHER
STATES CONCERNING THE COVERAGE
OF FOREIGN BRANCHES OF CREDIT
INSTITUTIONS HAVING THEIR
REGISTERED OFFICE ON THE TERRITORY
OF THE FRENCH REPUBLIC OR OF THE
PRINCIPALITY OF MONACO
Article 11
The deposit guarantee fund may conclude, on behalf of the
securities guarantee mechanism, an agreement setting out
the conditions governing its compensation of investors who
are customers of a branch established in a State not party to
the agreement on the European Economic Area by a credit
institution having its registered office on the territory of the
French Republic or of the Principality of Monaco in liaison
with the guarantee system to which the above-mentioned
branch belongs.
Article 12
The deposit guarantee fund may conclude, on behalf of the
securities guarantee mechanism, an agreement setting out
the conditions governing its compensation of the depositors
of a branch established in another State party to the
agreement on the European Economic Area by a credit
institution having its registered office in French Polynesia
or in Nouvelle Calédonie or in Wallis and Futuna islands or
in Saint-Pierre-et-Miquelon or in Mayotte or in the
Principality of Monaco, in liaison with the guarantee
system to which the above-mentioned branch belongs.
Article 13
The conclusion of such agreements is subject to the
condition that the cover afforded by the securities
guarantee mechanism is at least equivalent in both amount
and scope to the cover afforded by the guarantee system of
the country concerned, and that the foreign guarantee
system bears the cost, if any, of compensating investors
who are customers of branches established on the territory
68
of the French Republic or of the Principality of Monaco by
the members of such system under the conditions set forth
at Article 4 of the present Regulation.
The gross assessment base within the meaning of the
above-mentioned Regulation 99-15 shall include the
financial instruments and cash deposits covered within the
framework of the above-mentioned agreements.
The Autorité de contrôle prudentiel shall assess the
equivalence and reciprocity referred to in the first
paragraph above at the request of the guarantee fund.
TITLE IV
SUNDRY AND TRANSITIONAL
PROVISIONS
Article 14
For as long as they are not covered by a guarantee system
in their State of origin in accordance with the
above-mentioned directive 97/9/EC, the branches in
metropolitan France and in the overseas departments of
credit institutions having their headquarters in another State
party to the agreement on the European Economic Area are
required to join the securities guarantee mechanism under
the same conditions as credit institutions authorised in
France.
The branches referred to in the first paragraph above shall
inform the Autorité de contrôle prudentiel and the deposit
guarantee fund as soon as they are covered by the
guarantee system of their State of origin.
Article 15
Until 31 December 1999, neither the level nor the scope of
cover proposed by the branches in France of credit
institutions or investment firms that have their headquarters
outside France or, where applicable, of financial
institutions referred to at Article L. 511-23 of the Monetary
and Financial Code, and are members of a guarantee
system in their country of origin may exceed the maximum
level and scope of the cover proposed by the securities
guarantee mechanism.
ORDER OF 6 NOVEMBER 2012, RELATING TO
THE TOTAL AMOUNT OF CONTRIBUTIONS TO
THE SECURITIES GUARANTEE MECHANISM
FOR 2012.
Article 1
The total amount of the annual contribution for 2012 is
EUR 7.4 million.
Article 2
This Order shall be published in the Journal officiel de la
République française.
Selected French Banking and Financial Regulations – 2013
ORDER OF 6 NOVEMBER 2012 CONCERNING THE
EXCEPTIONAL CONTRIBUTION TO THE
SECURITIES GUARANTEE MECHANISM
Article 1
An exceptional contribution of 4.6 million euro to the
Securities Guarantee Mechanism is due from members of
the Deposit Guarantee Fund.
The provisions of Article 6 of Regulation 99-15 of 23
September 1999 mentioned above are not applicable to this
exceptional contribution.
Article 2
The present Order will be published in the Journal officiel
de la République française.
1.1.7. GUARANTEES OF BANK
GUARANTEES
EXCERPT FROM MONETARY AND FINANCIAL
CODE:
ARTICLES D. 313-26 TO D. 313-31, RELATING TO
THE GUARANTEES OF BANK GUARANTEES
implementing Article L. 313-50 of the Monetary
and Financial Code
CHAPTER I
OBLIGATORY GUARANTEES COVERED BY THE
GUARANTEE MECHANISM
Article D. 313-26
Pursuant to article 313-50 of the Monetary and Financial
Code (Code monétaire et financier), the guarantee
commitments granted by a credit institution authorised in
France are covered by the guarantee mechanism by way of:
1 ° Article 1799-1 of the Civil Code, Article 1 of act n° 71584 of 16 July 1971 as amended regulating public
procurement guarantees defined by the 3° of Article 1779
of the Civil Code and Article 13-1 and 14° of act n° 751334 of 31 December 1975 as amended relating to
outsourcing;
7° Article 3 (2°) of act n° 70-9 of 2 January 1970 regulating
the terms and conditions for conducting activities relating
to certain transactions on real estate and business assets;
8° The second paragraph of Article 27 of act n° 71-1130 of
31 December 1971 reforming certain judicial and legal
professions;
9° I of Article 7-1 of act n° 82-1153 of 30 December 1982
on domestic transport;
10° Article L. 519-4;
11° C of Article L. 212-2 of the Code of Tourism, b of
Article L. 213-3 of the same code until the date specified in
the first paragraph of Article 4 of Order n° 2005-174 of 24
February 2005, and, after this date, d of Article L. 213-3
and Articles L. 213-5 and L. 213-7 of the same code until
the date specified in the first paragraph of Article 4 of
Order n° 2005-174 of 24 February 2005;
12° Articles L. 522-11 and L. 522-12 of the Commercial
Code;
13° Article 3 of Decree n° 99-752 of 30 August 1999 on
road
freight;
14° Articles 7 and 14 of Decree n° 90-200 of 5 March 1990
on the profession of forwarding agent;
15° 2° of Article 3 of Decree n° 89-273 of 26 April 1989
implementing the Decree of 9 January 1852 as amended on
the practice of sea fishing with regard to the first marketing
of the catch and the rules governing the communications of
statistical data;
16° 2° of Article 9 of Decree n° 98-58 of 28 January 1998
regarding the attribution of the foreign tradesman’s identity
card;
17° Article 331-5 of the General Regulations of the
Autorité des marchés financiers;
18° Article 16 of the Order of 6 May 1995 concerning
airfields and other locations used by helicopters.
Article D. 313-27
Shall be excluded from any compensation or resumption of
by the guarantee mechanism:
2° Articles L. 1251-49 to L. 1251-53 and Articles L. 712319, L. 7123-21 and L. 7123-22 of the Labour Code;
1° the guarantee commitments carried out in the interest of
the following people:
3° Article L. 530-1 of the Insurance Code;
a) Credit institutions and investment firms, on their behalf
and for their own account;
4° H of Article L. 222-3, k of Article L. 231-2, g of Article
L. 232-1 and Articles R. 222-9 and R. 222-11 of the
Construction and Housing Code;
b) Insurance companies;
5° D of Article L. 261-11 and Articles R. 261-17 to R. 26124 of the Construction and Housing Code and Articles 6
and 15 of act n° 84-595 of 12 July 1984 defining rentingfirst-time homeownership;
6° Article R. 141-2 of the Country and Sea Fishing Code;
Selected French Banking and Financial Regulations – 2013
c) Collective investment undertakings;
d) Organisations of retirement and funds of pension;
e) Persons mentioned in Article L. 518-1 of the Monetary
and Financial Code;
f) Associates personally responsible and sleeping
partners, holders of at least 5% of the capital of the
credit institution, administrators, members of the
directory and the board of trustees, senior managers
69
and auditors of the institution, as well as any recipient
having the same qualities in other companies of the
group;
g) Companies having with the credit institution, directly
or indirectly, links of capital bringing to one of the
linked companies a real power of control on the others;
h) Other financial institutions within the meaning of
Article L. 511-21-4 of the Monetary and Financial
Code;
i) Third parties acting on behalf of the persons mentioned
above.
2° The guarantee commitments concerning the operations
for which a final penal sentence has been ordered against
the recipient for money laundering, on the base of
articles 222-38, 324-1 and 324-2 of the Penal Code or
Article 415 of the Customs Code;
3° The guarantee commitments for which the recipient has
been granted by the credit institution, on a purely
individual basis, financial advantages which contributed to
worsen the financial standing of this institution.
CHAPTER II
MODES OF INFORMATION OF THE PUBLIC ON
THE GRANTED GUARANTEE
Article D. 313-28
Credit institutions provide to the beneficiary the guarantee
commitments mentioned in Article D. 313-26, as well as to
any person who asks for it, all useful information on the
guarantee mechanism, in particular on the nature and the
extent of the protection offered.
Article D. 313-29
The member institutions of the guarantee fund shall insert
in the contracts of guarantee which fall into the scope of
application of Articles D. 313-26 to D. 313-31 the
following mention: " This commitment is covered by the
guarantee mechanism instituted in Article L. 313-50 of the
Monetary and Financial Code.”
Article D. 313-30
The beneficiaries of the guarantee commitments mentioned
in Article D. 313-26 may obtain, on a mere request made
by the deposit guarantee fund, additional information on
the conditions or delays concerning the compensation as
well as on the formalities required for reimbursement.
Article D. 313-31
Information aimed at the beneficiary as well as the
documents relating to the conditions and formalities to
fulfil in order to receive a payment on account of the
guarantee mechanism shall be written in French language,
with details and in an easily understandable way.
REGULATION 99-12 OF 9 JULY 1999, RELATING
TO THE CONDITIONS AND TIME LIMITS FOR
COMPENSATION THROUGH THE GUARANTEE
MECHANISM
as amended by Regulation 2002-06 of 15 July 2002
Article 1
Except in cases where reorganisation or liquidation
proceedings are initiated, the Autorité de contrôle
prudentiel, after determining that a credit institution is no
longer able to meet immediately or before long its
commitments relative to the guarantees listed in the Decree
mentioned in indent 5 of Article L. 313-30 of the Monetary
and Financial Code, shall immediately ask the deposit
guarantee fund to obtain the intervention of the guarantee
scheme under the terms of indent 3 of the above-mentioned
Article (L. 313-50).
Article 2
As soon as the decision of the Autorité de contrôle
prudentiel has been notified, the deposit guarantee fund
shall initiate, for the account of the guarantee mechanism,
proceedings for the compensation, withdrawal or transfer
of the commitments of the defaulting institution.
Within two months of the notification, the deposit
guarantee fund lists the beneficiaries of the guarantee
commitments granted by the defaulting institution and
informs them, via registered letter with acknowledgment of
receipt, that the commitment will be taken up. This letter
shall also inform the beneficiaries of the formalities to be
completed and the documents to be produced in order to
ensure be compensation or the taking up of the
commitments by the guarantee scheme. It shall also precise
the possibility for the beneficiary to choose between a
compensation in euros or in francs CFP and the ways to
follow to this purpose.
When the circumstances so warrant, the deposit guarantee
fund may apply to the Autorité de contrôle prudentiel for
an extension of the time limit fixed in the abovementioned
second indent. This extension may not exceed two months.
At the request of the guarantee fund, the Commission may
not grant more than two extensions of the time limit.
Article 3
The compensation or the taking up of the commitment by
the guarantee scheme shall be carried out in euros and
limited to 90% of the expenses which the defaulting
institution should have paid under the terms of its
commitment. The non compensated fraction shall not be
inferior to EUR 3,000.
The compensation or the taking up of the commitment is, if
necessary, is carried out in francs CFP. In such a case, the
amount mentioned at the preceding indent is equal to the
value in francs CFP resulting from the use of the parity
defined in application of Article L. 712-2 of the Monetary
and Financial Code.
Article 4
The disposals mentioned in the above-mentioned article do
not apply to the interventions of the guarantee scheme
70
Selected French Banking and Financial Regulations – 2013
where they are carried out under the terms of Article L.
313-51 of the Code Monétaire et Financier.
REGULATION 2000-06 OF 6 SEPTEMBER 2000,
RELATING TO THE MEMBERSHIP AND
RESOURCES OF THE GUARANTEE MECHANISM
as amended by Regulations 2002-06 of 15 July 2002,
2002-10 of 21 November 2002
and by the Orders of 10 October 2006
and 15 April 2010
taking, in cooperation with the guarantee fund, all
appropriate measures to ensure that such obligations are
met.
If, despite such measures, the branch in question fails to
fulfil the obligations mentioned in the preceding paragraph,
the guarantee fund, after informing the authorities that
delivered the authorisation and with not less than three
months notice, may exclude it. Guarantees granted by such
institution before its exclusion shall continue to benefit
from coverage until they mature. The branch shall
immediately inform the principals of the guarantees that
such coverage has been withdrawn.
TITLE I
TITLE II
CONTRIBUTORS TO THE GUARANTEE
MECHANISM
FINANCIAL RESOURCES OF THE
GUARANTEE MECHANISM
Article 1
Credit institutions having their registered office on the
territory of the French Republic, in New-Caledonia, in
French Polynesia, in the Wallis and Futuna islands, in the
overseas departments, in the collectivité territoriale
(territorial unit) of Saint-Pierre-et-Miquelon, or in the
Principality of Monaco whose authorisation in France
allows them to issue one or more guarantees required by a
law or regulation shall join the guarantee mechanism set
forth at Articles L. 313-50 and L. 313-51 of the Monetary
and Financial Code.
Branches of credit institutions whose registered office are
located in a State that is not a party to the agreement on the
European Economic Area which are established on the
territory of the French Republic and in the Principality of
Monaco and whose authorisation in France allows them to
issue guarantees shall be governed by the provisions of this
Regulation.
Branches of credit institutions whose registered office is
located on the European Economic Area and whose
authorisation allows them to issue guarantees in the
overseas territories, in the collectivité territoriale
(territorial unit) of Saint-Pierre-et-Miquelon or in the
departemental unit (collectivité départementale) of
Mayotte or in the Principality of Monaco shall be governed
by the provisions of this Regulation.
Article 2
Branches of credit institutions having their headquarters in
another State party to the agreement on the European
Economic Area and authorised to issue guarantees in their
home country which are established in metropolitan France
or in the overseas departments may join the guarantee
mechanism if they so wish. Should they do so, such
branches shall be governed by the provisions of this
Regulation.
Article 3
If a branch which has availed itself of the membership
option set forth at Article 2 fails to fulfil the obligations
incumbent upon it by virtue of its membership of the
guarantee mechanism, the Autorité de contrôle prudentiel
shall inform the competent authorities which have
delivered the authorisation of the fact with a view to
Selected French Banking and Financial Regulations – 2013
Article 4
The total amount of contributions shall be set so as not to
imperil the financial stability of the mechanism’s members.
The annual contribution shall be paid in a single instalment,
shared between the members according to the provisions
set forth in the appendix to this Regulation. All elements of
the calculation specific to each member shall be covered by
a professional secrecy obligation.
Article 5
New members joining the guarantee mechanism must for
two years pay a supplementary contribution in addition to
the amount of the annual contribution according to the
provisions set forth in the appendix to this Regulation.
Article 6
A member institution shall not be required to pay 100 % of
the amount of an annual contribution under the following
conditions:
a) it undertakes to pay upon request from the fund the
unpaid fraction of contributions for a five-year period from
the due date for payment of the contribution. For
performance of this undertaking, the guarantee fund may
deduct such amount from the deposit constituted under the
conditions set forth below and shall inform the institution
concerned thereof;
b) it constitutes on the fund’s books at the due date for
payment of the contribution a guarantee deposit frozen for
five years, in an amount equal to the unpaid fraction of the
contribution, the remuneration of which may not exceed the
yield on five-year government bonds as ascertained by the
Banque de France on 16 October, the date as of which the
members are liable for payment of the amount of the
contribution for which the deposit has been constituted, or
on the next working day where applicable.
In the event of loss of membership, the sums in the deposit
constituted by such member shall be transformed
automatically and without any other formality into
contributions. Guarantee deposits may be remunerated until
the date of such automatic transformation. Such
remuneration shall be equal to the interest paid on a
hypothetical interbank deposit constituted on the first day
of the year during which the decision takes effect and for
71
which an interbank rate is ascertained, maturing at the date
closest to the date of such transformation unless, before
that date, the Autorité de contrôle prudentiel has asked or
proposed that the deposit guarantee fund should intervene
on behalf of the guarantee mechanism. However, should
loss of membership be due to takeover by another member
or the transfer to another member of the entire business for
which membership of the guarantee mechanism was
required without the transferor institution being dissolved,
the amount of the guarantee deposits of the institution that
has been taken over or transferred shall be added to that of
the acquiring institution if, following the transaction, it no
longer carries guarantee commitments referred to in the
aforementioned Decree of 8 September 1999 as amended
Article 7
The guarantee fund shall collect the amount of outstanding
contributions. Member institutions must pay the
contributions or constitute the deposits fifteen days at the
latest after receiving notice to do so as set forth in the
appendix to the present Regulation. The fund shall inform
the Autorité de contrôle prudentiel of any delay or
difficulty in collecting a contribution.
Article 8
Recoveries of claims settled by the fund under the terms of
the mechanism and income from investment of the
mechanism’s assets, net of the mechanism’s operating
expenses and, where relevant, remuneration of the deposits,
shall be placed by the fund in a reserve earmarked for the
mechanism. If the mechanism’s operating expenses exceed
its recoveries and income in a given year, they shall be
carried over to subsequent years.
Article 9
The mechanism’s losses shall be set off against amounts
placed in the reserve earmarked for the mechanism, then
against contributions actually paid during the year up to an
amount of 10 million euro. Thereafter, the fund shall call
up, for half the amount of losses not yet covered, unpaid
fractions of contributions by order of priority of the due
date for payment of the contribution. Remaining losses
shall be set off first against the balance of paid-up
contributions, then against the balance of unpaid fractions
of contributions, in the same order of priority.
The fund may no longer call up unpaid fractions of
contributions after five years have elapsed following
constitution of the abovementioned deposits. At that date,
members may once more freely dispose of their deposits.
The fraction of charges, including calculated charges,
which exceeds total income for the current year before any
remuneration of deposits is deemed to constitute a loss
within the meaning of the present Regulation.
TITLE III
TOTAL AMOUNT OF CONTRIBUTIONS TO
THE GUARANTEE MECHANISM
Article 10
The total amount of the annual contribution for 2010 to
2013 shall be 3.1 million euro.
72
TITLE IV
Deleted
APPENDIX
CALCULATING MEMBERS’ SHARE OF
CONTRIBUTIONS
1. Principles
The amount of the annual contribution shall be calculated
according to the terms of this Appendix.
1.1
Ordinary contributions
Each member’s contribution shall be equal, for each
instalment, to the product of the variable total amount of
the instalment divided by the net share of risk attributed to
it for that instalment. The minimum amount of each
instalment shall be 4,000 euro.
By way of an exception to the provisions of the first
paragraph, member institutions struck off pursuant to
Article L. 312-5 I of the Monetary and Financial Code are
exempted from contributing to the guarantee mechanism
The variable total amount of each instalment shall be equal
to the total amount of the instalment minus the product of
the minimum contribution divided by the number of
members whose contribution assessment base is zero.
A member’s net share of risk is the ratio between its net
risk amount and the sum of all members’ net risk amounts.
Each member’s net risk amount is equal to the contribution
assessment base, increased or decreased according to the
financial situation indicator described at point 2 of this
Appendix.
The contribution assessment base is equal to the sum of the
following amounts:
−
70% of the
guarantees";
off-balance
sheet
line
"property
−
70% of the
guarantees";
off-balance
sheet
line
"financial
−
80% of the off-balance sheet line "other guarantees in
favour of customers". However, for calculation of the
contribution payable in respect of 2003, the item
"other guarantees on behalf of customers" of the offbalance sheet shall be included at 40%.
If the contribution assessment base cannot be calculated
from reliable data determined at the given date because
members are late or deficient in providing the necessary
information, the base calculated for the preceding
instalment shall be increased by 10% per defaulting
instalment, unless the institution can prove that it was
unable duly to provide the information for reasons of force
majeure. In such case, the contribution assessment base
shall be the average of the preceding three bases. The rate
of increase shall be reduced to 5% for the fraction of the
gross assessment base in excess of one billion euro.
Selected French Banking and Financial Regulations – 2013
If a member institution informs the Autorité de contrôle
prudentiel no later than 15 June of a given year that at
accounts closing on 31 December of the previous year it
did not carry any of the guarantees referred to in the
aforementioned Decree of 8 September 1999 as amended,
its contribution for the instalment of the year in question
shall be equal to the minimum contribution.
If a member institution has taken over another member
institution or has acquired from another member institution
the activity justifying membership of the guarantee
mechanism under the conditions set forth in the last
paragraph of Article 6 between the deadline for the
information needed to calculate the contribution and the
date at which the contribution is due, it must pay the target
or transferred institution’s contribution unless the latter’s
assessment base is zero.
1.2
Supplementary contributions from new members
New members must pay a supplementary contribution in
addition to the one set forth at point 1.1 above for the two
instalments after they join. The amount of the
supplementary contribution shall be equal, at each
instalment, to 10% of the product of the new member’s net
risk amount divided by the total amount, minus any losses,
of contributions actually paid to the fund by the other
members up to the instalment in question. The
supplementary contribution shall be paid only if the amount
thereof is greater than or equal to 100 euro.
If the new member takes over the elements included in
another member’s assessment base as a result of a merger,
demerger or total or partial acquisition of the business or
any other operation having as its effect the transfer of such
elements, the supplementary contribution may be reduced
by the share attributable to the amount of the elements
taken over, if the member applies to do so and provides the
Autorité de contrôle prudentiel with the relevant
information for calculating the reduction no later than the
end of the sixth month after the date at which the figures
required for the calculation are determined.
1.3 Allocation of sums that increase the total amount
Additional amounts resulting from new members’
supplementary contributions, from mistakes in declarations
referred to in point 4 of the appendix above and from the
minimum contribution shall be added to the annual total
amount of the contribution.
2. Financial situation indicator – Calculation of the net
risk amount
To calculate the net risk amount, the contribution
assessment base shall be weighted between limits of 0.75
and 1.25 by a linear transformation of the solvency rating
set forth in the appendix to Regulation 99-06 as amended,
under the conditions set forth in Regulation 99-07 for the
branches of foreign credit institutions.
3. Institutions affiliated to a central body
For institutions affiliated to a central body, a total
contribution for the network shall first be calculated. In
order to calculate such contribution, all affiliated
institutions, whether members or not, shall be regarded as a
single institution to which the provisions of points 1 and 2
above shall apply, with the following adjustments:
Selected French Banking and Financial Regulations – 2013
a)
the contribution assessment base shall be the sum of
the bases of affiliated institutions;
b)
the financial situation indicator shall be the solvency
rating for the network calculated according to the
terms of Regulation 99-06.
The network’s total contribution shall then be shared
between the affiliated institutions that are members in
proportion to their contribution to the network’s total risk,
defined as the quotient between its net risk amount and the
sum of the net risk amounts of all the affiliated institutions
that are members.
4. Notification
The Autorité de contrôle prudentiel shall carry out all the
calculations set forth in this Regulation on the basis of
figures as at 31 December of each calendar year. It shall
notify member institutions of the amount of their
contributions due as of 16 October, together with the
elements used to make the calculations described in points
1 and 2, by ordinary mail at the latest by 15 October of
each year.
Any member may ask the Autorité de contrôle prudentiel to
rectify the calculation of its contribution within two months
following receipt of notification. The Autorité de contrôle
prudentiel may also rectify its calculation during the five
years that follow payment of the contribution in the light of
information that comes to its attention after the date on
which the calculations are transmitted, having asked the
institution concerned for its observations. Unless the
Autorité de contrôle prudentiel rectifies its calculation,
outstanding contributions shall be collected on that basis.
The Autorité de contrôle prudentiel shall make a
rectification when there seems to be good reason to change
an institution’s contribution by more than 10% of the sums
it has paid. The fund shall make the rectification on the
instructions of the Autorité de contrôle prudentiel.
If, as a result of rectification, the contribution of the
institution requesting the rectification is adjusted by more
than 1.5% of the total amount of the contribution, or when
the algebraic sum of all adjustments is greater than that
amount, the Autorité de contrôle prudentiel shall
recalculate all outstanding contributions and allocate the
differences to the following instalment.
If a member institution has made a mistake in declaring its
assessment base or elements used to determine its synthetic
risk indicator, the rectified contribution shall be increased
by 10% of the amount of the variation in the contribution.
If the mistake alone has entailed a general recalculation, the
supplement shall be 20%.
The Autorité de contrôle prudentiel shall inform the
guarantee fund of the amount of each member’s
contribution by ordinary mail before 1 November of each
year. The fund shall issue payment notices to members
before 15 November of each year.
73
1.1.8. INTERNAL AUDITING
REGULATION 97-02 OF 21 FEBRUARY 1997,
RELATING TO INTERNAL CONTROL IN CREDIT
INSTITUTIONS AND INVESTMENT FIRMS
as amended by Regulations 2001-01 of 26 June 2001 and
2004-02 of 15 January 2004 and by the Orders of 31
March 2005, 17 June 2005, 20 February and 2 July
2007, 11 September 2008, 14 January 2009,
5 May 2009, two Orders of 29 October 2009,
3 November 2009,
19 January 2010, 25 August 2010 and 13 December
2010
TITLE I
size, their establishments and the various types of risk to
which they are exposed.
Article 2
Supervised institutions
consolidated basis shall:
a)
b)
c)
PRINCIPLES AND DEFINITIONS
Article 1
Supervised institutions within the meaning of this
Regulation are:
-
credit institutions;
-
the investment firms referred to at Article L. 531-4 of
the Monetary and Financial Code aforesaid other than
the portfolio management companies referred to at
Article L. 532-9 of the above-mentioned Code; and,
exclusively for the provisions relating to the risk of
money laundering and terrorist financing, the branches
of investment firms mentioned at Article L. 532-18-1
of the Monetary and Financial Code other than the
management companies mentioned at Article L. 532-9
of the same Code;
-
the undertakings referred to at Article L. 440-2, points
3 and 4, of the Monetary and Financial Code;
-
the undertakings referred to at Article L. 542-1, points
4 and 5 of the Monetary and Financial Code;
-
payment institutions.
Without prejudice to the provisions of the General
Regulations and decisions of the Autorité des Marchés
Financiers, supervised institutions must set up an internal
control system according to the conditions set forth in this
Regulation.
Supervised institutions shall set up an adequate internal
control system by adapting the systems provided for in this
Regulation to the nature and volume of their activities, their
74
are
supervised
on
a
take all measures to ensure that companies under their
exclusive or joint control within the meaning of
Regulation 2000-03 aforesaid comply with the
procedures required to implement this Regulation;
ensure that the systems implemented in these
companies are consistent with each other so that the
exposure to risk can be measured, monitored and
controlled on a consolidated level;
verify that these companies adopt adequate procedures
for the production of the information and data
necessary for supervision on a consolidated basis.
Supervised institutions shall ensure that the measures,
systems and procedures referred to in indents a, b and c
above are adapted to the group’s organisation and to the
nature of the companies controlled.
This Article applies to financial holding companies and
mixed financial holding companies that are subject to the
Autorité de contrôle prudentiel’s supervision in application
of Articles 3 and 12 of Regulation 2003-03 aforesaid.
These companies shall ensure that the present Regulation is
applied in the individual firms that are subject to it and
within the group or conglomerate as a whole, and shall take
the necessary measures to ensure that the system of internal
control is suited to their various activities and the rules
governing these different sectors.
Article 3
The internal control of supervised institutions affiliated to a
central body shall be organised in agreement with that
body.
Article 4
For the purposes of implementing this Regulation the
following definitions shall apply.
a)
Internal control includes in particular:
a control system for operations and internal procedures;
the organisation of accounting and information processing
systems;
risk and result measurement systems;
risk monitoring and risk control systems;
a documentation and information system;
a system for monitoring flows of cash and securities.
that
b)
Executive body: the persons who, in accordance with
Articles L. 511-13 and L. 532-2, point 4 of the
Monetary and Financial Code aforesaid, are
responsible for the effective direction of the
undertaking and the person who, in a hybrid payment
institution, has been declared as having the
responsibility for the payment services activities as
well as the persons who have the same responsibility
within the undertakings referred to in Article L. 440-2,
points 3 and 4 and Article L. 542-1, points 4 and 5 of
the Monetary and Financial Code.
Decision-making body:
−
the board of directors, supervisory board or partners’
meeting of firms governed by the Commercial Code
aforesaid,
−
the board of directors of the caisses de crédit agricole,
the banques populaires, the sociétés de caution
mutuelle (mutual loan guarantee banks) and the
caisses de crédit mutuel (mutual credit banks),
Selected French Banking and Financial Regulations – 2013
h)
−
the policy and supervisory boards of the caisses
d’épargne (savings banks) and the caisses de crédit
municipal (municipal credit banks),
−
the board of directors or supervisory board of other
public institutions,
i)
−
for undertakings having a different legal form, the
board of directors, supervisory board or collegiate
body that is responsible for supervising the
management and situation of the undertaking on
behalf of the contributors of capital.
j)
c)
Audit committee: a committee that may be set up by
the decision-making body to assist it in the exercise of
its functions.
The decision-making body shall choose the name of
the audit committee and determine its membership,
tasks, operating procedures and the conditions in
which the statutory auditors and any other person
belonging to the institution shall be involved in its
work.
More particularly, under the responsibility of the
decision-making body, the audit committee shall be
responsible for:
−
ensuring that the information provided is clear and
assessing the relevance of the accounting methods
used to prepare the individual and consolidated
accounts, if any,
−
assessing the quality of internal control procedures, in
particular whether the systems for measuring,
monitoring and controlling risks are consistent, and
recommending further action where appropriate.
Under the terms of the Commercial Code, this
committee may be the committee in charge of
monitoring the drawing up of financial information
and monitoring the statutory audit of annual accounts
and consolidated accounts or any body with equivalent
responsibilities.
Members of the executive body may not be members
of the audit committee.
In the absence of any audit- committee, the decisionmaking body shall carry out its missions.
d)
e)
f)
g)
Credit operations: all operations referred to at
Article L. 313-1 and related operations referred to at
Article L. 321-2, point 2 of the Monetary and
Financial Code aforesaid, applicable to credit
institutions and investment firms respectively, effected
with any counterparty, including other supervised
institutions.
Credit risk: the risk incurred in the event of default of
a counterparty or of counterparties deemed to
constitute a single beneficiary within the meaning of
Article 3 of Regulation 93-05 aforesaid.
Market risks, including foreign-exchange risk: the
risks defined in Articles 292-1 and 292-2 of the Order
of 20 February 2007 and in chapters 3, 4 and 8 of Title
VII of said Order.
Overall interest-rate risk: the risk incurred by balance
sheet and off-balance sheet transactions in the event of
interest-rate fluctuations except, where relevant,
transactions subject to the market risks referred to in
point f) above.
Selected French Banking and Financial Regulations – 2013
Liquidity risk: the risk that in a given market situation
the institution will not be able to meet its
commitments or will not be able to unwind or offset a
position within a specified time limit and at a
reasonable cost..
Settlement risk: the risk incurred during the period
between the time when the payment or delivery order
for a financial instrument that has been sold can no
longer be unilaterally cancelled and the final receipt of
the purchased instrument or corresponding cash.
Operational risk: the risk incurred by an inadequacy or
failure attributable to internal procedures, or
personnel, or internal systems, or to external events,
including events with a low probability of occurrence
but with a high risk of loss. Operational risk also
includes risks of internal and external fraud as defined
in Appendix IV of the Order of 20 February 2007.
k)
Legal risk: the risk of litigation with a counterparty
caused by any lack of clarity, inaccuracy or deficiency
whatsoever that may be attributed to the institution in
the course of its operations.
l) Value at risk: the most adverse valuation of the impact
of market fluctuations on results during a given period
at a given probability rate.
m) Intermediation risk: the risk that a principal or
counterparty will default in a transaction involving
financial instruments for which a supervised
institution has guaranteed final settlement.
n) Business continuity plan: a set of measures designed
to ensure, according to various crisis scenarios
including extreme shocks, the continuation of
essential services for the institution, where appropriate
temporarily in degraded mode, the provision of
services or any essential or important operational tasks
then the planned resumption of activities.
o) Means of payment: means of payment within the
meaning of Article L. 311-3 of the above-mentioned
Monetary and Financial Code other than bank notes
and coin.
p) Non-compliance risk: risk of judicial, administrative
or disciplinary sanction, of significant financial loss or
loss of reputation resulting from failure to comply
with the prevailing laws and regulations and
professional and ethical standards relating to banking
and financial activities or with instructions from the
executive body issued in particular pursuant to
directives from the decision-making body.
q) Outsourced activities: activities for which the
supervised institution entrusts the provision of
services or other essential or important operational
tasks to third parties on a permanent and habitual basis
by way of sub-contracting within the meaning of Act
75-1344 of 31 December 1975 or canvassing within
the meaning of Articles L.341-1 and 341-4 of the
aforesaid Monetary and Financial Code, via recourse
to related parties as defined in Articles L. 545-1 et seq.
of said Code, via recourse to related parties as defined
in Articles L. 523-1 et seq. of said Code or in any
other form.
r)
Providing of services or other essential or important
operational tasks:
−
banking operations within the meaning of Article
L. 311-1 of the Monetary, payment services
75
within the meaning of Article L. 314-1, II of said
Code and Financial Code aforesaid and
investment services within the meaning of Article
L. 321-1 of the same Code for which the
supervised institution has been authorised;
−
−
services participating directly in the performance
of the operations or services referred to at the first
two indents above;
anomaly or failure in its execution any provision
of services the exercise of which may seriously
damage the ability of the supervised institution to
constantly comply with the conditions and
obligations of its authorisation and those relative
to carrying out its activities, its financial
performances and the continuity of its services
and activities.
Without prejudice to any other task, the following
tasks are not considered as the provision of services
or other essential or important operational task as
defined in this article:
- the provision to the supervised institution of
advisory services and other services that do not
form part of the activities covered by its
authorisation, including the provision of legal
advice, staff training, invoicing and the security
of the company’s premises and staff;
s)
t)
u)
76
THE CONTROL SYSTEM FOR
OPERATIONS AND INTERNAL
PROCEDURES
the related operations referred to at paragraphs 1,
2 and 3 of Article L. 311-2 and paragraphs 1, 2, 5
and 6 of Article L. 321-2 of the Monetary and
Financial Code aforesaid;
– any provision for services in the event of an
−
TITLE II
the acquisition of standard services, including
services providing market information or data
flows on prices.
concentration risk: risk arising, directly or indirectly,
from credit exposures to the same counterparty,
groups of connected counterparties in the meaning of
Article 3 of Regulation 93-05 or from counterparties
operating in the same economic sector, geographic
region, as well as from credit exposures associated
with the same activity or from the application of credit
risks mitigation techniques, including in particular
collateral securities issued by the same issuer.
Residual risk: the risk that credit risk mitigation
techniques recognised for the application of the Order
of 20 February 2007 may prove less efficient than
expected.
Discretionary pension benefits: additional pension
benefits that are granted on a discretionary and
individual basis by a supervised institution to an
employee and are a part of the variable compensation
of this employee, but which do not include the rights
granted to an employee in accordance with the
pension scheme of his company.
CHAPTER I
GENERAL MEASURES
Article 5
The purpose of the control system for operations and
internal procedures is to provide optimal conditions in
terms of security, reliability and exhaustivity for:
a) ensuring that the institution’s operations, organisation
and internal procedures comply with relevant laws and
regulations, customary business practice and ethics
and the business strategy determined by the executive
body;
b) ensuring strict compliance with decision-making
procedures, and risk-taking procedures, whatever the
kind of risk, and with the management standards set
by the executive body, in particular in the form of
limits;
c) ensuring the quality of financial and accounting
information, whether destined for the executive and
decision-making bodies, for the supervisory
authorities or for publication;
d) verifying the conditions in which such information is
assessed, recorded, stored and made available, in
particular by ensuring that there is an audit trail as
defined at Article 12 of this Regulation;
e) ensuring
the
quality
of
information
and
communication systems.
f) making sure that the corrective measures decided on
are implemented within the supervised institutions
within a reasonable timeframe.
g) making sure that the compensation policy is in line
with the risk control objectives in accordance with the
provisions of Title IV, Chapter VI.
Article 6
Supervised institutions must, under terms and conditions
adapted to their size and the nature of their activities, have
staff at operational, central and, where relevant, local levels
who carry out permanent or periodic controls in accordance
with the provisions set forth below.
a)
Permanent control of the compliance, security and
validation of completed transactions and compliance
with other measures related to the missions of the risk
function shall be performed, with appropriate
resources, by:
−
certain central and local staff assigned exclusively to
that task;
−
other staff carrying on operational activities.
b)
Periodic control of the compliance of transactions, the
level of risk effectively incurred, compliance with
procedures and the effectiveness and appropriateness
of the measures described at paragraph a) shall be
performed by means of investigations carried out by
staff other than those mentioned at paragraph a)
above.
Selected French Banking and Financial Regulations – 2013
Article 7
1 – The organisation of supervised institutions, and in
particular the systems referred to at Article 6.a) above, shall
be designed to ensure that units responsible for initiating
transactions operate independently of those responsible for
validating them, in particular at the accounting level, for
settling them and for implementing the missions of the risk
function.
Such independence may be secured by ensuring that the
units report to different management bodies at a
sufficiently senior level, or by setting up an organisation in
which duties are clearly segregated, or by implementing
procedures (which may be computerised) specifically
designed for this purpose, in which case the institution
must be able to prove that they are appropriate and
sufficient.
The remuneration of employees in units responsible for
validating transactions shall be determined independently
of that of the business areas whose transactions they
validate or verify and shall be adequate to attract qualified
and experienced staff; it shall take account of the
achievement of the objectives associated with the function.
circumstances, a supervised institution may entrust
performance of the controls set forth at Article 6 to outside
service providers under the responsibility of the persons
appointed pursuant to paragraph 1 of this article and under
the conditions set forth at Article 37-2 of this regulation.
Article 8
The executive body shall keep the decision-making body
informed of the appointment of the officers referred to at
paragraphs 1 and 2 of Article 7, whose identities shall be
communicated to the Autorité de contrôle prudentiel.
The above-mentioned officers shall report on the conduct
of their assignments to the executive body. When the
executive body or the decision-making body deem it
necessary, they shall also report directly to the decisionmaking body or, where appropriate, the audit committee.
Article 9
Supervised institutions shall ensure that the number and
qualification of the persons mentioned at Article 6 and the
resources placed at their disposal, in particular the
monitoring tools and risk analysis methods, are adapted to
the institution’s activities, size and establishments.
Supervised institutions shall appoint one or more officers
responsible for the permanent control set forth at the first
indent of Article 6.a). Among these officers, those at the
most senior level, if they are not members of the executive
body, may not carry out any commercial, financial or
accounting transaction.
The resources allocated to internal control by way of the
systems referred to at Article 6.b) above must be sufficient
to enable a full audit review of all operations over as few
years as possible. A schedule of audit tasks shall be drawn
up at least once a year on the basis of the annual internal
control objectives set by the executive and the decisionmaking body.
If there is more than one officer at the most senior level of
permanent control, a member of the executive body shall
ensure that permanent control is coherent and effective.
Article 9-1
Supervised institutions define procedures to :
2 – Supervised institutions shall also appoint an officer
responsible for ensuring the coherence and effectiveness of
the assignments referred to at Article 6.b).
The staff responsible for the periodic control set forth at
Article 6.b) above shall perform their assignments
independently of all the entities and services to which their
control relate.
3 – When the size of the institution does not justify
entrusting the responsibilities) to specially appointed staff,
those responsibilities may be entrusted to a single person or
to the executive body which, under the control of the
decision-making body, shall coordinate all arrangements
contributing to performance of that assignment.
4 – When the supervised institution is an investment firm,
the functions set forth at Article 6.a) of this regulation may
be entrusted to the persons responsible for the controls
provided for in the general regulations of the Autorité des
Marchés Financiers. The person responsible for such
controls may assume the responsibilities set forth at
paragraph 1 of this article.
5 – When an undertaking belongs to a group within the
meaning of Article 1 of Regulation 2000-03 aforesaid or is
affiliated to a central body, those responsibilities may be
assumed by another undertaking of the same group or
affiliated to the same central body, with the consent of the
decision-making bodies of both undertakings concerned.
6 – Under the conditions set forth at paragraph 3 of this
article, or when such measures are justified by particular
Selected French Banking and Financial Regulations – 2013
a)
make sure that the corrective measures decided
on by the competent persons in the framework of
the internal control system are implemented
within a reasonable
b)
enable the officer in charge of the periodic
controls to inform directly and on his own
initiative the audit committee of the nonimplementation of the corrective measures
decided on.
Article 10
Supervised institutions shall ensure that the control system
is well-integrated into the organisation, methods and
procedures of each activity and that the systems referred to
at Article 6.b) above apply to the entire institution,
including its branches, and to all undertakings under its
exclusive or joint control.
CHAPTER II
COMPLIANCE CONTROL SYSTEM
Article 11
Supervised institutions shall appoint an officer responsible
for ensuring the coherence and effectiveness of controls of
non-compliance risk and shall inform the Autorité de
contrôle prudentiel of the person’s identity.
77
The compliance officer, if not a member of the executive
body, may not carry out any commercial, financial or
accounting transaction.
Supervised institutions shall determine whether the
compliance officer should report on the performance of his
or her assignment to the person responsible for permanent
control set forth at Article 7.1, indent 3 or directly to the
executive body.
When the executive body or the decision-making body
deem it necessary, the compliance officer shall also report
directly to the decision-making body.
When the size of a supervised institution does not justify
entrusting such responsibility to a specially appointed
person, the person responsible for permanent control shall
coordinate all arrangements contributing to performance of
compliance control assignments.
When an undertaking belongs to a group within the
meaning of Article 1 of Regulation 2000-03 aforesaid or is
affiliated to a central body, that responsibility may be
assumed by another undertaking of the same group or
affiliated to the same central body, with the consent of the
decision-making bodies of both undertakings concerned
When the supervised institution is an investment firm, the
functions set forth at the first paragraph of this article may
be entrusted to the person responsible for controlling
compliance with provisions within the competence of the
Autorité des Marchés Financiers, without prejudice to
application of Article 7.4 of this regulation.
Article 11-1
Supervised institutions shall draw up specific procedures
for assessing compliance, including:
−
−
procedures for systematic prior approval, including a
written notice from the compliance officer or a person
duly authorised by the compliance officer for the
purpose, for new products or changes to existing
products with significant implications for the
institution or the market; or
for the provision of investment services, any system
that offers advice and assists those concerned with
investment services enabling them to meet their
obligations as defined in this chapter.
They also provide for control procedures for the
transactions executed.
Article 11-2
Supervised institutions shall introduce, under terms and
conditions that are adapted to their organisation and that
take account, where relevant, of their membership of a
group within the meaning of Article 1 of Regulation 200003 aforesaid or affiliation to a central body, of procedures
to centralise information relating to possible malfunctions
in the effective implementation of compliance obligations.
In that regard, they shall ensure that it is possible for any
manager or staff member to inform the compliance officer
of the entity or line of business to which they belong, or the
officer referred to at Article 11, of any concerns they may
have about such possible malfunctions. The entire staff
shall be informed of the organisational rules adopted.
78
Article 11-3. – Supervised institutions shall introduce
procedures that make it possible to monitor and evaluate
the effective implementation of actions designed to remedy
any malfunction in relation to the obligations and standards
defined at Article 4.p) of this regulation.
As a rule, the management body shall define procedures
that guarantee the segregation of duties in the organisation
and the prevention of conflicts of interest.
Article 11-4
Supervised institutions shall provide all staff members
concerned with training in procedures for controlling
compliance, adapted to the operations they perform.
They shall introduce a system that will guarantee
monitoring on a regular basis and as often as possible of
any changes to the rules and regulations applicable to their
operations and, in that context, shall immediately inform all
staff members concerned.
Article 11-5
Supervised institutions shall ensure that their foreign
affiliates and branches take steps to ensure that their
operations are compliant.
Such steps shall include controlling compliance with the
local rules that apply to the activity of their affiliates and
branches and implementation of this regulation. When local
rules are stricter than the provisions of this regulation, a
local establishment that complies with them is deemed to
comply with the obligations set forth in this regulation.
Article 11-6
When the provisions of local regulations hamper
application of the rules set forth in this regulation,
especially if they prevent the disclosure of information
necessary for such application, the local entities concerned
shall inform the compliance officer. The supervised
institution shall inform the Autorité de contrôle prudentiel
of such cases.
CHAPTER III
ARRANGEMENTS FOR COMBATING MONEY
LAUNDERING AND THE FINANCING OF
TERRORISM
Article 11-7
1. Supervised institutions shall introduce an organisation, a
classification of money laundering and terrorist financing
risks, internal procedures and a system for controlling these
arrangements.
2.1 Supervised institutions shall ensure that staff whose
activity is exposed to money laundering and terrorist
financing risks are able to demonstrate a level of vigilance
adapted to those risks. To that end, supervised institutions
shall ensure that the training and information of such staff
as provided for at Article L. 561-33 of the Monetary and
Financial Code are adapted to their activities, taking
account of the risks identified by the classification and the
level of responsibility exercised. Staff training and
information shall concern in particular the procedures
indicating the transactions in relation to which they must
demonstrate particular vigilance with respect to the risks
identified by the classification drawn up by the supervised
institution.
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2.2 Supervised institutions shall introduce arrangements
for monitoring and analysing their business relationships,
based on the know-your-customer principle, so that they
can notably detect transactions that are anomalous in
relation to the business relationship profile and could be the
subject of scrutiny as provided for at Article L. 561-10-2 II
or the report provided for at Article L. 561-15 of the
Monetary and Financial Code.
They shall also introduce arrangements adapted to their
activities allowing for the detection of any transaction in
favour of a person or entity that is the subject of a measure
to freeze funds, financial instruments and economic
resources. This requirement does not apply to transfers
from:
-
-
-
a Member State of the European Community or a State
party to the agreement on the European Economic Area
if the supervised institutions do not know the identity
of the payer pursuant to Article 6 of Regulation no.
1781/2006 of the Parliament and of the Council of
15 November 2006 on information on the payer
accompanying transfers of funds;
an associate country or territory under the terms of
Article 17 of Regulation no. 1781/2006 of the
Parliament and of the Council of 15 November 2006 on
information on the payer accompanying transfers of
funds; or
Saint-Pierre-et-Miquelon, Mayotte, New Caledonia,
French Polynesia and the Wallis and Futuna islands if
the supervised institutions do not know the identity of
the payer pursuant to Article L. 713-5 of the Monetary
and Financial Code.
The arrangements implemented in this way shall be
adapted to the supervised institution’s activities, customer
segments and establishments and to the risks identified by
the classification.
The arrangements for monitoring and analysing
transactions must allow for the definition of significance
criteria and thresholds specific to anomalies relating to
money laundering and terrorist financing.
2.3 Supervised institutions shall ensure, in ways adapted
to their size, the nature of their activities and the risks
identified by the classification of money laundering and
terrorist financing risks, that they have sufficient human
resources to analyse anomalies detected by the abovementioned arrangements. They shall ensure that the staff in
question have the right experience, qualification, training
and positioning to perform their duties. They shall ensure
that they have access to the internal information necessary
for them to perform their duties.
2.4 Supervised institutions shall introduce, in ways
adapted to their organisation that take account, where
relevant, of their membership of a group within the
meaning of Article 1 of Regulation 2000-03 of 6 September
2000 relating to prudential supervision on a consolidated
basis or of a network affiliated to a central body,
procedures to centralise the analysis of detected anomalies
meeting the criteria and thresholds mentioned in the final
paragraph of 2.2 above. The procedures shall provide for
the transmission of such anomalies to the declarant and
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correspondent mentioned in Articles R. 561-23 and R. 56124 of the Monetary and Financial Code according to their
respective competence.
Supervised institutions shall ensure that the declarant and
the correspondent have access to all the information
necessary for them to perform their duties. They shall
provide them with tools and resources so that, according to
their respective competence, they can:
-
make the reports provided for at Article L. 561-15 of
the Monetary and Financial Code; and
-
process information requests from TRACFIN, the
national FIU.
The above-mentioned declarant and correspondent shall
also be informed:
-
of incidents relating to money laundering and terrorist
financing revealed by internal control systems;
-
of shortcomings found by national and foreign
supervisory authorities in the implementation of
measures to counter money laundering and terrorist
financing.
3.
The classification of money laundering and terrorist
financing risks:
a) shall cover all activities liable to expose the institution
to risks in the sphere of money laundering and terrorist
financing, including in particular:
-
transactions with the persons mentioned at
Article R. 561-18 of the Monetary and Financial
Code;
-
the activities mentioned at Article R. 561-21 of
the Monetary and Financial Code;
-
wealth management activities;
-
activities conducted with persons established in
countries or territories mentioned by an
international authority involved in the fight
against money laundering or terrorist financing as
being among those whose legislation or practices
impede that fight, or through establishments in
such countries or territories;
-
activities conducted with persons established
countries or territories mentioned at Article
511-45 of the Monetary and Financial Code
through establishments in such countries
territories;
in
L.
or
or
b) shall take account of information and reports circulated
by the international authority for consultation on and
coordination of the fight against money laundering and
terrorist financing of which France is a member and by
the minister of the economy;
c) shall take account of information received from
TRACFIN, the national FIU;
79
d) shall evaluate the risk of the various products and
services offered, the particular terms or conditions of
transactions performed, the distribution channels used
and the characteristics of the target customers;
e) shall be updated at regular intervals and following any
event that significantly affects the supervised
institution’s activities, customer segments or
establishments.
a) the origin and destination of the sums and the purpose
of the transaction;
b) the identity of the payer and, where relevant, of the
beneficial owner;
c) the identity of the beneficiary or beneficiaries or the
other party to the transaction (name, address,
profession where relevant);
4. Supervised institutions shall introduce procedures
relating to the vigilance obligations set forth at Book V,
Title VI, Chapters I and II of the Monetary and Financial
Code, taking account of the risks identified by the
classification provided for at point 3 of this article. The
procedures shall concern the following, in particular:
d) the characteristics of the transaction (amount, date) and
the terms of its execution (especially use of a particular
payment system);
a) terms and conditions for accepting new customers,
especially persons exposed to specific risks on account
of the political, jurisdictional or administrative duties
they perform or have ceased to perform within the last
twelve months;
f) relevant information about the business relationship
profile.
b) terms and conditions for accepting transactions with
occasional customers;
c) due diligence measures to be taken to identify the
customer and, where relevant, the beneficial owner, in
particular where they use a service provider to identify
and verify their client’s identity under the conditions
set forth at Article R. 561-13. II of the Monetary and
Financial Code; in such case, the procedures shall
stipulate the conditions for application of Articles 37-11 and 37-2, with the exception of points 3a, 3c and 4 of
Article 37-2, and the conditions for the transmission by
the service provider of all information relevant to the
fight against money laundering and the financing of
terrorism, while ensuring the confidentiality of such
information;
d) additional or enhanced due diligence to be conducted
for the business relations mentioned at Article L. 56110 and Articles L. 561-10-1 and L. 561-10-2 of the
Monetary and Financial Code and the revision of due
diligence measures where the customer, in the course
of a business relationship, happens to meet the criteria
of Article R. 561-18 of the Monetary and Financial
Code;
e) the necessary elements for a sufficient knowledge of
the business relationship and, where relevant, of the
beneficial owner, and the frequency with which they
are updated, in particular among those mentioned in the
order of 2 September 2009 implementing Article R.
561-12 of the Monetary and Financial Code;
f) Where supervised institutions use the services of
agents, under the conditions set forth at Article L. 5231. I of the Monetary and Financial Code, specific
procedures shall stipulate how the vigilance obligations
set forth in the Monetary and Financial Code are to be
implemented.
5. The procedures shall stipulate the information to be
gathered and kept for the transactions mentioned at Article
L. 561-10-2. II of the Monetary and Financial Code:
80
e) where relevant, the terms and conditions for operating
the account;
6. Where supervised institutions are members of a financial
group, a mixed group or a financial conglomerate, the
procedures shall define the ways of circulating the
information necessary to organise the fight against money
laundering and terrorist financing within the group under
the conditions set forth at Article L. 511-34 of the
Monetary and Financial Code. In particular, they shall
stipulate how such information is to be processed in the
monitoring and analysis arrangements mentioned at Article
11.7, point 2.2, and ensure that the information is not used
for any purpose other than the fight against money
laundering and terrorist financing.
The procedures shall stipulate the conditions for exchanges
of information relating to the existence and the content of
the reports provided for at Article L. 561-15 of the
Monetary and Financial Code. They shall define, under the
conditions set forth at Article L. 561-20 of the Monetary
and Financial Code, how to ensure that such information is
protected, and in particular that the persons whose amounts
and transactions are reported are not informed of the fact.
7. The procedures shall stipulate the conditions for
exchanges of information relating to the existence and the
content of the reports provided for at Article L. 561-15 of
the Monetary and Financial Code, under the conditions set
forth at Article L. 561-21. They shall indicate, inter alia:
-
the persons duly authorised to make such exchanges;
-
the precautions to be taken to ensure that that the
persons whose amounts and transactions are reported
are not informed of the fact;
-
the measures to be taken to ensure that the information
is not used for any purpose other than the fight against
money laundering and terrorist financing.
8. The procedures shall define the terms and conditions for
keeping, in ways designed to ensure confidentiality:
a) copies of the identification documents mentioned at
Article R. 561-5 of the Monetary and Financial Code or
the references thereof;
b) where relevant, elements that identify the beneficial
owner;
Selected French Banking and Financial Regulations – 2013
c) items of information necessary to know the business
relationship;
d) information, declarations and documents relating to the
sums and transactions mentioned at Article L. 561-15
of the Monetary and Financial Code.
9. The permanent control of anti-money laundering and
terrorist financing measures shall form part of the
compliance control system under the conditions set forth at
Chapter II of this title.
The compliance control officer shall ensure that the
measures and procedures mentioned in this chapter are
appropriate, and in particular that they comply with the
obligations set forth at Articles
L. 561-10-2, L. 561-15 and R. 561-31 of the Monetary and
Financial Code.
10. Where supervised institutions use a service provider to
identify and verify the identity of their customer under the
conditions set forth at Article R. 561-13. II of the Monetary
and Financial Code, their control system shall ensure
compliance with the provisions of Articles 37-1-1 and 37-2,
with the exception of points 3a, 3c and 4 of Article 37-2, of
this regulation.
may be entrusted to the persons responsible for the controls
provided for by the General Regulation of the Autorité des
Marchés Financiers.
Article 11-9
The risk officer shall ensure that the risk and result
measurement and monitoring systems referred to at Title
IV and the risk monitoring and risk control systems
referred to at Title V are implemented. He shall ensure that
the level of risk to which the supervised institution is
exposed is compatible with the business plan drawn up by
the decision-taking body and the limits mentioned at
Article 33.
Article 11-10
Supervised institutions shall endow the risk function with
sufficient resources in terms of staff, information systems
and access to the internal and external information it needs
to perform its duties. They shall ensure that risk function
staff have sufficient experience and qualifications and the
right positioning to perform their duties within the firm.
TITLE III
ORGANISATION OF ACCOUNTING AND
INFORMATION PROCESSING SYSTEMS
[Indent 10 takes effect as of 31 October 2010].
CHAPTER IIV
SUPERVISION OF THE RISK FUNCTION
Article 11-8
Supervised institutions shall appoint a risk officer
responsible for the risk function, informing the Autorité de
contrôle prudentiel of his/her identity. The risk function
includes staff and units responsible for measuring,
monitoring and controlling risks.
Where the risk officer is not a member of the executive
body, he shall report directly to it and may not perform any
commercial, financial or accounting operation.
The risk officer shall report on the performance of his
assignment to the executive body and shall alert it to any
situation liable to have significant repercussions on risk
control. Where the executive body or decision-taking body
deems it necessary, he/she shall also report directly to the
decision-taking body or to the audit committee if there is
one.
Where the size of a supervised institution or the
circumstances so require, the person responsible for
permanent control shall coordinate all the arrangements
that participate in the risk function.
Where an institution belongs to a group within the meaning
of Article 1 of Regulation 2000-03 aforesaid or is affiliated
to a central body, responsibility for the risk function may
be assumed by another institution in the same group or
affiliated to the same central body, with the consent of the
decision-taking bodies of the two institutions concerned.
Where the enterprise is an investment firm, the
responsibilities set forth at the first paragraph of this article
Selected French Banking and Financial Regulations – 2013
Article 12
Supervised institutions shall comply with the provisions of
Articles 1 to 6 of Decree 83-1020 aforesaid, taking into
account the following points.
1.
Regarding the information disclosed in the balance
sheet, profit and loss account and notes to the financial
statements, the organisation must ensure that there is a
set of procedures, known as an audit trail, making it
possible to:
a) reconstruct operations in chronological order;
b) support all information with original documents
from which it must be possible to trace an
operation directly back to the summary
document, and vice versa;
c) account for changes in balances from one closing
date to the next by preserving a record of
movements that affect accounting items.
In particular, the accounting balances shown in the
chart of accounts provided for at Article 4 of the
above-mentioned decree shall be related, directly or in
aggregate, to balance sheet and profit and loss account
items and sub-items and to the information contained
in the notes to the financial statements. By way of
exception, the balance of an account may be allocated
to several items, provided that the institution can
justify doing so, that it complies with adequate
security and control procedures and that it describes
the method used in the document specified at Article 1
of the above-mentioned decree.
2. The accounting information shown in the returns to be
transmitted to the Autorité de contrôle prudentiel, and
the information necessary to calculate the management
standards prepared in application of Articles L. 611-2,
point 6 and L. 533-1 of the Monetary and Financial
81
Code aforesaid and the management standards
applicable to the legal persons referred to at points 3
and 4 of Article L. 440-2 and points 3 and 4 of Article
L. 542-1 of the Monetary and Financial Code aforesaid
shall comply with at least the first two aspects of the
audit trail described in paragraphs a) and b), 1°, of this
Article.
In particular, it must be possible to verify each amount
shown in the returns, in the appended tables, in the
statements concerning the management standards and
in the other documents transmitted to the Autorité de
contrôle prudentiel, notably on the basis of the detailed
components of the amount.
Where the Autorité de contrôle prudentiel has
authorised information to be supplied in the form of
statistics, this information shall be verifiable even if it
is not covered by the audit trail.
Article 13
Supervised institutions shall ensure that the information
and the valuation and accounting methods are exhaustive,
of a high standard and accurate, notably by means of:
a) regular reviews to ensure that the methods and
parameters used by the management systems to value
transactions are sufficient and appropriate;
b) regular reviews of the relevance of accounting
procedures to the overall objectives of security and
prudence, and their compliance with the prevailing
accounting rules;
c) at least monthly reconciliation of the dealing records
of transactions giving rise to market risks, including
foreign-exchange risks, with the accounting records.
These reconciliations shall comply with the prevailing
valuation rules, and institutions shall be able to
identify and analyze any discrepancies that appear.
Article 14
Supervised institutions shall determine the level of
computer security deemed necessary with regard to the
requirements of their business areas. They shall ensure that
this level is maintained and that their information systems
are appropriate.
In particular, control of information systems shall ensure
that:
a) regular assessments of information systems security
are carried out and corrective action is taken where
appropriate;
b) back-up procedures are available to allow business
operations to continue in the event of serious systems
failure.
c) In any event, the integrity and confidentiality of the
information is preserved.
Control of information systems extends to data storage and
documents relating to the analysis, programming and
execution of data processing.
Article 14-I
In addition to the provisions set forth at Article 14 of this
Regulation, supervised institutions shall:
a)
82
have business continuity plans;
b)
provide for regular assessment of their organisation
and the availability of their human, property, technical
and financial resources from the standpoint of
business continuity-related risks;
c)
ensure the coherence and effectiveness of business
continuity plans in the framework of a master plan
which incorporates the objectives defined by the
executive body and, where appropriate, the decisionmaking body.
Article 15
Supervised institutions shall keep all files containing
documentary evidence for the last closing records
transmitted to the Autorité de contrôle prudentiel until the
next closing date.
Article 16
Without prejudice to the General Regulations and decisions
of the Autorité des Marchés Financiers relating to
accounting procedures for financial instruments,
accounting or material records must be kept showing
inventories, inflows and outflows of assets held by
supervised institutions for third parties which are not
included in the individual annual accounts.
With regard to such assets, a distinction shall be made, if it
is significant, between assets held on deposit and assets
held as collateral either for a loan granted or for a
commitment given for a specific purpose or by virtue of a
standing agreement in favour of the depositor.
TITLE IV
RISK AND RESULT
MEASURING SYSTEMS
Article 17
Supervised institutions shall set up risk analysis and risk
measurement systems that are suited to the nature and
volume of their transactions in order to assess the different
types of risk to which these transactions expose them,
particularly credit risk, market risk, overall interest-rate
risk, intermediation risk, settlement risk, liquidity risk and
operational risk.
Supervised institutions and the financial holding companies
mentioned at Article 2 of this Regulation must have risk
measurement systems suited to the nature and volume of
their transactions that allow them to assess credit risk,
market risk, liquidity risk, overall interest-rate risk,
settlement risk and operational risk on a consolidated basis.
Article 17 a
Supervised institutions shall have sound, effective and
complete systems and procedures to assess and maintain,
on an ongoing basis, the amounts, types and distribution of
internal capital that they deem to be appropriate in terms of
the nature and level of risk to which they are or might be
exposed.
These systems and procedures shall be subject to regular
internal reviews to ensure that they remain comprehensive
and proportionate to the nature, scale and complexity of the
activities.
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Article 17 b
The risk analysis and measurement systems defined in
Article 17 must set forth the criteria and thresholds for
identifying as significant the incidents brought to light by
the internal control procedures as defined in Article L.51141 of the Monetary and Financial Code. These criteria must
be adapted to the activity of the institution and cover the
risk of loss, even if none has been incurred.
b)
Any fraud resulting in a loss or gain exceeding 0.5% of
core capital is considered as significant. This amount may
not be less than EUR 10,000.
e)
Article 17 c
Supervised institutions shall introduce systems and
procedures that enable them to gain an overall
understanding of all the risks associated with the
institution’s banking and non-banking activities,
particularly credit risk, market risk, overall interest-rate
risk, intermediation risk, settlement risk, liquidity risk and
operational risk.
These systems and procedures should enable institutions to
draw up a risk map that identifies and evaluates exposure to
risk in the light of internal factors (particularly the
complexity of the organisation, the nature of the business
pursued, the professionalism of staff and the quality of
systems) and external factors (particular economic
conditions and regulatory developments). The risk map
should:
a)
take account of all exposure to risk;
b)
be drawn up for each entity and/or business area at
the level of which, as appropriate, consolidated or
supplementary supervision is exercised;
c)
assess whether the exposure to risk is consistent with
the business plan;
d)
identify actions to control exposure to risk, by:
-
strengthening permanent control measures;
- implementing the risk monitoring and risk control
systems set forth at Title V;
- drawing up the business continuity
provided for at Article 14-1.
plans
Article 17 d
All the systems referred to at Articles 17 to 17c should be
regularly updated and assessed.
CHAPTER I
SELECTION AND MEASUREMENT
OF CREDIT RISK
Article 18
Supervised institutions shall have a credit risk selection
procedure and a system for measuring this risk that allow
them to:
a) centralise their balance sheet and off-balance sheet
exposure vis-à-vis a counterparty or counterparties
deemed to constitute a single beneficiary within the
meaning of Article 3 of Regulation 93-05 aforesaid;
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c)
d)
assess different categories of risk using qualitative and
quantitative data; this includes intra-day credit risk
when it is significant for the activity of the supervised
institution;
address and control the concentration risk by means of
written policies and procedures;
address and control the residual risk by means of
written policies and procedures;
verify whether the diversification of credit portfolios
is adequate given their overall credit strategy.
Article 19
Subject to the provisions of Article 23 below, assessment
of credit risk must take into account elements of the
financial position of the beneficiary, in particular his ability
to pay, and, where relevant, any security received. For
company risk, the assessment must also take account of the
analysis of the companies’ environment, the characteristics
of the partners or shareholders and managers and the most
recent accounting documents.
Supervised institutions shall compile credit files that
contain all this qualitative and quantitative information and
include in a single file information concerning
counterparties deemed to constitute a single beneficiary,
without prejudice to the application of foreign regulations
that may restrict the provision of information.
At least once every quarter, supervised institutions shall
update the files on counterparties which have unpaid or
doubtful debts or which involve significant risks or
amounts.
Article 20
The selection of credit operations must also take account of
their profitability by ensuring that projections of direct and
indirect costs and income are as comprehensive as possible
and include operating and financing costs, the costs
corresponding to the estimated risk of default by the
beneficiary during the credit operation, and the cost of
remunerating capital.
At least once every six months, the executive body shall
carry out an ex post analysis of the profitability of credit
operations.
Article 21
Decision-making procedures for loans or commitments,
particularly where they involve delegation of authority,
must be clearly formalised and suited to the institution’s
characteristics, in particular its size, its organisation and the
nature of its activity.
Where the nature and scale of transactions so require,
supervised institutions shall ensure, within the framework
of compliance with any delegation procedures that may
have been defined, that loan or commitment decisions are
taken by at least two persons and that the credit files are
also analyzed by a specialist unit that is independent of
operational entities.
When loans or commitments are granted to principal
managers or shareholders as defined at Article 6b of
Regulation 90-02 aforesaid, supervised institutions shall
examine the nature of the transactions and the conditions
83
governing them, notably in the light of the provisions of
Articles L. 225-38 to L. 225-43 of the Commercial Code
and in relation to equivalent transactions customarily
carried out with persons other than those referred to above.
Article 22
The credit risk measurement systems shall make it possible
to identify, measure and aggregate the risk resulting from
all balance sheet and off-balance sheet transactions in
which the institution is exposed to a risk of counterparty
default.
For the measurement of credit risk generated by
instruments traded on over-the-counter markets or markets
assimilated to regulated markets, supervised institutions
with significant activity shall use a mark-to-market
valuation method that takes into account a future risk
factor.
Article 23
Supervised institutions that use statistical systems to select
and measure their credit risk shall regularly verify their
relevance in the light of payment incidents recorded in the
recent past and taking into account developments in the
economic and legal environment.
Article 24
At least every quarter, supervised institutions shall review
developments in the quality of their commitments. This
review should make it possible to determine, for large
transactions, any necessary reclassifications within internal
categories for assessing the level of credit risk and, where
necessary, any allocations to bad debt items and the
appropriate level of provisions.
When setting the appropriate level of provisions,
supervised institutions shall take account of guarantees.
They shall ensure that such guarantees can be called and
that a recent valuation exists, carried out on a prudent basis.
Article 24 a
The risks arising from the securitisation transactions credit
institutions that are originators, sponsors or investors shall
be assessed and processed using the appropriate
procedures, which aim in particular to ensure that the
economic substance of the transaction is fully reflected in
the risk assessment and management decisions
CHAPTER II
MEASUREMENT OF MARKET RISK
Article 25
Supervised institutions shall have systems for monitoring
their own-account transactions that make it possible to:
a) record on at least a day-to-day basis foreign-exchange
transactions and transactions on their trading book,
defined in Articles 298 to 303 of the Order of 20
February 2007 and calculate the results thereof, and
determine positions with the same frequency;
b) measure at least on a day-to-day basis the risks
resulting from trading book positions in accordance
with Article 294 of the Order of 20 February 2007 and
the adequacy of the institution’s capital.
84
Article 26
For the measurement of market risks, supervised
institutions shall ensure that their assessment of the risk is
comprehensive and that it specifies every component of the
risk.
When their activity is significant, supervised institutions
shall supplement the measures referred to in the preceding
paragraph with an overall measurement of their risk using
an approach based on the notion of value at risk.
The measurement of market risk must be designed with
systems that make it possible to aggregate different product
and market positions at the level of the institution or group,
in the case of supervised institutions and financial holding
companies supervised on a consolidated basis.
Article 27
Supervised institutions shall ensure that they regularly
assess the risks to which they are exposed in the event of
substantial changes in the parameters of a market or, where
necessary, of a market segment.
The validity and consistency of the parameters and
assumptions used in this assessment of market risk must be
periodically monitored.
The results of these measurements shall be provided to the
executive body, which shall inform the decision-making
body in order to assess the institution’s risks, particularly
with regard to its own funds and results.
CHAPTER III
MEASUREMENT OF
OVERALL INTEREST-RATE RISK
Article 28
Supervised institutions shall have a system for measuring
overall interest-rate risk, when it is significant, that allows
them to:
a)
b)
c)
assess certain or foreseeable positions and flows
resulting from all balance sheet and off-balance sheet
transactions;
assess the different overall interest-rate risk factors to
which such transactions expose them;
periodically assess the impact of these different
factors, if they are significant, on their results and own
funds.
Article 29
Supervised institutions may choose to remove the
transactions for which they measure market risk as defined
in Chapter II of this Regulation from the scope of overall
interest-rate risk measurement.
Supervised institutions that are controlled exclusively or
jointly by an institution or financial holding company
supervised on a consolidated basis may dispense with a
system for measuring the overall interest-rate risk.
Selected French Banking and Financial Regulations – 2013
Article 30
Supervised institutions shall ensure that they regularly
assess the risks to which they are exposed in the event of
substantial changes in market parameters or breakdowns in
the assumptions used in simulations.
The validity and consistency of the parameters and
assumptions used in this assessment of overall interest-rate
risk must be periodically monitored.
The results of these measurements shall be provided to the
executive body, which shall inform the decision-making
body in order to assess the institution’s risks, particularly
with regard to its own funds and results.
Supervised institutions must be able to inform the Autorité
de contrôle prudentiel as to the impact on their own funds
of a sudden and unexpected change in the interest rates
relating to their activities based on assumptions determined
by the Autorité de contrôle prudentiel
CHAPTER IV
SELECTION AND MEASUREMENT OF
INTERMEDIATION RISK
Article 30-1
This Article applies only to providers of investment
services who guarantee settlement in transactions involving
financial instruments and to the legal persons referred to at
Article L. 440-2, points 3 and 4, of the Monetary and
Financial Code aforesaid, referred to hereafter as service
providers.
1.
Service providers must have an intermediation risk
selection and measurement procedure that allows them
to assess commitments with regard to principals and
counterparties and to classify, principal by principal,
guarantees in the form of deposits of cash or financial
instruments.
Service providers must set up formal procedures for
initiating transactions, particularly where they involve
delegation of authority.
2.
The assessment of the service provider’s exposure to
each principal must take account of elements of the
principal’s financial position and the characteristics of
the transactions it transmits.
3.
Service providers must have a system for monitoring
intermediation transactions that makes it possible to:
value of these positions shall be reconciled daily
with their transaction value;
c)
assess at the end of each day the market value of
financial instruments provided as collateral by
principals;
d)
record at the end of each day and retrace
individually all errors in the acceptance and
execution of orders. These positions must be
considered, from the standpoint of risk
monitoring and control, as own-account market
risks. Service providers that are not authorised to
provide the own-account trading service shall
unwind such positions without delay. When the
error exceeds a threshold set by the executive
body, each incident must be recorded in a
descriptive document brought to the attention of
one of the persons in charge of permanent control
mentioned at Article 6, a, 1 above.
Service providers shall ensure that they are able to
reconstruct the chronology of transactions and assess
positions taken during the day after the event.
When the service provider is a legal person referred to at
Article L. 440-2, point 3 or 4, of the Monetary and Financial
Code aforesaid, the term principal(s) used in this Article shall
be replaced by the term trader(s) if the above-mentioned
legal person is not in direct contact with the principal.
CHAPTER V
MEASUREMENT OF LIQUIDITY
AND SETTLEMENT RISK
Article 31
Supervised institutions shall have policies and procedures
adapted to their size, the nature and complexity of their
activities and their exposure to risk for measuring and
managing their liquidity risk on an ongoing and forwardlooking basis. Alternative scenarios shall be considered.
The assumptions underpinning the management of this risk
shall be reviewed regularly. Contingency plans to deal with
any liquidity crisis shall be in place.
Supervised institutions shall have a system for measuring
their exposure to settlement risk. Supervised institutions
shall ensure that they assess the different stages in the
settlement process for the different instruments they deal
in, in particular the deadline for unilateral cancellation of
the payment order, the deadline for final receipt of funds
relative to the purchased instrument, and the moment when
they record final receipt of the funds or non-payment.
a)
record transactions already completed without
delay. Transactions transmitted by principals that
are not immediately posted to their accounts or
formally accepted by them must be regarded as
own-account positions with regard to the
monitoring and control of risks;
Supervised institutions shall set up procedures that allow
them to monitor their current and future exposure to
settlement risk as they enter into new transactions and as
transactions that have not yet been settled go through the
different stages of the settlement process.
b)
take the necessary measures to be able to
calculate at the end of each day the market value
of long or short positions of principals who
require close monitoring following the
assessment referred to in paragraph 2 above. The
Article 31-1
This Article applies only to providers of investment
services who guarantee settlement in transactions involving
financial instruments and to the legal persons referred to at
Article L. 440-2, points 3 and 4, of the Monetary and
Financial Code aforesaid, referred to hereafter as service
providers.
Selected French Banking and Financial Regulations – 2013
85
1.
Service providers shall have a system for measuring
the liquidity risk arising from the performance of
investment or clearing services that allows them to
assess all flows of cash and securities at the settlement
date.
In particular, service providers shall take into account
certain or foreseeable flows of cash or securities
related to futures transactions or transactions involving
financial futures.
2.
Service providers shall ensure that they assess the
different stages of the delivery and payment process
for the different instruments they deal in and for each
delivery-versus-payment system used. In the event of
delay or non-payment, transactions must be monitored
until the date at which the position is finally unwound.
When transactions are processed by a settlementdelivery system that provides for intra-day final
settlement, the measurement system must also identify
forecast intra-day flows of cash or securities so as to
take account of deadlines for unilateral cancellation of
payment or delivery orders.
Service providers shall monitor on a daily basis
transactions that have given rise to fails and shall
ensure that they are cleared as soon as possible.
3.
4.
Service providers must have a system for measuring
resources in the form of readily available securities or
cash that enable them to meet their commitments with
regard to counterparties, in compliance with the rules
on the segregation of assets laid down by the
regulations in force. In this respect, they shall take the
necessary measures to ensure compliance with their
obligations in connection with delivery-versuspayment systems that provide for intra-day final
settlement.
At least once a year, service providers shall assess the
liquidity and settlement risks to which they are
exposed in the event of substantial changes in the
parameters of a market or default by principals. The
assumptions and parameters applied must be assessed
at regular intervals.
The results of this measurement shall be provided to
the executive body, which shall ensure that the service
provider has the necessary resources at its disposal to
meet its commitments in all events. The decisionmaking body shall be informed of this measurement
and of decisions taken by the executive body to cover
liquidity risks.
CHAPTER VI
THE CONSIDERATION OF RISK IN
COMPENSATION POLICY
Article 31-2
Supervised institutions shall ensure that total variable
compensation does not limit their ability to strengthen their
capital base as necessary.
86
To this end, supervised institutions define an appropriate
ratio between the fixed and variable components of total
compensation.
Supervised institutions apply compensation policies and
implement procedures with the aim to prevent risks and
“conflicts of interest” in accordance with this chapter and in
a coherent manner with the professional standards that
transpose the principles and measures laid down by the
Financial Stability Board.
The compensation of the risk personnel is set independently
from that of the business areas whose operations they
validate and control, and sufficiently high so as to recruit
skilled and experienced personnel; it takes account of the
achievement of the objectives linked to the function. The
compensation of the officers referred to in Articles 11 and
11-8 is directly examined by the compensation committee or,
by default, by the decision-making body.
Article 31-3
The size of the variable compensation pool and its
allocation within the supervised institution should take into
account the full range of risks, including the liquidity risk
inherent in the activities concerned and the capital required
to support the risks taken.
In respect of risk control, supervised institutions should be
able to significantly reduce the amount of variable
compensation allocated in respect of the financial year or
years in which losses are reported.
Article 31-4
In respect of risk control, supervised institutions shall
ensure,
as regards staff categories that include risk takers, those
persons exercising a control function and any employee
who, in view of his total income, is in the same pay
bracket, whose professional activities have a significant
impact on the risk profile of the supervised institution, as
well as for the staff of non reporting subsidiaries within a
group supervised on a consolidated basis, whose activities
have a significant impact on the risk profile of the group, in
a manner and to an extent that is suited to their size and
their internal organisation as well as to the nature, scope
and complexity of their activities:
1.
that a substantial proportion of compensation is
variable and paid on the basis of individual, businessunit and firm-wide criteria and indicators that
adequately measure performance;
2.
that no guaranteed variable compensation is paid,
except in the context of hiring, and for a period that
does not exceed one year
3.
that a substantial proportion of such variable
compensations, that may not be under 40% and shall
be at least equal to 60% as regards the highest variable
compensations, is payable according to performance
under deferral arrangements over a period of three
years and vests no faster than on a pro rata temporis
basis. The time of the deferral shall take into account
the economic cycle, the nature of the activities, the
risks linked to them and the activities of the
employees concerned.
Selected French Banking and Financial Regulations – 2013
4.
that a substantial proportion of such variable
compensation, that may not be under 50%, is awarded
in the form of shares, equity-linked instruments,
index-linked instruments that create incentives aligned
with long-term value creation or, for unlisted
companies, other equivalent instruments. They shall
ensure that awards in shares or equity-linked
instruments are conditional on a minimum retention
period. This rule applies to the postponed part as well
as to the non-postponed part of the variable
compensation
5.
that if the business area in question reports a loss, the
portion of deferred compensation payable to the
employees concerned according to performance in the
financial year in which the losses are reported is
substantially reduced or not paid.
6.
that the discretionary payments in relation to the
early termination of a work contract be
subordinated to the compliance with the conditions
linked to the performance of the beneficiary,
assessed in relation to those of the undertaking,
subject to the mandatory provisions of French
labour law
7. that the pension policy be in compliance with the
supervised institution’s risk control objectives. If
the employee leaves the supervised institution
before retirement, the discretionary pension
benefits are allocated by the supervised institution
in the form of instruments mentioned in point 4 of
Article 31-4 and paid after a period of five years. In
the case of an employee who has reached
retirement age, the discretionary pension benefits
are paid to the employee under the conditions laid
down in point 4 of Article 31-4, subject to a
retention period of five years.
Supervised institutions shall prohibit their employees
from using personal hedging strategies or
compensation- and liability-related insurance to
undermine the risk alignment effects embedded in
their compensation arrangements.
Supervised institutions shall ensure that the
compensation of members of their executive body is
allocated and paid in compliance with the principles
defined above.
TITLE V
RISK MONITORING
AND RISK CONTROL SYSTEMS
They shall set up risk monitoring and risk control systems,
in particular with regard to credit risk, market risk, overall
interest-rate risk, intermediation risk, settlement and
liquidity risk, such systems providing for visible internal
limits and means to assess whether compliance with these
limits is effective.
Supervised institutions and the financial holding companies
referred to at Article 2 of this Regulation shall also have
systems for monitoring and controlling credit risk, market
risk, overall interest-rate risk, settlement and liquidity risk
that enable them to assess these risks on a consolidated
basis under the conditions set forth at Article 17, paragraph
2 above.
Article 32-1
Supervised institutions shall regularly re-evaluate their
systems for measuring risk and determining limits in order
to verify their relevance in the light of developments in the
business, the market environment, the macroeconomic
environment in which it operates in relation to the business
cycle and analytical techniques.
Supervised institutions shall introduce systems and
procedures that ensure preliminary and forward-looking
analysis of the risks incurred where they decide:
a)
b)
c)
d)
to carry out operations relating to new products;
to make significant changes to a product that
already exists for the institution or the market;
to carry out internal or external growth
operations;
to carry out exceptional transactions..
Article 33
Systems for monitoring and controlling credit risk, market
risk, overall interest-rate risk, intermediation risk,
settlement and liquidity risk must contain overall limits.
For market activities, the overall limits must be defined by
type of exposure. For intermediation risk, the overall limits
must be defined for each legal entity.
The executive body and, where appropriate, the decisionmaking body shall set and review overall risk limits as and
when necessary, and at least once a year, taking into
account the institution’s capital and consolidated capital
where appropriate, and giving consideration to whether the
distribution of capital within the group is suited to the risks
incurred.
Operational limits, which may be set for the different
organisational entities within the institution, must be
consistent with the above-mentioned overall limits.
The setting of the various overall and operational limits
must be consistent with the risk measurement system.
CHAPTER I
GENERAL PROVISIONS
Article 34
Supervised institutions shall set up systems which,
according to formal procedures, allow them to:
Article 32
Supervised institutions shall provide themselves with
suitable means for controlling operational risks including
legal risks.
constantly ensure compliance with the set procedures and
limits;
Selected French Banking and Financial Regulations – 2013
87
analyze the causes of any non-compliance with procedures
and limits;
inform the entities or persons designated for the purpose of
the extent to which the procedures or limits have been
disregarded or exceeded and of the corrective action
proposed or undertaken.
Article 35
Where the limits are divided between organisational
entities within the institution or between consolidated
undertakings and are likely to be reached, the entities
concerned must refer to the appropriate level of
management within the framework of formal procedures.
Where the monitoring of compliance is controlled by a risk
committee, its members must comprise not only managers
of operational units and representatives of the executive
body but also persons chosen for their risk management
expertise who are independent of operational units.
Article 36
Supervised institutions shall define procedures for
informing, at least once every quarter, the executive body
and, where appropriate, the risk committee about
compliance with risk limits, particularly when the overall
limits are likely to be reached.
If the supervised institution uses an outside service
provider to which the provisions of Article 2.a) of this
regulation apply, the provisions set forth at paragraphs a)
and b) above shall be integrated into the system for internal
control on a consolidated basis.
This regulation can include the measure wherein the
supervised institution supervises the service provider or
may influence its actions.
When the supervised institution uses a service provider that
is also subject to this Regulation, its system shall take into
account the measures actually taken, where appropriate
together, by the two supervised institutions to comply with
the provisions of this regulation and to enable it to ensure
that it satisfies its own obligations on the basis of these
measures.
Article 37-2
Supervised institutions that outsource a service essential to
their activity within the meaning of Article 4.q) and r) of
this regulation remain entirely responsible for the
compliance with all obligations incumbent upon them. In
particular, they shall comply with the following provisions.
1.
a)
Outsourcing in no way entails the delegation of the
executive body’s responsibility;
b)
The relationship of the supervised institution with its
clients and its obligations toward the latter should not
be affected;
c)
The conditions that the supervised institution is
obliged to meet in order to receive and maintain its
authorisation should not be altered;
d)
None of the other conditions on which the supervised
institution’s authorisation was based should be
removed or changed;
e)
The supervised institution, which must maintain the
expertise necessary to effectively control the
outsourced services and tasks and manage the risks
associated with outsourcing, monitors these services
and tasks and controls these risks.
2.
The outsourcing of services and tasks shall:
a)
give rise to a written contract between the external
service provider and the supervised institution;
b)
enter into the framework of the supervision of external
service providers as defined by the supervised
institution. Appropriate measures must be taken if it
appears that the service provider seems unable to
perform its tasks efficiently or in compliance with
legal or regulatory obligations;
Article 37-1-1
Supervised institutions:
c)
be able to be interrupted, if necessary, without
impacting the continuity or quality of the services
provided to clients.
a) shall ensure that their control system within the meaning
of Article 5 of this regulation includes their outsourced
activities
3.
the supervised institutions guarantee, in their relations
with their external service providers, that the latter:
a)
ensure that the quality of their services is up to
standard and, should an incident occur, are able to rely
on the contingency mechanisms mentioned in Point c;
Article 37
Supervised institutions must draw up suitable summary
statements for the monitoring of their operations and in
particular for the information to be provided to the
executive body, the risk committee referred to at Article 35
of this Regulation, the decision-making body and the audit
committee, if any. The statements must contain
quantitative and qualitative information, the latter in
particular providing details of the scope of the measures
used to evaluate the level of exposure to risk and to set
limits.
CHAPTER II
CONDITIONS APPLICABLE TO OUTSOURCING
Article 37-1. Supervised institutions shall ensure that any
service which substantively contributes to a decision
committing the undertaking vis-à-vis its clients to conclude
a transaction referred to in the first three indents of Article
4.r) of this regulation is outsourced only to persons
approved or authorised to carry on such activities in
accordance with the prevailing standards in their country.
Where a payment institution intends to outsource a service
essential to its activity, it shall inform the Autorité de
contrôle prudentiel beforehand
b) shall set-up arrangements within the meaning of Article
6 of this regulation to control their outsourced activities
88
Selected French Banking and Financial Regulations – 2013
b)
guarantee the protection of confidential information
regarding the supervised institution and its clients;
TITLE VI
c)
implement contingency mechanisms in the event of a
serious problem affecting the continuity of the service,
or factor into their continuity plan the eventuality that
an external service provider may fail to carry out its
task;
DUTY OF THE EXECUTIVE BODY AND OF
THE DECISION-MAKING BODY OF THE
SUPERVISED INSTITUTION AND OF THE
AUTORITÉ DE CONTRÔLE PRUDENTIEL
d)
cannot impose a substantial change to the service that
they provide without the supervised institution’s prior
agreement;
e)
conform to the procedures defined by the supervised
institution concerning the organisation and
implementation of the supervision of the services that
it provides;
f)
provide them, whenever necessary, with access, on
site if need be, to any information on the services
made available to them, in accordance with the
regulations relative to the disclosure of information;
g)
inform them of any event liable to have a significant
impact on their ability to carry out the outsourced
tasks effectively and in compliance with the
legislation and regulations in force;
h)
accept that the Autorité de contrôle prudentiel or its
foreign equivalents, as defined by articles L. 632-7, L.
632-12 and L. 632-13 of the aforementioned Monetary
and Financial Code, may have access to information
on the outsourced tasks in order to perform its duties,
on site if need be.
4. When an investment services provider uses for it is
outsourced activities relating to the portfolio management
provided to its non-professional customers an external
service provider located in a country that is not a member
of the European Community and is not party to the
Agreement on the European Economic Area, he shall
ensure that the following conditions are met:
- the service provider is authorised or registered in its home
country to provide portfolio management services for third
parties and is subject to prudential supervision;
- there is an appropriate cooperation agreement between the
Autorité de contrôle prudentiel or the Autorité des marches
financiers and the service provider’s supervisory authority.
If one or both of the aforementioned conditions are not met,
the investment services provider may only outsource
portfolio management services to service providers located
in a country that is not party to the Agreement on the
European Economic Area after notifying the Autorité de
contrôle prudentiel of the outsourcing contract. In the
absence of any remark by the Commission within a period
of three months from the date of notification, the
outsourcing planned by the investment services provider
may go ahead.
Article 38
The executive body and the decision-making body are
responsible for making sure that the supervised institution
complies with its obligations under this regulation.
In particular, the executive body and the decision-making
body have at their disposal relevant information on the
risks incurred by the supervised institution. They are
obliged to regularly assess and control the effectiveness of
policies, systems and procedures set up to comply with this
regulation and take the appropriate measures to remedy
possible failings.
Article 38-1
The decision-making body sets – where appropriate, on the
basis of the opinion issued by the central body of the
supervised institution – the significance criteria and
thresholds mentioned in Article 17b of this regulation used
to identify incidents that must be brought to its attention.
Significant incidents with regard to the criteria and
thresholds mentioned in Article 17b must without delay be
brought to the attention of the executive body and the
decision-making body and, if necessary, the central body of
the supervised institution.
Information about significant anomalies detected by the
anti-money laundering and terrorist financing monitoring
and analysis system and about shortcomings of the system,
particularly those found by national and foreign
supervisory authorities, must be brought to the attention of
the executive body and the decision-making body and, if
necessary, the central body of the supervised institution.
Article 38-2
Supervised institutions communicate to the Autorité de
contrôle prudentiel the criteria and thresholds mentioned in
Article 17b and decided on by the decision-making body.
The Autorité de contrôle prudentiel checks the relevance of
the criteria and thresholds chosen with regard to the
situation of the institution and the way in which they are
applied. If the situation of the institution warrants it, it may,
in accordance with Article L.613-16, request an institution
to review its criteria and thresholds as well as the way in
which they are implemented.
The executive body is in charge of
Autorité de contrôle prudentiel,
significant incidents with regard
thresholds mentioned in Article 17b
decision-making body.
Selected French Banking and Financial Regulations – 2013
communicating to the
without delay, the
to the criteria and
and decided on by the
89
Article 38-3
For supervised institutions that are part of a financial
group, a mixed group or financial conglomerate, the
significance criteria and thresholds as well as the
obligations under Articles 38-1 and 38-2 are defined and
implemented by the competent executive and decisionmaking bodies of the institutions for which the Autorité de
contrôle prudentiel exerts a control of capital requirements
defined in the Order of
20 February 2007 or the supplementary supervision under
the conditions set forth in Regulation No. 2000-03.
associated with the activity and results of the
supervised institutions or groups, and particularly the
risk distribution provided for in Article 18 as well as
the analysis of the profitability of the credit operations
provided for in Article 20 of this Regulation;
b)
of the measures taken to ensure business continuity
and the assessment of the effectiveness of the
arrangements in place;
c)
of the measures taken to control outsourced activities
and any risks the supervised institution may incur
thereby; essential services covered by the first three
indents of Article 4.r) of this regulation must be
identified in such information.
However, the same institutions apply Article 38-1 on an
individual basis.
Article 38-4
The decision-making body shall determine the principles of
the compensation policy in accordance with the provisions
of Title IV, Chapter VI and in consistency with the
professional standards that transpose the principles and
measures laid down by the Financial Stability Board.
In order to prepare its decisions, and except where the size
of the institution does not warrant such a measure, the
decision-taking body shall constitute a remuneration
committee comprising a majority of independent members
competent to analyse compensation policies and practices
in the light of all relevant criteria, including the
institution’s risk policy.
The president and the members of the remuneration
committee are members of the decision-making body who
are not members of the executive body of the supervised
institution
This committee, or the decision-taking body if there is
none, shall conduct an annual review of the compensation
policy and in particular shall ensure, on the basis of the
report submitted to it by general management, that it
complies with the provisions of Title IV, Chapter VI and is
consistent with the professional standards that transpose the
principles and measures laid down by the Financial
Stability Board. It shall draw as necessary on internal
control units or outside experts. It shall report on its work
to the decision-taking body.
The minute of the decision-taking body’s debate on
compensation policy shall be transmitted to the Autorité de
contrôle prudentiel.
Article 39
At least twice a year, the decision-making body assesses
the activity and results of the internal control, in particular
control of compliance on the basis of the information it
receives from the executive body and the officers
mentioned in Articles 7 and 11 and the significant incidents
brought to light by the internal control procedures in
accordance with Article 38-1.
The executive body reports to the decision-making body
and, if need be, the audit committee on a regular basis and
at least once a year.
a)
90
of the essential elements and main lessons that may be
drawn from the analysis and monitoring of risk
When the decision-making body is not involved in setting
the limits, the executive body shall inform it and the audit
committee, if any, of decisions taken in this respect. It shall
inform the decision-making body regularly, and at least
once a year, of compliance with the set limits.
If the audit committee is distinct from the decision-making
body, the provision of information and assessment laid
down in this Article may take place only once a year.
The documents examined in this context by the decisiontaking body shall be sent to the General Secretariat of the
Autorité de contrôle prudentiel together with excerpts from
the minutes of the meetings at which they were examined.
Article 40
Supervised institutions shall draw up and regularly update
manuals of procedures relating to their various activities.
These manuals must describe the methods for recording,
processing and retrieving data, accounting procedures and
procedures for entering into transactions.
Supervised institutions shall draw up, in the same
conditions, documents that set out the means intended to
ensure that the internal control system operates smoothly,
including:
a)
b)
c)
d)
e)
f)
g)
the various levels of responsibility;
the functions and resources allotted to the running of
internal control systems
the rules that ensure the independence of these
systems as set forth at Article 7 of this Regulation;
the procedures relating to the security of information
and communication systems and to business
continuity plans;
a description of risk measurement systems;
a description of risk monitoring and control systems;
for investment service providers and the legal persons
referred to at Article L. 442-2, points 3 and 4 and at
Article L. 542-1, points 4 and 5 of the Monetary and
Financial Code aforesaid, cash management
arrangements in the context of the performance of
investment or clearing services and the conditions in
which cash flow forecasts are monitored as well as the
procedures set up to ensure compliance with the
provisions relating to the segregation of the funds
belonging to the customers of investment firms.
Selected French Banking and Financial Regulations – 2013
Documentation shall be organised in such a way that it can
be made available upon request to the executive body, the
decision-making body, the statutory auditors, the General
Secretariat of the Autorité de contrôle prudentiel and,
where appropriate, the audit committee and the central
body.
2. Supervised institutions and financial holding companies
supervised on a consolidated basis shall also draw up, at
least once a year, a report on the conditions in which
internal control is carried out at group level. Supervised
institutions shall include this group report in the report
referred to in the first paragraph of this Article.
Article 41
The reports drawn up following controls conducted within
the framework of the arrangements referred to at Article
6.b) above shall be provided to the executive body and,
upon request, to the decision-making body and audit
committee, if any. When the number of the reports and the
size of the undertaking can justify doing so, the conclusion
of the report accompanied with the main financial
statements may be brought to the knowledge of the
executive body.
3. When the supervised institution is an investment firm,
the report drawn up as set forth in this article may
recapitulate the information contained in the report
provided for in the General Regulations of the Autorité des
Marchés Financiers, if the investment firm deems such
information to be significant with regard to the matters
referred to in paragraph 1) of this Article.
When an institution is affiliated to a central body, the
reports shall also be provided to the central body.
The reports shall be made available to the statutory auditors
and to the General Secretariat of the Autorité de contrôle
prudentiel.
Article 42
At least once a year, supervised institutions shall draw up a
report on the conditions in which internal control is
conducted.
1. The report shall notably include, for each of the kinds of
risks defined in this regulation:
a) a description of the main actions carried out in
relation to internal control, for the implementation
of Article 6, a), and the lessons drawn from these
actions;
b) an inventory of investigations carried out for the
implementation of Article 6, b), identifying the
main lessons to be drawn, especially the main
shortcomings observed, and the follow-up to the
corrective actions taken;
c) a description of significant changes made in
relation to internal control during the period under
review, in particular to take account of
developments in activities and risks;
d) a description of the conditions in which the
procedures in place are applied to new activities;
Article 43
At least once a year, supervised institutions and financial
holding companies supervised on a consolidated basis shall
draw up a report on the measurement and monitoring of
their exposure. When the institution is itself responsible for
the supervision on a consolidated basis of other supervised
institutions, the report shall cover the risks to which the
group is exposed. The report shall include the information
provided to the decision-making body in accordance with
Article 39 of this Regulation.
For supervised institutions and financial holding
companies, this report shall include an appendix relating to
the security of means of payment to be transmitted by the
General Secretariat of the Autorité de contrôle prudentiel to
the Banque de France as part of its mission defined by
Article L. 141-4 of the above-mentioned Monetary and
Financial Code. In the appendix, supervised institutions
shall describe the assessment, measurement and monitoring
of the security of the means of payment they issue or
manage with regard to their internal standards, if any, and
to the recommendations that the Banque de France or the
European System of Central Banks bring to their attention.
For institutions subject to the Order relating to the
identification, measurement, management and control of
liquidity risk, this report shall include an analysis of
developments in liquidity cost indicators during the period
under review.
In the framework of the standard approach for measuring
liquidity risk as defined in Title II of the above-mentioned
Order, this report shall include:
–
an appendix describing the assumptions used to
prepare the cash flow statement referred to in Title II,
Chapter 2, Article 17 of the aforesaid Order as well as,
where necessary, the significant changes that have
taken place during the period under review;
–
an analysis of the changes in liquidity gaps calculated
in the cash flow statement prepared during the period
under review.
e) a section relating to the internal control of foreign
branches;
f) a description of the main initiatives planned in
relation to internal control;
g) an appendix listing transactions concluded with the
principal managers and shareholders as defined at
Article 6b of Regulation 90-02 aforesaid;
h) an up-to-date description of the classification of
money laundering and terrorist financing risks and
a description of the analyses on which the
classification is based.
Selected French Banking and Financial Regulations – 2013
With regard to the monitoring of the liquidity of investment
services providers and the legal persons referred to at
Article L. 442-2, points 3 and 4 of the Monetary and
Financial Code aforesaid, the report shall state, inter alia,
the assumptions used.
91
The report shall include :
a)
b)
An appendix containing the assumptions and
methodological principles used as well as the
results of stress tests performed by supervised
institutions in accordance with Articles 116 and
349 of the Order of 20 February 2007.
An Appendix indicating the methods, including
stress tests, used for identifying the risks
resulting from the use of credit risk mitigation
techniques recognised for the application of the
Order of 20 February 2007, in particular the risk
of concentration and the residual risk.
The report may be included in the report provided for at
Article 42 of this Regulation.
Article 43-1
Each year, supervised institutions shall draw up and
transmit to the Commission bancaire a report containing
the following information about the compensation policy
and: of the members of the executive body and the persons
whose professional activities have a significant impact on
the risk profile of the company :
f)
the amounts of severance payments awarded
during the financial year, number of beneficiaries,
and highest such award to a single person.
Article 43-2
Supervised institutions shall publish the information
mentioned at Article 43-1, paragraphs 1 to 3 annually, in a
manner and to an extent that is suited to their size and their
internal organisation as well as to the nature, scope and
complexity of their activities. To this end, they shall
determine the appropriate medium or location and shall
endeavour to provide all disclosures in one medium or
location.
Where relevant, such information shall be published at the
level of the group over which the Autorité de contrôle
prudentiel exercises supervision on a consolidated or subconsolidated basis.
Supervised institutions with fewer than ten employees who
are financial market professionals and whose actions have a
material impact on their risk exposure are exempt from the
requirement to disclose the information about those
employees mentioned at Article 43-1, paragraph 3.
1.
the decision-taking process used to determine the
firm-wide compensation policy, including the
composition and the mandate of the remuneration
committee, as well as, if need be, the identity of the
external consultants whose services are used to define
the compensation policy
Where they provide evidence that employee anonymity
cannot be preserved because of the very small number of
employees concerned, supervised institutions may refrain
from disclosing all or some of the information about those
employees mentioned at Article 43-1, paragraph 3(e).
2.
the most important design characteristics of the
compensation system, including criteria used for
performance measurement and risk adjustment, the
linkage between pay and performance, deferral policy
and vesting criteria, and the parameters used for
allocating cash versus other forms of compensation;
Article 43-3
The Autorité de contrôle prudentiel shall examine whether
the total variable compensation of supervised institutions
expressed as a percentage of net banking income is
consistent with the maintenance of a sound capital base.
3.
aggregate quantitative information on compensation,
broken down by members of the executive body and
by employees who are financial market professionals
and whose actions have a material impact on the risk
exposure of the firm, indicating for each category:
Article 44
The reports referred to at Articles 42 and 43 of this
Regulation shall be provided to the decision-making body
and, where appropriate, the audit committee and the central
body.
a)
amounts of remuneration for the financial year,
split into fixed and variable compensation, and
number of beneficiaries. Such information shall
be communicated for each line of business;
The onus to ensure that the supervised institution meets its
obligations with respect to these regulations is on the
executive and decision-making bodies.
b)
amounts and forms of variable compensation,
split into cash, shares and equity-linked
instruments and other;
c)
amounts of outstanding deferred compensation,
split into vested and non-vested;
d)
e)
92
the amounts of deferred compensation awarded
during the financial year, paid out and reduced
through performance adjustments;
new sign-on and severance payments made
during the financial year, and number of
beneficiaries of such payments;
In particular, the executive and decision-making bodies are
obliged to assess and monitor the efficiency of the policies,
mechanisms and procedures implemented to meet the
obligations of these regulations and to take appropriate
measures to deal with any fails.
TITLE VII
SUNDRY PROVISIONS
Article 45
With the exception of the provisions relating to the
measurement of liquidity risk set forth in Articles 31, 31-1,
43 paragraph 3 and 44, and of the provisions relating to the
money laundering and terrorist financing risks mentioned
in Articles 11-7, 38-1 and 42, this Regulation does not
apply to branches of institutions having their registered
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offices either in another Member State of the European
Union or in a country that is a signatory to the agreement
on the European Economic Area that are referred to at
Articles L. 511-21, L. 511-22 and L. 511-23 of the
Monetary and Financial Code aforesaid.
With the exception of the provisions relating to the money
laundering and terrorist financing risks mentioned in
Articles 11-7, 38-1 and 42, this Regulation does not apply
to branches of investment firms having their registered
office in an EU Member State or in a State party to the
agreement on the European Economic Area and mentioned
in Article 1 of this Regulation.
Article 46
The provisions of Articles 11-7, 38-1 and 42 relating to the
fight against money laundering and terrorist financing do
not apply to institutions and branches authorised to pursue
their business in the Principality of Monaco.
ORDER OF 13 DECEMBER 2010 AMENDING
VARIOUS REGULATORY REQUIREMENTS
RELATIVE TO THE MONITORING OF THE
INCOMES PERCEIVED BY THE PERSONS WHOSE
FUNCTIONS MAY HAVE AN IMPACT ON THE
RISK PROFILE OF CREDIT INSTITUTIONS AND
INVESTMENT FIRMS AS WELL AS VARIOUS
PRUDENTIAL PROVISIONS
Article 1
See Regulation 97-02
Article 2
The Autorité de contrôle prudentiel ensures that the
variable incomes distributed by the supervised institutions
that receive an exceptional public intervention is limited
when it is not compatible with the maintaining of the own
funds of the institution at a sufficient level. It also ensures
that the incomes of the members of the deciding body are
justified.
Article 3
The Autorité de contrôle prudentiel may require that the
supervised institutions, in accordance with Article L. 51141-3 of the Monetary and Financial Code restructure their
incomes so as to comply with sound risk management and
a long-term growth target.
Article 4
See Order of 20 February 2007. 2007
Article 5
This Order enters into force on 1 January 2011, with the
exception of Article 4, 2° that enters into force on 31
December 2010 1.
Article 6
This order shall be published in the Journal officiel de la
République française.
1 See point 3 of indent 1 of Article 391 of Order of 20 February 2007
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93
1.1.9. REPRESENTATIVE OFFICES
CIRCULAR OF 22 FEBRUARY 1990 AS AMENDED
RELATIVE TO THE OPENING AND
FUNCTIONING OF REPRESENTATIVE OFFICES
OF CREDIT INSTITUTIONS
Pursuant to Article L. 511-19 of the Monetary and
Financial Code, where credit institutions with their
registered office abroad intend to open a representative
office in France or in the Principality of Monaco, the
opening of such offices shall be notified in advance to the
Autorité de contrôle prudentiel.
1) The official letter of notification shall bear the foreign
company letterhead and the signature of one of its senior
managers. It shall also state explicitly that the office will
restrict its activities to information, liaison and
representation, to the exclusion of any transactions
regulated by the Monetary and Financial Code.
2) The following information concerning the applicant
institution must be provided in support of this notification:
•
Registered name in the home country and name
under which it operates in the country or
countries where it carries out its main activities;
•
Address of its registered office;
•
Legal form in its home country;
•
Breakdown of its capital;
•
Status in its home country (indicating national
banking or financial supervisory authorities) and
in the country or countries where it carries out
most of its activities;
•
A letter from the supervisory authority of the
institution indicating that the opening of the
office has already been authorised or that
pursuant to the legislation in force such an
opening does not require any authorisation. The
letter shall be accompanied by an official
translation;
•
Description of its main activities (commercial
bank, investment bank, specialised financial
institution, underwriting and distributing of
bonds and new equity issues) accompanied by the
annual report of the Board of Directors to the
Annual General Meeting.
3) This information shall be supplemented by information
relating specifically to the representative office to which
the notification of opening applies, in particular:
•
The form of establishment and the name that the
office intends to use;
•
Its main functions and, where appropriate, the
terms and conditions of establishment;
•
Date of opening, address and telephone1;
•
Identity and curriculum vitae of the senior
manager of the office;
•
Number of employees.
4) The information referred to in paragraphs 1, 2 and 3
above shall be sent to the :
BANQUE DE FRANCE
40-1355 DECEI
75049 PARIS CEDEX 01
which is responsible for processing the application.
The applicant institution is entitled to open its
representative office upon receipt of a letter from the
BANQUE DE FRANCE (DECEI) acknowledging receipt
of the required notification.
5) The opening statement shall be accompanied by a letter
sent to the supervisory authorities of the reporting country.
6) In order to enable the Committee to keep the list of
representative offices up to date, these offices are required
to inform the BANQUE DE FRANCE (DECEI) of any
change in their main characteristics or those of the
institution they represent and, where relevant, of their
closing.
They shall also provide the above-mentioned department of
the BANQUE DE FRANCE with the following
information:
•
an annual memorandum of their activities,
including any changes in the number of
employees, no later than three months after the
end of the year.
•
the annual report of the institution they represent,
as soon as possible.
Any new senior manager of the office shall provide a
curriculum vitae.
1 This information may be supplied at a later stage, upon receipt of
the letter from the Banque de France referred to in paragraph 4
acknowledging receipt of notification.
94
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CIRCULAR OF 26 MARCH 1999 AS AMENDED1
RELATIVE TO THE OPENING AND
FUNCTIONING OF REPRESENTATIVE OFFICES
OF INVESTMENT COMPANIES
Pursuant to Article L. 532-14 of the Monetary and
Financial Code, where investment firms with their
registered office abroad intend to open a representative
office in France, the opening of such offices shall be
notified in advance to the Autorité de contrôle prudentiel;
this latter shall inform the Autorité des marchés financiers.
1) The official letter of notification shall bear the foreign
company letterhead and the signature of one of its senior
managers. It shall also state explicitly that the office will
restrict its activities to information, liaison and
representation, to the exclusion of any investment services
such as defined in the Monetary and Financial Code.
2) The following information concerning the applicant
institution must be provided in support of this notification:
•
Registered name in the home country and name under
which it operates in the country or countries where it
carries out its main activities.
•
Address of its registered office.
•
Legal form in its home country.
•
Breakdown of its capital.
•
Status in its home country (indicating national banking
or financial supervisory authorities) and in the country
or countries where it carries out most of its activities.
•
Breakdown of its capital.
•
Description of its main activities (annual report of the
Board of Directors to the Annual General Meeting).
4) The information referred to in paragraphs 1, 2 and 3
above shall be sent to the :
BANQUE DE FRANCE
40-1355 DECEI
75049 PARIS CEDEX 01
which is responsible for processing the application.
The applicant institution is entitled to open its
representative office upon receipt of a letter from the
BANQUE DE FRANCE (DECEI) acknowledging receipt
of the required notification.
5) The Banque de France makes the opening notification to
the supervisory authorities of the reporting country.
6) In order to enable the Committee to keep the list of
representative offices up to date, these offices are required
to inform the BANQUE DE FRANCE (Direction des
établissements
de
crédit
et
des
entreprises
d’investissement) of any change in their main
characteristics or those of the institution they represent and,
where relevant, of their closing.
They shall also provide the above-mentioned department of
the BANQUE DE FRANCE with the following
information:
•
an annual memorandum of their activities, including
any changes in the number of employees.
•
the annual report of the institution they represent.
3) This information shall be supplemented by information
relating specifically to the representative office to which
the notification of opening applies, in particular:
•
The form of establishment and the name that the office
intends to use.
•
Its main functions and, where appropriate, the terms
and conditions of establishment.
•
Date of opening, address and telephone number2.
•
Identity and curriculum vitae of the senior manager of
the office.
•
Number of employees.
1 Uptaded 26 July 2005.
2 This information may be supplied at a later stage, upon receipt of
the letter from the Banque de France referred to in paragraph 4
acknowledging receipt of notification.
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95
1.2.DETAILS OF OPERATIONS CARRIED
OUT BY CREDIT INSTITUTIONS AND
INVESTMENT FIRMS
1.2.1.SETTLEMENT FINALITY IN PAYMENT
AND SECURITIES SETTLEMENT SYSTEMS
EXCERPT FROM MONETARY AND FINANCIAL
CODE: ARTICLES R. 330-1 TO R. 330-3, ADOPTED
WITH A VIEW TO TRANSPOSING ARTICLES 6
AND 10 OF DIRECTIVE 98/26/CE OF THE
EUROPEAN PARLIAMENT AND COUNCIL
CONCERNING SETTLEMENT FINALITY IN
PAYMENT AND SECURITIES SETTLEMENT
SYSTEMS
Article R. 330-1
The list of systems for interbank settlement and settlement
and delivery of financial instruments notified to the
European Commission by the Minister of Finance, in
accordance with Article L. 330-1 of the Monetary and
Financial Code, shall be published in the Journal officiel of
the French Republic.
Article R. 330-2
The operators of the systems mentioned in Article R. 330-1
shall provide the Banque de France, and, in the case of
systems for settlement and delivery of financial
instruments, the Autorité des marchés financiers (Act
2003-706 of 1 August 2003, Article 46), with a list of
persons that participate in them, whether directly or
indirectly, and notify them without delay of any changes to
this list.
The Banque de France and the Autorité des marchés
financiers (Act 2003-706 of 1 August 2003, Article 46)
shall make this information, along with the identity and
address of the operators of the relevant systems, available
to any person that requests it.
Article R. 330-3
Anyone with a legitimate interest shall obtain on request
from a participant in one of the systems mentioned in
Article 1 information on the system in question and the
rules governing its functioning with respect to the
conditions of and procedures for joining the system, the
currencies or financial instruments processed, the
transactions carried out, the status of the settlement agent,
the risk-management mechanisms in place, and the
procedures designed to ensure the irrevocability of
instructions for settlement and delivery of financial
instruments, as well as of the settlement and delivery of
financial instruments themselves.
This obligation may, should the case arise, be met by
referring to the rules for the functioning of the system
published by the Autorité des marchés financiers (Act
2003-706 of 1 August 2003, Article 46).
96
1.2.2.EQUITY PARTICIPATIONS
REGULATION 90-06 OF 20 JUNE 1990, RELATING
TO EQUITY HOLDINGS IN THE CAPITAL OF
ENTERPRISES
as amended by Regulations 94-03 of
8 December 1994, 98-03 of 7 December 1998,
2000-03 of 6 September 2000
and the Order of 19 September 2005
Article 1
Credit institutions, hereinafter referred to as institutions
subject to this Regulation, may take and hold equity in an
undertaking on the terms and within the limits defined
below.
For the purposes of this Regulation, interests shall be
regarded as equity interests when they confer at least 10%
of the capital or of the voting rights or enable a significant
influence within the meaning of Regulation 2000-03 of
6 September 2000 to be exerted or have been acquired in
order to exert such an influence.
Article 2
Equity interests must at no time exceed either of the
following two limits:
− as regards each equity interest, 15% of the amount of
the own funds of an institution subject to this
Regulation;
− as regards total equity interests, 60% of the own funds
of an institution subject to this Regulation.
For the purposes of this Article, undertakings to purchase
equity interests entered into by an institution for a period
exceeding three months shall be treated as equity interests.
Conversely, securities in respect of which an undertaking to
purchase for a period exceeding three months has been
received from another institution subject to this Regulation
shall not be regarded as equity interests.
Article 3
The following shall not be subject to the limits laid down in
Article 2 above:
a) equity interests in:
− financial undertakings defined in Article in Article 1 of
Regulation 2000-03 of 6 September 2000,
− insurance
companies or reinsurance companies
authorised in a Member State of the European Union or
another State that is party to the Agreement on the
European Economic Area.
− insurance companies or reinsurance companies falling
under the supervision of the relevant authority of a
State that is not a party to the European Economic
Agreement, subject to approval by the Autorité de
contrôle prudentiel. In this case, the Autorité de
contrôle prudentiel defines the conditions for including
this equity interest in the calculation of own funds
pursuant to Regulation 90-02 aforementioned and,
where necessary, for exercising prudential supervision
on a consolidated basis pursuant to Regulation 2000-03
of 6 September 2000.
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b) equity interests involving:
− securities acquired not more than three years previously
as a result of a financial assistance operation or for the
purpose of reorganising or rescuing an undertaking;
− securities held by an institution, under an agreement
concluded beforehand with a third party, for account of
the latter;
− securities classified as trading securities, as defined in
Article 2 of the above-mentioned Regulation 90-01;
− for a period not exceeding one year, securities that a
third party has given an irrevocable undertaking to
purchase;
− securities held in connection with the underwriting of
an issue, for a period of three months from the closing
of the issue, or in Unit Trust (Sociétés d’investissement
à capital variable - SICAV), for a period of six months
from their formation.
Article 4
Repealed by Regulation 94–03.
Article 5
The Autorité de contrôle prudentiel may authorise an
institution subject to this Regulation to take or hold a
particular equity interest even though one of the two limits
laid down in Article 2 is exceeded as a result. In this event
the amount of such excess shall be deducted from the
amount of the institution’s own funds for the purposes of
the above Regulation 90-02.
If both the limits laid down in Article 2 are exceeded, only
the higher of the two excess amounts shall be deducted
from own funds in the way just indicated.
Article 6
This regulation applies on a consolidated basis to the
supervised institutions supervised by the Autorité de
contrôle prudentiel on a consolidated basis pursuant to
Regulation 2000-03 of 6 September 2000.
Article 7
When an institution subject to this Regulation holds equity
through holding or investment companies that are not
financial undertakings within the meaning of Article 1 of
Regulation 2000-03 of 6 September 2000, the limits laid
down in Article 2 above shall apply to the equity interests
of these companies.
Article 8
For the purposes of this Regulation:
a) The amount of own funds shall be calculated in
accordance with Regulation 90-02 aforesaid;
b) Each equity interest shall be included at net book value
before any consolidation by the equity method.
Article 9
If regional development companies (Sociétés de
Développement Régional, SDR) and financial companies
the main purpose of which is to provide undertakings with
Selected French Banking and Financial Regulations – 2013
permanent resources and that have been specially
authorised by the Comité de la Réglementation Bancaire
are not, on the date this Regulation enters into force,
observing the limits laid down in Article 2 above, they shall
have five years in which to comply.
Article 10
When an institution subject to this Regulation does not
observe the limits laid down in Article 2, and is unable to
avail itself of the provisions of Article 9 or of an
authorisation given under Article 5, the Autorité de
contrôle prudentiel may, exceptionally, grant it a period of
time to regularise its position by increasing its own funds
or by any other means.
Article 11
This Regulation shall enter into force on 1 September 1990
and Regulation 85-16 shall be repealed on that date.
REGULATION 98-04 OF 7 DECEMBER 1998,
RELATING TO EQUITY INTERESTS TAKEN BY
INVESTMENT FIRMS OTHER THAN PORTFOLIO
MANAGEMENT COMPANIES AND INVESTMENT
FIRMS WHICH HAVE NEITHER FUNDS NOR
SECURITIES BELONGING TO THEIR
CUSTOMERS AND WHICH ONLY PROVIDE THE
INVESTMENT SERVICE MENTIONED IN
ARTICLE L. 321-1.1 OF THE MONETARY AND
FINANCIEL CODE IN EXISTING OR NEW
UNDERTAKINGS
as amended by Regulation 2000-03 of 6 September 2000
and Orders of 19 September 2005
15 May 2006 and 20 February 2007
Article 1
Investment firms referred to in Article L. 531-4 of the
Monetary and Financial Code, other than portfolio
management companies referred to in Article L. 532-9 and
investment firms which have neither funds nor securities
belonging to their customers and which only provide the
investment service mentioned in Article L. 321-1.1
hereinafter referred to as firms subject to this Regulation,
may take and hold equity interests in an existing or new
undertaking on the terms and within the limits defined
below.
For the purposes of this Regulation, equity interests are
interests that give the holder at least 10% of the capital or
voting rights or allow the holder to exert a significant
influence as defined in the laws and regulations that apply
to investment firms in accordance with regulation 2000-03
of 6 September 2000.
Article 2
Equity interests must at no time exceed either of the
following two limits:
–
as regards each equity interest, 15% of the amount of
the own funds of a firm subject to this Regulation;
–
as regards total equity interests, 60% of the own funds
of a firm subject to this Regulation.
97
For the purposes of this Article, undertakings to purchase
equity interests entered into by a firm for a period
exceeding three months shall be treated as equity interests.
Conversely, securities in respect of which an undertaking to
purchase for a period exceeding three months has been
received from another firm subject to this Regulation shall
not be regarded as equity interests.
Article 3
The following shall not be subject to the limits laid down in
Article 2 above:
a) Equity interests in:
–
–
–
financial undertakings as defined in Article 1 of
Regulation 2000-03 of 6 September 2000;
insurance companies or reinsurance companies
authorised in a Member State of the European Union or
another country that is party to the Agreement on the
European Economic Area;
insurance companies or reinsurance companies falling
under the supervision of the relevant authority of a state
that is not a party to the European Economic
Agreement, subject to approval by the Autorité de
contrôle prudentiel. In this case, the Autorité de
contrôle prudentiel defines the conditions for including
this equity interest in the calculation of own funds
pursuant to Regulation 97-04 aforementioned and,
where necessary, for exercising prudential supervision
on a consolidated basis pursuant to Regulation 2000-03
of 6 September 2000.
Article 5
This regulation applies on a consolidated basis to the
institutions subject to this regulation and which fall under
the prudential supervision on a consolidated basis of the
Autorité
de
contrôle
prudentiel
pursuant
to
Regulation 2000-03 of 6 September 2000.
Article 6
When a firm subject to this Regulation holds equity
interests through holding or investment companies that are
not financial undertakings within the meaning of the laws
and regulations that apply to investment firms in
accordance with Article 1 of Regulation 2000-03 of 6
September 2000 shall apply to the equity interests of these
companies.
Article 7
For the purposes of this Regulation:
a) the amount of own funds shall be calculated in
accordance with Regulation 97-04 aforesaid;
b) each equity interest shall be included at net book value
before any consolidation by the equity method.
Article 8
When a firm subject to this Regulation does not observe the
limits laid down in Article 2, and is unable to avail itself of
an authorisation given under Article 4, the Autorité de
contrôle prudentiel may, exceptionally, grant it a period of
time to regularise its position by increasing its own funds
or by any other means.
b) Equity interests involving:
–
securities acquired not more than three years previously
as a result of a financial assistance operation or for the
purpose of reorganising or rescuing an undertaking;
–
securities held by a firm, under an agreement
concluded beforehand with a third party, for account of
the latter;
–
securities classified as trading securities, as defined in
Article 2 of Regulation 90-01 aforesaid;
–
for a period not exceeding one year, securities that a
third party has given an irrevocable undertaking to
purchase;
–
securities held in connection with the underwriting of
an issue, for a period of three months from the closing
of the issue, or in open-end investment companies
(sociétés d’investissement à capital variable - SICAV)
for a period of six months from their formation.
Article 4
The Autorité de contrôle prudentiel may authorise an
institution subject to this Regulation to take or hold a
particular equity interest even though one of the two limits
laid down in Article 2 is exceeded as a result. In this event
the amount of such excess shall be deducted from the
amount of the firm’s own funds for the purposes of
Regulation 97-04 aforesaid.
If both the limits laid down in Article 2 are exceeded, only
the higher of the two excess amounts shall be deducted
from own funds in the way just indicated.
98
Article 9
This Regulation shall enter into force on 1 July 1999.
1.2.3.VIGILANCE VIS-A-VIS MONEY
LAUNDERING
REGULATION 2002-01 OF 18 APRIL 2002,
RELATING TO OBLIGATIONS OF VIGILANCE
WITH REGARD TO CHEQUES IN ORDER TO
COMBAT MONEY LAUNDERING AND THE
FINANCING OF TERRORISM
as amended by the Orders of 18 July and
20 December 2002, 9 July 2003 and 15 March 2004, by
Regulation 2003-01 of 16 May 2003 and by Orders of 23
September 2004, 31 May 2005 and 29 October 2009
TITLE I
GENERAL PROVISIONS
Article 1
The present Regulation applies to the credit institutions
defined in Article L. 511-1 of the Monetary and Financial
Code, as well as the payment institutions defined in Article
L. 522-1 of said Code where they provide for the cashing
of cheques. They are referred to hereinafter as "supervised
institutions".
Selected French Banking and Financial Regulations – 2013
The present Regulation applies to cheques payable in
France as defined by the Monetary and Financial Code and
to cheques payable in Monaco governed by the provisions
of Regulation 2001-04 aforesaid.
Article 2
The written internal rules referred to at Article 2 a) of
Regulation 91-07 shall describe the specific procedures to
be carried out to control cheques for the purposes of
preventing money laundering and terrorist financing,
without prejudice to the obligations imposed for other
purposes by Book I, Title III, Chapter I of the Monetary
and Financial Code and the measures taken pursuant to
Title V of the aforementioned Book.
Article 3
The written internal rules set forth at Article 2 of the
present Regulation shall provide for cheques to be
examined as the supervised institution deems necessary in
accordance with the principles set forth in the present
Regulation in order to supplement its knowledge of its
customers with a view to fulfilling its obligations of
vigilance with regard to the risk of money laundering.
To that end, the supervised institution shall define the
controls to be carried out on the references appearing on
the cheques or addenda that may contain information from
which abnormal or unusual characteristics of the
transaction may be detected in the light of the institution’s
knowledge of its customer.
The cheques shall be examined by persons properly trained
in anti-money laundering techniques who have access to
the information they need in order to carry out the controls
incumbent upon them under the terms of the present
Regulation.
Article 4
Each year supervised institutions shall draw up and
perform a cheque control programme in application of the
vigilance obligations set forth in the present Regulation.
The programme, revised as necessary while in progress,
shall include selection criteria defined by the institution
according to its particular activities which take account of
developments in money laundering typologies and publicly
available information, in particular the information
circulated by the international consultative and
coordinating body for combating money laundering or by
the department referred to at Article L. 562-4 of the
Monetary and Financial Code.
The correspondents referred to at Articles 2 and 5 of the
decree of 13 February 1991 aforesaid shall be informed of
the results of the examination of such cheques. After the
programme has been carried out, the results shall be
brought to the attention of the decision-making body under
the conditions set forth at Article 38 of Regulation 97-02 of
21 February 1997 aforesaid.
Article 5
Supervised institutions shall adapt their cheque processing
system so that the procedures provided for in the present
Regulation may be applied.
Selected French Banking and Financial Regulations – 2013
Article 6
The monitoring system referred to at Article 2 b) of
Regulation 91-07 of 15 February 1991 shall include
verification of compliance with the procedures provided for
in the present Regulation.
TITLE II
CHEQUES RECEIVED FOR CASHING AND
DISCOUNTING
Article 7
For cheques received for cashing or discounting from
customers other than those referred to at Article 8 of the
present Regulation, the programme set forth (referred to) at
Article 4 shall include at least an examination for the
purposes of preventing money laundering:
a)
of cheques for which an examination is deemed
necessary in order to supplement analysis of the
operation of the account when the supervised
institution, while monitoring the payee’s account,
observes, where relevant by computerised means, that
the account is being operated in an unusual manner;
b)
of cheques selected on the basis of criteria defined by
the institution in accordance with Article 4.
To that end, the supervised institution shall examine the
references appearing on the cheques or on the addenda that
may contain information from which abnormal or unusual
characteristics of the transaction may be detected in the
light of the institution’s knowledge of the payee, the
payee’s economic activity and the usual operation of the
account.
Article 8
Supervised institutions that offer foreign institutions a
cheque cashing or discounting service shall conclude
written agreements to that effect. Foreign institutions with
which such agreements are concluded are deemed to be
clients of the supervised institution for the purposes of the
present Regulation. No cheque cashing or discounting
service may be offered unless such an agreement has been
concluded.
The above-mentioned agreements shall
commitment by the foreign institution:
include
a
a)
before transmitting cheques, to carry out all the
verifications of its customers set forth in the
recommendations of the international consultative and
coordinating body for combating money laundering
and the additional anti-money laundering verifications
that the French institution may ask the foreign
institution to make subsequent to its own controls;
b)
to remit separately cheques that it has itself received
from institutions located in states or territories whose
legislation is known to be inadequate or whose
practices are deemed by the international consultative
and coordinating body for combating money
laundering to hinder the fight against money
laundering, a list of which is attached as an appendix
99
to the present Regulation and updated by order of the
minister for economic affairs;
c)
to provide the French institution upon request with all
information that will enable it to assess whether the
procedures and controls carried out comply with its
contractual commitments.
In the case of agreements concluded with foreign
institutions located on the territory of a member of the
above-mentioned international body, the supervised
institution shall in addition ask its co-contractor to remit
separately cheques received from institutions located in
states or territories not referred to in paragraph b) above
that are not members of the international body. If the
co-contractor is not able to remit such cheques separately,
the supervised institution shall step up the controls set forth
at Article 9 c) below.
Article 9
For cheques received for cashing or discounting from a
foreign institution as set forth at Article 8 above, the
programme set forth at Article 4 shall include at least the
examination for the purposes of preventing money
laundering:
a)
b)
c)
of all cheques received from an institution located in
one of the states or territories referred to at Article 8 b)
and all cheques that have been remitted separately as
set forth therein;
of at least 25% of cheques received from all
institutions located in states or territories not referred
to at Article 8 b) that are not members of the
international consultative and coordinating body for
the fight against money laundering or remitted
separately as set forth at the last paragraph of Article
8. Such percentage shall be reviewed two years at the
latest after the present Regulation takes effect;
of a sample of the other cheques received by the
supervised institution, determined according to its
knowledge of its co-contractors’ activity and the
measures they take to control them.
Such examination shall concern the references on the
cheques or addenda that may contain information from
which it is possible to detect clear material anomalies with
regard to the French rules for using the cheque. Its purpose
is to isolate cheques to be transmitted to the drawee
pursuant to Article 10 and to ensure that the foreign
institution has complied with the obligations set forth at
Article 8.
When the above-mentioned controls detect such anomalies
or failure by the foreign institution to perform its
contractual obligations or an indirect remittance by an
institution referred to at Article 9 a) or b), the supervised
institution shall seek an explanation from its co-contractor
or from other institutions in the collection circuit for the
cheques in question. If the explanation is not satisfactory,
the supervised institution, if it does not terminate the
agreement, shall control all cheques remitted by the cocontractor.
100
Article 10
In addition to the procedures set forth at Articles 7 to 9, a
supervised institution that has received cheques for cashing
or discounting shall transmit the following cheques to the
drawee institution, indicating the characteristics of the
cheque or cheques that have attracted its attention:
a)
cheques where controls carried out pursuant to
Articles 7 to 9 have brought to light clear anomalies;
b)
cheques from other countries, when the controls set
forth at Article 9 have shown that they originate with
an establishment referred to at Article 9 a) or b) and
bear more than two endorsements.
TITLE III
CHEQUES RECEIVED BY THE DRAWEE
INSTITUTION
Article 11
When cheques are presented for payment under the
conditions set forth at Articles 3 or 6 of Regulation 200104 of 29 October 2001 aforesaid, the programme
mentioned at Article 4 shall provide for the supervised
institution to carry out the anti-money laundering
examination of cheques that are forwarded to it in material
form.
To that end the programme shall provide, as regards
cheques drawn on the books of the supervised institution,
for individual examination:
a)
of cheques drawn by customers in respect of whom
the declaration set forth at Article L. 562-2 of the
Monetary and Financial Code has been made or
entering into the framework of a transaction
mentioned at Article L 563 - 3 of the Code;
b)
of cheques for which an examination is deemed
necessary in order to supplement analysis of the
operation of the account when the supervised
institution, while monitoring its customer’s account,
observes, where relevant by computerised means, that
the account is being operated in an unusual manner;
c)
cheques selected on the basis of criteria defined by the
institution, in particular in accordance with
developments in money laundering typologies;
d)
cheques which are not crossed or do not include the
form of words limiting transmission by endorsement
set forth at Article L. 131-71 of the Monetary and
Financial Code;
e)
cheques transmitted pursuant to Article 10 of the
present Regulation;
f)
cheques presented directly for payment by an
institution referred to at Article 9 a) or b).
Where appropriate, the drawee institution shall take the
necessary steps to put back into circulation cheques which
meet the conditions set forth in the preceding paragraph
and have not been transmitted in accordance with the first
paragraph of this Article or to obtain communication of
them.
Selected French Banking and Financial Regulations – 2013
The supervised institution shall examine the references
appearing on the cheques or on the addenda that may
contain information from which abnormal or unusual
characteristics of the transaction may be detected in the
light of the institution’s knowledge of the drawer, the
drawer’s economic activity and the usual operation of the
account.
TITLE IV
SUNDRY AND TRANSITIONAL PROVISIONS
Article 12
The present Regulation shall take effect on 30 June 2002.
However, the cheque processing systems set forth at Article
5 shall be adapted and the agreements set forth at Article 8
shall be proposed by 31 December 2002 at the latest.
Article 13
See Regulation Article 5 of Regulation 92-13 of 23
December 1992.
Article 14
The procedures and controls set forth in this Regulation
shall be implemented by institutions having their
headquarters, a branch or an agency in Monaco with a view
to detecting, in accordance with the recommendations of
the international consultative and coordinating body for the
fight against money laundering and the financing of
terrorism, abnormal or unusual transactions concerning the
territory of the French Republic, without prejudice to
application of the provisions of Monacan law relating to the
prevention of money laundering in the Principality. The
internal control arrangements of such institutions shall
include a system for monitoring the procedures and
controls set forth in this Regulation. The provisions of the
first sentence of the second paragraph of Article 4 do not
apply to them.
Other supervised institutions shall not consider the
institutions referred to in the preceding paragraph to be
foreign institutions within the meaning of Article 8.
Appendix
(As amended by Decrees of 18 July and 20 December
2002,
14 March and 9 July 2003, 15 March 2004,
Orders of 23 September 2004 and 31 May 2005)
Burma
Nauru
ORDER OF 2 SEPTEMBER 2009, IMPLEMENTING
ARTICLE R.561-12 OF THE MONETARY AND
FINANCIAL CODE AND DEFINING THE
INFORMATION RELATING TO KNOWING THE
CUSTOMER AND THE BUSINESS RELATIONSHIP
FOR THE PURPOSES OF ASSESSING THE RISKS
OF MONEY LAUNDERING AND THE FINANCING
OF TERRORISM
Article 1
Pursuant to Article R. 561-12, the items of information that
may be collected during the whole length of the business
relationship for the purpose of assessing the risks of money
laundering and terrorism financing are:
1° As regards the knowledge of the business relationship:
- the amount and nature of the planned transactions;
- the origin of the funds;
- the destination of the funds;
- the economic justification reported by the customer or the
planned functioning of the account.
2° As regards the knowledge of the professional, economic
and financial situation of the client and, where applicable,
the actual recipient:
a) For natural persons:
- a justification of the up-to-date home address at the time
when the elements are collected;
- the professional activities currently performed;
- the income or any piece of information that may be used
for estimating the other resources;
- any piece of information that may be used to estimate
wealth;
- as regards persons referred to in I, II and III of Article R.
561-9, the functions or any element that may be used to
assess the nature of the links between these persons;
b) For legal persons:
- a justification of the head office address;
- the statutes;
- mandates and powers;
- and any evidence to assess the financial position;
c) For the management structures of a special purpose fund
without legal personality, a trust or a similar legal entity
governed by foreign law, a document shall be provided
showing the entitlements to the capital or income of the
entity in whose name an account has been opened or a
transaction has been requested.
Article 2
The Head of the Treasury and Economic Policy is
responsible for implementing this Order, which shall be
published in the Journal officiel of the French Republic.
Nigeria
Selected French Banking and Financial Regulations – 2013
101
ORDER OF 27 JULY 2011, RELATING TO THE
LIST OF EQUIVALENT THIRD COUNTRIES WITH
RESPECT TO COMBATING MONEY
LAUNDERING AND THE FINANCING OF
TERRORISM REFERRED TO IN 2°, SECTION II OF
ARTICLE L. 561-9 OF THE MONETARY AND
FINANCIAL CODE
Article 1
The equivalent third countries mentioned under 2° of II of
Article L. 561-9 are South Africa, Australia, Brazil,
Canada, South Korea, the United States, Russia, Hong
Kong, India, Japan, Mexico, Singapore and Switzerland.
Article 2
In their systems for assessing and managing risks of money
laundering and terrorism financing referred to in Article L.
561-32 of the Monetary and Financial Code, the persons
mentioned in Article L. 561-2 of the same code are
required to take account of the information and declarations
issued by the international consultative and coordinating
authority with regard to the fight against money laundering
and the financing of terrorism, of which France is a
member or by the Minister for the Economy, which may
refute the presumption of equivalence set out in Article 1 of
this Order.
Article 3
The Order of 21 July 2006 regarding the list of equivalent
third countries referred to in Article R. 563-1 of the
Monetary and Financial Code is abrogated.
Article 4
The Head of the Treasury is charged with implementing
this Order, which shall be published in the Journal officiel
of the French Republic.
1.2.4.NEGOTIABLE DEBT SECURITIES
ORDER OF 13 FEBRUARY 1992, IMPLEMENTING
AMENDED DECREE N° 92–137 OF 13 FEBRUARY
1992 AND DEFINING THE MANDATORY
REFERENCES FOR FINANCIAL
DOCUMENTATION COMPILED BY ISSUERS OF
NEGOTIABLE DEBT SECURITIES
as amended by the Order of 19 October 2004
Article 1
The presentation of the issuance programme referred to in
1° of II of Article 8 of amended Decree of
13 February 1992 aforesaid shall include the following:
- the ceiling on the outstanding amounts for the year
expressed in euro and, where necessary, identification of
the currencies in which the issues shall be denominated;
- features of the issues that the issuer intends to put out,
specifying, inter alia, time slots and coupons;
- planned placement methods and, where necessary,
identification of the intermediaries that shall be charged
with placing the securities; in the case of issuance
programmes for negotiable medium-term notes, the issuer
shall supply the name of at least one institution established
in France charged with providing the Banque de France
with information on developments on the securities market;
102
- the domiciling institution(s) selected;
- in the case of issuers that have published the ratings
assigned to their issuance programmes by specialised
agency included on the list referred to in Article 6 of
amended Decree of 13 February 1992 aforesaid, the ratings
report on the issuance programme obtained from this
agency;
- where necessary, the identity and status of the company
that has underwritten the issuance programme as well as a
certified copy of the guarantee;
- a brief presentation of the issuance programmes of issuers
that issue equivalent securities abroad, indicating the
markets on which these securities are traded.
Article 2
The information sheet referred to in 2° of II of Article 8 of
amended Decree of 13 February 1992 aforesaid shall
include the following:
1o General information on the issuer :
- name of the issuing entity, head office and main
administrative head office if it is different from the head
office;
- date of the setting-up of the entity;
- summary of the corporate objectives;
- trade register (or the equivalent) and registration number
on this register;
- legal status, legislation applicable to the issuer and
competent courts;
- Accounting standards used to establish consolidated
accounting data;
- management structure: names of the main managers and
management organisation chart, if this information is not
provided in the documents relating to the last two financial
years provided to the shareholders listed in the financial
presentation report.
2o General information on the issuer’s capital:
- amount of the subscribed capital, quantity, types and main
features of securities in this capital;
- portion of unpaid-up capital;
- distribution of capital indicating shareholders that hold at
least 5% of capital;
- indication, where necessary, of regulated markets on
which the issuer’s equity securities are traded.
3° Information on the issuer’s activity.
If it does not figure explicitly in the documents relating to
the last two financial years referred to in 2° of II of Article
8 of the amended Decree of 13 February 1992 aforesaid,
the following information shall be provided:
I.– For industrial or commercial issuers:
- description of the issuer’s main activities, specifying the
main categories of products and/or services provided;
- amount of turnover made in the last two financial years,
by business line and geographical market.
II.– For credit and other financial institutions:
- identification of the main business lines, distinguishing
between loan transactions (credits to customers and
financial loans), cash transactions (lending and borrowing),
market transactions (spot, forward) and provision of
services, with a comparison of data for the last two
financial years for which data is known.
Selected French Banking and Financial Regulations – 2013
The fairness of the accounting information provided in the
information sheet shall be vouched for by statutory auditors
or any other persons acting in this capacity.
Article 3 – repealed by Article 4 of the Order of 19
October 2004
Article 4 – repealed by Article 4 of the Order of 19
October 2004
Article 5
The public sector firms referred to in Article 2 of amended
Decree of 13 February 1992 aforesaid that are not subject
to the plan comptable general (the French chart of
accounts), EU institutions and the international
organisations referred to in 4° of Article L. 213-3 of the
Monetary and Financial Code, local authorities and local
authority groupings, associations governed by the act of 1
July 1901, central governments, special purpose vehicles,
referred to in 6°, 7°, 8° and 9° of Article L. 213-3 of the
same code, may, with the consent of the Banque de France,
adapt the presentation of the documentation referred to in
2° of the second paragraph of Article 8 of the amended
Decree of 13 February 1992 aforesaid and Article 2 of the
present Order in accordance with the specific rules that
apply to them.
Article 6
Where the issuer can provide specific proof that the
information requested in a particular section is not adapted
to its specific situation, it may adjust the contents of the
report, with the consent of the Banque de France and
subject to the provision of said detailed proof.
Article 7
The Banque de France shall define the format of the
financial presentation report that it receives in order to
ensure dissemination pursuant to the provisions set out in
Article 14 of the amended Decree of 13 February 1992
aforesaid. The Banque de France shall define, in
accordance with the issuer’s activity, the scope of the
financial presentation reports that are disseminated.
ORDER OF 31 DECEMBER 1998, RELATING TO
THE REQUIREMENTS THAT ISSUERS OF
NEGOTIABLE DEBT SECURITIES MUST COMPLY
WITH REFERRED TO IN 2° TO 10° OF ARTICLE L.
213-3 OF THE MONETARY AND FINANCIAL
CODE
as amended by the Orders of 3 September 2001,
16 February 2005, 22 December 2006 and 15 February
2011
Article 1
I. - Commercial paper issued by entities referred to in 2° to
10° of Article L. 213-3 of the Monetary and Financial Code
shall have, an original maturity of at least one day and a
unit value amounting to at least the equivalent of EUR
150,000. Their original maturity shall not exceed one year.
II. - Negotiable medium-term notes issued by entities
referred to in points 2°, 3°, 4°, 5°, 6°, 7°, 8° and 9° of
Article L. 213-3 of the Monetary and Financial Code shall
have, an original maturity of over one year and a unit value
amounting to at least the equivalent of EUR 150,000.
Selected French Banking and Financial Regulations – 2013
Article 2
Negotiable debt securities issued by entities referred to in
2°, 3°, 4°, 6°, 7° and 9° of Article L. 213-3 of the Monetary
and Financial Code may be guaranteed by a credit
institution authorised by its statutes to provide such
guarantees.
They may also be guaranteed by an investment firm or
entity referred to in points 2°, 3° or 4° of Article L. 213-3
of the Monetary and Financial Code, which is itself
authorised to issue commercial paper, where this firm
holds, directly or indirectly, at least 20% of the equity
capital of the issuer, or where the issuer holds, directly or
indirectly, up to 20% of the capital of the investment firm.
Article 3
Issuers of negotiable debt securities referred to in 2°, 3°, 4°,
6°, 7°, 8°, 9° and 10° of Article L. 213-3 of the Monetary
and Financial Code shall domicile their securities, under
the terms and conditions defined in the General
Regulations of the Autorité des marchés financiers, with:
a) A credit institution authorised in France;
b) A branch referred to in Article L. 511-22 of the
Monetary and Financial Code;
c) An investment firm authorised in France and licensed to
hold cash accounts;
d) A branch referred to in Article L. 532-18 of the
Monetary and Financial Code and licensed to hold cash
accounts;
e) the Caisse des Dépôts et Consignations;
f) a legal entity established in France whose main or sole
activity is the custody or management of the financial
instruments referred to in 5° of Article 542-1 of the
Monetary and Financial Code.
Domiciling institutions shall agree to domicile securities
only after having verified that the issuer has fulfilled the
issuance conditions laid down in Articles L. 213-1 to L
213-4 of the Monetary and Financial Code and the texts
implementing these articles.
Article 4
Issuers of negotiable debt securities referred to in 2° to 10°
of Article L. 213-3 of the Monetary and Financial Code
shall inform the Banque de France of the features of each
issue and provide it with information on the daily
outstanding amounts of securities issued, as well as on the
outstanding amount, for each issuing programme, of the
securities purchased and held after their issue and on the
early redemption of their securities. The Banque de France
shall determine the frequency of disclosure of this
information.
Issuers shall comply with the requirements set out in the
preceding paragraph through their domiciling agents.
Article 5 – repealed (Order of 15 February 2011)
103
Article 6
The Banque de France shall take the measures required for
the application of the present Order in order to ensure the
smooth functioning of the market.
In accordance with Article D. 213-2 of the Monetary and
Financial Code, the Banque de France may suspend or
prohibit issuance by issuers that fail to comply with the
laws and regulations governing negotiable debt securities.
Article 7
The present Order shall be published in the Journal officiel
of the French Republic.
ORDER OF 16 FEBRUARY 2005 IMPLEMENTING
ARTICLE 1, SECTION III OF DECREE 92-137 OF 13
FEBRUARY 1992 AS AMENDED ON THE TERMS
AND CONDITIONS FOR THE ISSUANCE OF
NEGOTIABLE DEBT SECURITIES BY
INVESTMENT FIRMS, CREDIT INSTITUTIONS
AND THE CAISSE DES DÉPÔTS ET
Article 5
Negotiable medium-term notes issued by entities referred
to in Article 1 of this Order shall have an original maturity
of over one year and a unit value at least equal to the
equivalent of 150,000 euro.
Article 6
Issuers of negotiable medium-term notes referred to in
Article 1 of this Order shall inform the Banque de France
of the name of the credit institution(s) established in France
that they have designated to report to the Bank, under terms
and conditions defined by the Bank, on developments on
the market for their securities.
Article 7
Issuers of negotiable debt securities referred to in Article 1
of this Order shall domicile their securities, under the terms
and conditions defined in the General Regulations of the
Autorité des Marchés Financiers, with:
CONSIGNATIONS
a)
b)
as amended by the Order of 15 February 2011
c)
Article 1
In addition to the Caisse des Dépôts et Consignations,
credit institutions and investment firms that fulfil the
following conditions shall be authorised to issue negotiable
debt securities under the conditions set forth in this Order:
d)
a)
b)
c)
d)
they are not prevented from doing so by the laws and
regulations that apply to them;
their capital is at least equal to the equivalent of 2.2
million euro or, for home loan companies governed by
the Act of 10 April 1908 codified by Article L. 312-2
of the Construction and Housing Code, their own
funds within the meaning of Regulation 90-02
aforesaid are at least equal to 4.5 million euro;
they are authorised and supervised by a competent
authority;
their accounts are certified by professionals deemed
competent and independent.
Article 2
Certificates of deposit issued by credit institutions and by
the Caisse des Dépôts et Consignations and commercial
paper issued by investment firms shall have an original
maturity of at least one day and a unit value equal to the
equivalent of 150,000 euro. Their original maturity shall
not exceed one year.
Article 4
Negotiable debt securities issued by entities referred to in
Article 1 of this Order may be guaranteed by a credit
institution authorised by its status to deliver such
guarantees.
They may also be guaranteed by an investment firm which
is itself authorised to issue commercial paper when such
firm directly or indirectly holds at least 20% of the issuer’s
capital or when the issuer directly or indirectly holds at
least 20% of its capital.
104
e)
f)
a credit institution authorised in France,
a branch referred to in Article L. 511-22 of the
Monetary and Financial Code,
an investment firm authorised in France and
licensed to hold cash accounts,
a branch referred to in Article L. 532-18 of the
Monetary and Financial Code and licensed to hold
cash accounts,
the Caisse des Dépôts et Consignations,
a legal entity established in France whose main or
sole activity is the custody or management of the
financial instruments referred to in point 5 of
Article L. 542-1 of the Monetary and Financial
Code.
Domiciling institutions may agree to domicile securities
only after having verified that the issuer has fulfilled the
conditions of issuance set forth in Articles L. 213-1 to L.
213-4 of the Monetary and Financial Code and their
implementing regulations.
Article 8
Issuers of negotiable debt securities referred to in Article 1
of this Order shall inform the Banque de France of the
features of each issue and provide it with information on
the daily outstanding amounts of securities issued as well
as on the outstanding amount, for each issuing programme,
of the securities purchased and held after their issue and on
the early redemption of their securities, the Banque de
France shall determine the frequency with which such
information should be provided.
Issuers shall comply with the requirement set forth in the
preceding paragraph through their domiciling agents.
Article 9
The Banque de France shall take the necessary measures to
implement this Order with a view to ensuring the smooth
operation of the market.
In accordance with Article 4 of the Decree of 13 February
1992 aforesaid, the Banque de France may suspend or
prohibit issues by any issuer that fails to comply with the
laws and regulations governing negotiable debt securities.
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Article 10
Regulation 98-08 as amended is hereby repealed.
Consequently, all references to Regulation 98-08 in the
laws and regulations shall be replaced by references to this
Order:
- in the third indent of Article 4 of Regulation 86-13 of 14
May 1986 as amended on the remuneration of funds
received by credit institutions,
- in Article 5.1 c) of Regulation 88-01 of 22 February 1988
as amended on liquidity,
- in the twenty-second indent of Article 5, paragraph 2 of
Regulation 92-13 of 23 December 1992 on the provision of
banking services in France by institutions that have their
registered offices in other Member States of the European
Union.
Article 11
This Order shall be published in the Official Journal of the
French Republic.
1.2.5.CLEARING OF CHEQUES
REGULATION 2001-04 OF 29 OCTOBER 2001,
RELATING TO CHEQUE CLEARING
as amended by Order of 29 October 2009
Article 4
4.1 Cheques in electronic form are presented for payment
by a supervised institution. This presupposes that the
supervised institution is previously in possession of the
cheque and that the beneficiary’s or bearer’s supervised
institution has carried out verifications to ensure that the
cheque complies with formal requirements.
The supervised institution that presents a cheque guarantees
that the information transmitted in electronic form is
strictly identical to the corresponding information
appearing on the cheque. In the event of failure to comply
with these provisions, the obligation set forth at Article 2,
paragraph 3 does not apply.
4.2 Presentation of a cheque for payment in electronic form
presupposes that the drawee institution has been provided,
in whatever form, with information enabling the drawer,
the cheque and the amount to be identified with certainty.
4.3 Presentation of a cheque for payment in electronic form
does not preclude remittance of the original cheque to the
drawee institution, concomitantly or not. The time it takes
to transmit the cheque must not under any circumstances
influence the decision whether to pay or not, or preclude
compliance with statutory and regulatory obligations.
4.4 The administrative expense of transmitting the cheque
or a copy thereof to the drawee may be reimbursed. The
conditions for calculating and reimbursing the expense, on
the basis of real costs, are set out in an industry-wide
agreement.
Article 1
This regulation applies to credit institutions as defined in
Article L. 511-1 of the Monetary and Financial Code and to
the investment service providers as defined in Article
L. 531-1 of the above-mentioned Code enjoying acquired
rights granted when Act 96-597 of 2 July 1996 (Financial
Activity Modernization Act) came into effect, as well as to
payment institutions as defined in Article L 522-1 of said
Code where they provide for the cashing of cheques. They
are referred to hereinafter as supervised institutions.
Article 5
Exchanged cheques are kept under the responsibility of a
supervised institution.
Article 2
Any supervised institution on which cheques are drawn is
required to participate, directly or through an agent, in
cheque clearing operations in the framework of an
interbank settlement system within the meaning of
Article L. 330-1 of the Monetary and Financial Code.
Article 6
The provisions of Articles 4 and 5 apply even when a
cheque in electronic form is presented outside an interbank
settlement system as referred to at Article 2, in particular
when the drawee institution is also the institution
presenting the cheque.
The terms and conditions for clearing cheques through the
system are set out in a master agreement, in accordance
with the above-mentioned article.
Article 7
The above-mentioned industry-wide agreement shall set
out the procedures for presenting cheques for payment in
electronic form, together with specifications and
recommendations for keeping cheques on behalf of drawee
institutions.
Supervised institutions are required to accept that any
cheque drawn on them may be presented to them for
payment within the above-mentioned system.
Article 3
Cheques presented within the system referred to in the
preceding Article may be exchanged in electronic form,
provided that the supervised institutions are capable of
making all the verifications necessary for their payment or
refusal.
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They should be kept for 10 years.
During this period, the supervised institution responsible
for them is required to produce the original of the cheque or
a recto-verso copy under the conditions set forth in the
above-mentioned industry-wide agreement.
Article 8
The general decision of the Conseil National du Crédit
79-05 of 24 April 1979 relating to cheque clearing is
abrogated from 30 June 2002.
A new indent is added to the penultimate paragraph of
Article 5 of Regulation 92-13 of 23 December 1992 as
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amended relating to the provision of banking services in
France by institutions having their registered office in other
Member States of the European Union, reading as follows:
"- Regulation 2001-04 relating to cheque clearing".
Article 3
The annual total of revenues derived from operations
authorised pursuant to the foregoing Article shall not
exceed 10 per cent of net banking income.
The reference to the above-mentioned Decision 79-05 in
the same Article is deleted at the date on which the decision
is abrogated.
These revenues shall be recorded in the accounts under
specially denominated headings, in accordance with the
conditions laid down above by an Instruction of the
Autorité de contrôle prudentiel.
Article 9
This Regulation, which does not apply in the overseas
territories, shall take effect immediately.
1.2.6.NON BANKING ACTIVITIES OF CREDIT
INSTITUTIONS
REGULATION 86–21 OF 24 NOVEMBER 1986,
RELATING TO THE EXERCISE OF NON BANKING
ACTIVITIES
as amended by Regulation 2000-03 of 6 September 2000
Article 1
Credit institutions may, under the conditions laid down
herein, conduct as part of their regular business other than
banking operations as defined in Articles L. 311-1,
L. 311-3, L. 312-2 and L. 313-1 of the Monetary and
Financial Code operations related to their normal
operations as referred to in Article L. 311-2 of the same
Code, or the acquisition of equity holdings in undertakings,
under the conditions laid down in Article L. 511-2 of said
Code and as provided for in the aforementioned Regulation
85-16.
Article 2
A credit institution may act as representative, broker or
agent, notably on behalf of a subsidiary.
It may also:
– manage a real estate portfolio unrelated to its normal
operations but owned by it;
– provide services constituting accessory uses of
resources primarily utilised in its banking operations;
– provide services to its customers which, while
unrelated to its business, represent an extension of its
banking operations.
These operations must not, however, be incompatible with
the standards of the banking profession, in particular the
upholding of the reputation of the institution, and the
protection of the interests of depositors.
Institutions that engage in such operations shall, moreover,
comply with the laws, regulations and articles of
associations relating to them specifically and with the
conditions on which their authorisation was granted. They
shall also, where applicable, comply with the particular
regulations governing the goods or services supplied by
them.
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Compliance with the ratio provided for supra may by
assessed on the basis of consolidated accounting statements
drawn up according to the rules laid down in
Regulation 2000-03 of 6 September 2000.
Article 4
The terms of the present Regulation are not applicable to
housing loan companies engaged in real estate development
activities pursuant to Section L. 422-4 of the Construction
and Housing Code.
Article 5
Deleted by Regulation 2000-03 of 6 September 2000.
Article 6
Institutions subject to the present Regulation which, on the
date of publication thereof, are engaged in an activity other
than those laid down in Articles L. 311-1, L 311-2, 311-3,
L 312-2, L 313-1 and L. 511-2 of the Monetary and
Financial Code, shall have until 31 December 1988 to
comply with the present Regulation.
1.2.7.CREDIT OPERATIONS AND ACTIVITIES
OTHER THAN INVESTMENT SERVICES OF
INVESTMENT FIRMS
REGULATION 98–05 OF 7 DECEMBER 1998,
RELATING TO THE CREDIT OPERATIONS OF
INVESTMENT FIRMS
as amended by Regulation 2000-10 of 8 December 2000
Article 1
Without prejudice to the provisions of Article 1 of amended
Regulation 85-17 of 17 December 1985 aforesaid,
investment firm referred to in Article L. 532-1 of the
Monetary and Financial Code, hereinafter referred to as
“firms subject to this Regulation”, may carry out credit
operations only under the conditions set forth in this
Regulation, in accordance with Article L. 321-2 of said
Code.
Article 2
Firms subject to this Regulation that hold neither funds nor
securities belonging to their customers are not authorised to
carry out credit operations.
Article 3
Firms subject to this Regulation must have paid-up capital
as defined in Article 4 of Regulation 96-15 aforesaid at
least equal to FRF 12.5 million (€ 1.9 million, as from
1 January 2002, Regulation 2000-10 of 8 December 2000).
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Article 4
A firm subject to this Regulation may grant credit only to
an investor with whom it has direct business relations and
for the sole purpose of enabling the investor to carry out a
transaction concerning financial instruments in which the
firm is involved.
The credit referred to in the preceding paragraph includes
all credit operations defined in Article L. 313-1, first indent
of the Monetary and Financial Code.
Article 5
Firms subject to this Regulation may grant or renew credits
only with the express agreement of the parties and for a
fixed period.
However, the parties’ agreement may be established in a
line of credit agreement concluded for a fixed amount and
for a period not exceeding one year. Such agreements may
not be renewed tacitly. Each drawdown of such line of
credit must be allocated to the settlement of an identified
transaction and reimbursed within 15 days unless the
parties expressly agree otherwise.
The amount of any credit granted by a firm subject to this
Regulation to the same beneficiary shall, where relevant, be
applied to the line of credit referred to in the preceding
paragraph.
Payment extensions granted to investors to allow them to
defer settlement of a debt arising from a transaction
involving financial instruments may not under any
circumstances exceed 30 days from the due date for
payment of such transaction.
Article 6
Firms subject to this Regulation shall be free to determine
the conditions under which credits granted under the terms
of this Regulation bear interest.
Article 7
An Article 5b shall be inserted after Article 5 of
Regulation 86-09 of 27 February 1986 aforesaid, worded as
follows:
“Article 5b: For the purposes of this Regulation, investment
service providers authorised to grant credits pursuant to
Regulation 98-05 of 7 December 1998 shall be treated in
the same way as credit institutions.”
ORDER OF 5 SEPTEMBER 2007
RELATIVE TO ACTIVITIES OTHER
THAN INVESTMENT SERVICES AND
RELATED SERVICES
THAT MAY BE CARRIED OUT BY
INVESTMENT COMPANIES OTHER
THAN
PORTFOLIO MANAGEMENT
COMPANIES
Article 1
Investment companies other than portfolio management
companies may, under the conditions laid down in the
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present Order, exercise business activities other than the
investment services mentioned in article L. 321-1 and the
related services mentioned in article L. 321-2 of the
Monetary and Financial Code.
Article 2
An investment company may act as a representative, broker
or agent, notably on the behalf of a subsidiary.
Article 3
Investment companies may provide services that constitute
the supplementary use of means mainly allocated to the
investment services activity, including the provision of IT
services or the sale of software developed by the company.
They may also provide services that, without being related
services as defined by article L. 321-2 of the Monetary and
Financial Code, constitute the extension of investment
services, notably asset management consultancy or safetydeposit box rental.
Article 4
The annual amount of total profits from activities other
than investment services and related services shall not
exceed 20% of net banking income.
These profits shall be included in the specific items under
the conditions detailed in a Autorité de contrôle prudentiel
Instruction.
Compliance with this ratio may be evaluated on the basis of
consolidated documents drawn up according to the rules
established by the above-mentioned regulation of 6
September 2000.
Article 5
Activities other than investment services and related
services shall not be incompatible with the profession’s
requirements, notably upholding the investment company’s
reputation, the primacy of the clients’ interests and
competition in the market under consideration.
Moreover, the investment company that exercises such
activities shall comply with specific regulations, applicable,
where relevant, to the goods or services offered.
Article 6
The control system for operations and internal procedures
defined in Article 5 of aforesaid Regulation 97-02 shall include
verification of the requirements set forth in this Order.
The internal control procedures of undertakings subject to
this Order must enable them to ensure that the provisions of
this Order are complied with at all times.
Article 7
The present Order comes into force on 1 November 2007.
Article 8
Investment companies that, on the date the present Order
comes into force, exercise activities other than those
mentioned in Articles 2 and 3 shall comply with the
provisions of the present Order by 31 December 2008 at
the latest.
107
Article 9
The present Order shall be published in the Official Journal
of the French Republic.
1.2.8. SEGREGATION OF FUNDS OF
INVESTMENT FIRMS’ CUSTOMERS
ORDER OF 2 JULY 2007 ON THE SEGREGATION
OF FUNDS OF INVESTMENT FIRMS’ CUSTOMERS
TITLE I
SCOPE OF APPLICATION AND DEFINITIONS
Article 1
This Order applies to the investment firms mentioned in
Article L. 531-4 of the Monetary and Financial Code other
than the portfolio management companies mentioned in
Article L. 532-9 of the said Code, that are authorised to
hold funds for their customers incidentally to their principal
activity.
The bank branches mentioned in Article L.532-18-1 of the
Monetary and Financial Code are subject to the provisions
of Title IV.
The present Order does not apply to deposits held by credit
institutions.
iii) it must provide liquidity through same say or next day
settlement.
A money market instrument shall be considered to be of
high quality if it has been awarded the highest credit rating
by all competent rating agencies that have rated the
instrument. An instrument that has not been rated by a
competent agency shall not be considered to be of high
quality.
A rating agency shall be considered to be competent if it
regularly publishes on a professional basis credit ratings in
respect of money market funds and is an external credit
assessment institution as defined in Article L.511-44 of the
Monetary and Financial Code;
(d) “durable medium”: an instrument which enables a client
to store information addressed personally to that client in
such a way that it is easily accessible for future reference
for a period of time suited to the purpose of the information
and that enables the information stored to be identically
reproduced. The durable medium may be in a form other
than paper provided that:
i) the provision of information in this medium is suited to
the context in which the undertaking subject to this Order
and its client conduct or will conduct their business;
ii) the person to whom the information is to be provided,
when offered the choice between information on paper or
this other durable medium, formally opts for the provision
of information in this other medium.
TITLE II
Article 2
For the purpose of this Order, the following terms have
been defined:
– “professional customer”: a professional customer as
defined by Articles L. 533-16 and D.533-11 of the
Monetary and Financial Code;
– “non-professional customer”: a customer other than a
professional customer;
SEGREGATION RULE
Article 3
Undertakings subject to this Order shall deposit all of the
funds of their clients on one or more accounts opened
specially for this purpose, separately identified from any
other account used to hold funds belonging to the
undertaking subject to this Order, with one or more of the
following institutions:
– “qualifying money market fund”: a collective investment
undertaking as defined in Article L.214-1 of the Monetary
and Financial Code, or subject to supervision, and, if
applicable, authorised by an authority under the national
law of a Member State of the European Community or
another Member State of the European Economic Area, and
that meets the following conditions:
a central bank;
i) its primary investment objective must be to maintain the
net asset value of the undertaking either constant at par (net
of earnings) or at the value of the investors’ initial capital
plus earnings;
a qualifying money market fund.
ii) to achieve its primary investment objective, it must
invest exclusively in high-quality money market
instruments with a maturity or residual maturity of no more
than 397 days, or for which regular yield adjustments in
accordance with the annual maturity are made, and for
which the average weighted maturity is 60 days. It may
also achieve this objective by additionally investing in
deposits with credit institutions;
108
a credit institution authorised in a Member State of the
European Community or another Member State of the
European Economic Area;
a bank authorised in a third country;
Undertakings subject to this Order should at any moment
be able to produce a justification of their compliance with
this obligation.
Article 4
I – The amount of funds to be segregated within the
meaning of this Title shall be calculated by adding together
the following items:
- the credit balance of customers’ cash accounts;
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- sums deposited with the undertaking subject to this Order
by customers, in any form whatsoever, in order to cover
and guarantee transactions related to the provision of
investment services and all other sums used to carry out
these transactions or resulting from these transactions;
- among all accounts tracking current transactions linked to
the accounts or sums referred to in the preceding
paragraphs, sums due to customers but not yet credited to
their accounts and, for transactions where delivery versus
payment is pending, sums awaiting disbursement by the
undertaking subject to this Order that have been debited
from customer accounts.
II – The following sums shall be deducted from that
amount: sums credited to customer accounts or to accounts
tracking their current transactions and transactions awaiting
collection by the undertaking subject to this Order.
Article 5
Sums thus deposited into one or more of these accounts are
recorded in the books of the entities referred to in Article 3
in the name of the undertaking subject to this Order. When
these sums are deposited with a credit institution authorised
by a Member State of the European Community or another
Member State of the European Economic Area or a bank
authorised in a third country, they may be paid into sight or
time accounts. The account name shall mention the
appropriation of the sums deposited in compliance with the
provisions of this Order.
Undertakings subject to this Order must regularly reconcile
their accounts and internal registers with those of third
parties with whom these assets are held.
Article 6
In the event that the funds of its clients are not deposited
with a central bank, the undertaking subject to this Order
must exercise extreme care, diligence and competence
when selecting, appointing and conducting a periodical
assessment of the credit institution, authorised bank in a
third country or money market fund where these funds are
deposited and of the provisions governing the holding of
these funds.
The undertakings subject to this Order must take into
account the expertise and the reputation of these
institutions and money market funds on the market, as well
as any legal or regulatory requirement or market practice
linked to the holding of clients’ funds, which might have an
adverse impact on clients’ rights.
Clients have the right to be opposed to their funds being
invested in a qualifying money market fund.
TITLE III
INTERNAL CONTROL AND ENFORCEMENT
Article 7
The undertakings subject to this Order shall make sure that
their auditors report at least once a year to the Autorité de
contrôle prudentiel on the compliance of the measures
taken with the present Order.
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Article 8
If, pursuant to a foreign regulation similar to the one set
forth in this Order, certain funds held for customers must
be segregated specifically, verification of the requirements
of this Order shall be extended to include verification of
such specific provisions.
Article 9
The Autorité de contrôle prudentiel may object to the
inclusion of certain assets or the exclusion of certain
liabilities when implementing the provisions of this Order
if it considers that such assets or liabilities do not
satisfactorily meet the conditions contained in the
regulations or that their inclusion or exclusion is liable to
distort assessment of the effective capacity to repay
customers’ funds.
Article 10
The Autorité de contrôle prudentiel may, under exceptional
circumstances, allow an undertaking subject to this Order
time to bring its situation into compliance with the
provisions of this Order.
TITLE IV
INFORMATION OF EXISTING OR POTENTIAL
CLIENTS
Article 11
I. – Undertakings subject to this Order are required to
communicate to their non-professional clients or potential
clients the following information on the maintenance of
funds:
a)
– when funds are invested in a qualifying money market
fund, the possibility of them being held by a third party in
the name of the undertaking subject to this Order as well as
the responsibility carried by the latter, according to the
national law of the country under consideration, for any
action or omission of the third party, or its possible
insolvency and its consequences for the client;
– in the other cases, the holding of these funds by a third
party in the name of the undertaking subject to this Order
as well as the responsibility carried by the latter, according
to the national law of the country under consideration, for
any action or omission of the third party, or its possible
insolvency and its consequences for the client;
b) The cases in which the accounts mentioned in Article 3
are or will be governed by a law other than the national law
of a Member State of the European Community or another
Member State of the European Economic Area, by
specifying to what extent the rights of the client are
affected;
c) The existence or conditions of any security interest or
lien that the undertaking subject to this Order has or could
have over the funds of the client, or of any right of set-off it
holds in relation to these funds. If necessary, the
undertakings subject to this Order shall inform the client
that a depository may have a security interest or lien, or a
right of set-off in relation to these funds.
109
II. – The undertakings subject to this Order are also
required to communicate to their professional clients or
potential clients the information under b) and c) of I.
Article 12
The undertakings subject to this Order as defined in Article
1 shall provide the clients for whom they hold funds with a
statement of these funds at least once a year on a durable
medium, unless the same information is available in
another periodical information notice, notably the statement
of financial instruments set out in the general regulations of
the Autorité des marchés financiers.
The statement of the client’s funds referred to in the first
indent should contain the following information:
Details on all the funds held by the undertaking subject to
this Order for the client at the end of the period covered by
the statement ;
The extent to which any temporary sales of securities have
been carried out;
The quantification of any advantage falling to the client
that results from his participation in any temporary sales of
securities, and the grounds on which this advantage falls to
him.
TITLE V
FINAL PROVISIONS
Article 13
The present Order enters into force on 1 November 2007.
The Order of 17 June 2005 on the segregation of the funds
of customers of investment firms is abrogated on the same
date.
Article 14
The present Order will be published in the Official Journal
of the French Republic.
1.2.9. INTERBANK MARKET
REGULATION N° 85-17 OF 17 DECEMBER 1985,
RELATING TO THE INTERBANK MARKET
as amended by regulations 93-06 of 21 December 1993
and 97-05 of 29 July 1997
Article 1
An interbank transaction is an operation in which each
concerned party is a credit institution, or an institution
described in Article L. 518-1 of the French Monetary and
Financial Code, or an investment company other than a
portfolio management company.
Article 2
Persons authorised to participate in the interbank market
may initiate or be a party to operations, in compliance with
the specifically applicable rules, with any other person
involving the financial instruments defined in Article
L.211-1 of the French Monetary and Financial Code, on a
French or a foreign market.
Only the credit institutions and establishments described in
Article L.518-1 of the French Monetary and Financial
Code are authorised to acquire or accept as collateral in a
repurchase agreement all other forms of debt instruments.
Without prejudice to transactions referred to in article 1 of
Regulation n°93-06, such institutions and establishments
cannot dispose of or give the aforementioned debt
securities as collateral in a reverse repo to unauthorised
persons.
Article 3
As an exception to Articles 1 and 2 above, the following
persons or entities may also participate in the interbank
market:
- Provident institutions and pension funds until a certain
date that will be determined by a future regulation; [at the
latest 31 August 1987. cf. Regulation no.86-18, Article 1]
- Entities subject to the French Insurance Code until 31
December 1986 ;
- The other persons referred to in Article 2 of the abovementioned General Decision n° 67-10 until 31 May 1986.
Article 4
Banque de France may take any action necessary in order
to ensure the control of monetary aggregates and guarantee
the normal functioning of markets.
Article 5
The general decisions of the National Credit and Securities
Council (Conseil national du crédit et du titre) n° 67-10 of
28 June 1967, n° 67-14 of 7 December 1967 and n° 68-04
of 5 July 1968 are rescinded.
110
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1.3.MANAGEMENT STANDARDS FOR
CREDIT INSTITUTIONS AND
INVESTMENT FIRMS
1.3.1.OWN FUNDS
REGULATION 90-02 OF 23 FEBRUARY 1990,
RELATING TO OWN FUNDS
as amended by Regulations 91-05 of
15 February 1991, 92-02 of 27 January 1992,
93-07 of 21 December 1993, 94-03 of
8 December 1994 , 98-03 of 7 December 1998,
2000-03 of 6 September 2000,
2000-09 of 8 December 2000
and the Orders of 24 May 2005,
19 September 2005, 3 March 2006,
20 February 2007, 11 September 2008,
29 October 2009,
25 August 2010, 29 December 2010 and
23 November 2011
The IFRS referred to in the present Regulation correspond
to International Accounting Standards and International
Financial Reporting Standards (IAS/IFRS) and SIC/IFRIC
Interpretations, in their most recent version adopted by the
European Commission pursuant to Regulation (EC) No.
1606/2002.
Credit institutions and investment firms other than portfolio
management companies shall at all times have own funds at
least equal to the minimum capital resulting from the
Regulations applicable to them.
Article 2
Core own funds shall comprise the sum of the items listed
in a), less the items listed in b).
a) The following items shall be included:
Article 1
Own funds shall comprise the sum of:
−
−
−
−
−
−
−
−
for institutions subject to this Regulation other than
those subject to IFRS, provisions for general banking
risks as defined in Article 3;
−
for supervised institutions originating securitisation
transactions, net gains which arise from the
capitalisation of future income resulting from the
securitised assets and which constitute the credit
enhancement to securitisation positions shall not be
included.
Core own funds as defined in Articles 2 and 2a;
Supplementary own funds as defined in Article 4,
within the limits laid down in Article 5,
from which shall be deducted in the conditions defined in
this Regulation the equity holdings, subordinated claims
and all other own funds items referred to in Article 6, the
securitisation positions referred to in Article 6b and the
items referred to in Article 6c.
Where the calculation of own funds has to be made on a
consolidated basis, the rules laid down in Article 7 shall
apply.
This Regulation shall apply to credit institutions, financial
holding companies, payment institutions and investment
firms, excluding portfolio management companies and
investment firms which have neither funds nor securities
belonging to their customers and which only provide the
investment service referred to in Article L. 321-1-1 of the
Monetary and Financial Code, hereinafter called supervised
institutions.
Supervised institutions subject to IFRS are those that are
subject to prudential supervision on a consolidated or subconsolidated basis pursuant to Regulation 2000-03 of 6
September 2000 and publish consolidated financial
statements according to international accounting standards
within the meaning of Regulation (EC) No. 1606/2002 as a
result of the mandatory or optional application of this
Regulation.
Supervised institutions subject to IFRS also include
institutions subject to prudential supervision on a subconsolidated basis in the absence of any mandatory
accounting rule on the matter if the consolidated financial
statements of their parent company are published under
IFRS under the conditions set forth in the preceding
paragraph.
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capital;
reserves, including revaluation reserves;
share premiums;
retained earnings;
the profit for the last financial year, pending its
allocation, less the dividend distribution to be provided
for;
Core own funds also include the profit for the last financial
year, pending its allocation, and may include the profit as
recorded on dates other than the end of the annual
accounting period, provided that:
−
it is determined after booking to account all the charges
relating to the period and allocations to the
depreciation, provision and value adjustment accounts;
−
it is calculated net of foreseeable taxes and of interim
dividends or forecast dividends;
−
and it is verified by the auditors.
Share capital, in addition to the capital of those institutions
subject to the present Regulation which are constituted in
the form of commercial companies, shall be deemed to
include the sums which take the place thereof or which are
equivalent thereto, under the legislation in force, in the
accounts of institutions governed by special Articles of
association, in particular permanent endowments of funds
or fixed or variable capital represented by actually paid up
"parts sociales" or by "certificats coopératifs d’investissement".
b) Also included in the limits fixed at Article 5 are the
funds originating from the issue of instruments which the
ACP has decided meet the following conditions for
inclusion in base capital:
111
1° Indefinite maturity, or, with initial maturity of at least
thirty years. They can only be bought back or redeemed
upon the initiative of the issuer and only if the financial
situation and solvency of the credit institution subject to
this Regulation is not adversely affected. Moreover, any
such buy-back or redemption must receive prior
authorisation from the ACP.
They may include one or several buy-back or redemption
options the exercise of which can exclusively be initiated
by the issuer, but these options can only be exercised after
a minimum of five years after their issue with the ACP’s
approval and providing that the instruments be replaced by
shareholder capital of at least the same quality, unless the
ACP determines that the credit institution subject to this
Regulation already possesses a level of shareholder capital
more than adequate to cover its risks.
If the issue contract of an indefinite maturity instrument
provides for a moderate incentive to redeem, this incentive
may not be exercised during the first ten years after the
issue date. The ACP assesses the “moderate” character of
the incentive.
provided that this mechanism allows the credit institution
subject to this Regulation to preserve its financial
resources. Substitutions of this kind must respect the
conditions defined by the ACP.
3° The issue contract provides for the absorption of losses
by the principal of the instrument, the interest or the
undistributed dividends via an appropriate mechanism and
that any such loss absorption should not obstruct
reconstitution of the shareholder capital of the credit
institution subject to this Regulation.
4° In the event of judicial liquidation of the credit
institution subject to this Regulation, these instruments
carry a lower ranking than the elements mentioned in c) of
Article 4 of this Regulation.
c)
The following items shall be deducted:
–
the unpaid portion of the capital;
–
holdings of own shares valued at their book value;
–
accumulated losses;
–
intangible assets, including formation expenses;
–
The ACP may request a credit institution subject to this
Regulation to replace the instrument by assets of identical
or superior quality, such as those described in the first
indent of a) to b) of this Article.
if applicable, the loss determined on dates other than
the end of the annual accounting period;
–
The ACP requires the suspension of the redemption of
fixed-term instruments if the credit institution subject to
this Regulation no longer meets the capital adequacy
requirements stipulated in Article 2-1 of the Order of 20
February 2007 and may indeed enforce this suspension
whenever the objectives of prudential supervision, and
particularly the financial situation and solvency of the
credit institution subject to this Regulation, warrant such
action.
the amounts of pension commitments and similar
benefits valued in accordance with Conseil National de
la Comptabilité Recommendation No; 2003-R.01 of
1 April 2003 not otherwise booked as provisions for
liabilities and charges.
Article 2 a
For supervised institutions subject to IFRS, core capital as
per Article 2 shall be restated as follows.
The issue contract of a fixed-term instrument must not
carry any incentive to redeem at any date other than the
maturity date.
The ACP may authorise at any moment the early
redemption of fixed- or indefinite term instruments in the
event of any modification of the tax treatment or the
regulatory classification of these instruments after their
issue date.
2° Should it be necessary, the issue contract provides for
cancellation by the credit institution subject to this
Regulation of interest and/or dividend payments for an
indefinite period, in a non-cumulative way, and its
stipulates that credit institutions subject to this Regulation
must cancel their payments if they no longer meet the
shareholder capital adequacy requirements provided for in
Article 2-1 of the Order of 20 February 2007.
The ACP may require the cancellation of these payments
whenever the objectives of prudential supervision, and
particularly the financial situation and solvency of the
credit institution subject to this Regulation, warrant such
action. Such cancellations do not prejudice the rights of the
credit institution subject to this Regulation to substitute the
payment of the interest or the dividends by a payment in
the form of a capital security in the meaning described at
the first indent of a) of Article 2 of this Regulation,
112
All shares issued by mutual institutions shall be included in
core capital.
The as yet non-amortised share of hybrid debt included in
book capital under IFRS shall be deducted from core
capital. The instrument may be included in capital if it
complies with the provisions of Articles 2 or 4.
The positive impact on capital of components of
derivatives on own stock booked as own funds shall be
neutralised. However, it may be included in capital if it
complies with the provisions of Articles 2 or 4. If the
impact is negative, causing a decrease in capital, it shall not
be restated.
Net actuarial gains booked to earnings or reserves (in the
latter case reflecting variations in previous years) in the
framework of defined benefit pension schemes must be
restated so that they are neutralised in core capital.
For supervised institutions subject to IFRS, the reserves
referred to in Article 2 shall include unrealised or deferred
gains or losses, especially if they are attributable to IFRS.
However, unrealised capital gains or losses on financial
assets available for sale, booked directly as own funds,
shall be restated as follows:
Selected French Banking and Financial Regulations – 2013
−
for own equity instruments, net unrealised capital
gains shall be deducted from core capital, currency by
currency, net of tax deducted, and included for 45%,
currency by currency and before tax, in supplementary
capital. Net unrealised capital losses are not restated;
−
unrealised capital gains or losses on other financial
instruments, comprising debt instruments or loans and
receivables, shall be neutralised;
−
losses of value on any asset available for sale booked
to the income statement are not restated;
−
restatements of financial assets available for sale do
not apply to elements deducted from capital pursuant
to Article 6.
present Regulation may include in supplementary capital,
after tax and application of a discount where relevant,
100% of revaluation differences on such fixed assets under
French accounting standards until 31 December 2004. In
that case, the restatements set forth at Articles 2a and 2b
shall apply to unrealised capital gains and revaluation
differences that exceed the fraction included for 100% in
supplementary capital.
Article 3
For institutions subject to the present Regulation other than
those subject to IFRS, provisions for general banking risks
shall be the sums that the management within the meaning
of Article L. 511-13 of the Monetary and Financial Code
decides to allocate to cover such risks, where prudential
reasons require it in the light of the risks inherent in
banking operations.
Unrealised capital gains or losses booked directly to own
funds as the result of a cashflow hedging transaction shall
be neutralised.
Article 4
Supplementary own funds shall include:
Revaluation differences on tangible fixed assets shall be
deducted from core capital, item by item, net of tax
deducted, and included for 45%, item by item and before
tax, in supplementary capital.
a) items included in supplementary capital pursuant to
Articles 2a, 2b and 2c;
Unrealised capital gains on investment properties booked in
application of the fair value model shall be deducted from
core capital, item by item, net of tax deducted, and included
for 45%, item by item and before tax, in supplementary
capital. Unrealised capital losses are not restated.
The positive impacts of revaluations made on first
application of IFRS to tangible fixed assets or investment
properties, whether or not they are subsequently valued at
amortised cost under IFRS, shall be deducted from core
capital, item by item, net of tax deducted, and included for
45%, item by item and before tax, in supplementary capital.
Negative impacts are not restated.
To calculate their capital adequacy, supervised institutions
shall apply the requirements detailed in Articles 305 to
307-3 of the amended Decree of 20 February 2007 to all
their assets valued at fair value, regardless of whether or
not they belong to the trading portfolio, and shall deduct
from core capital any additional value impairments
compared with the recorded book value.
The Commission Bancaire may decide other prudential
restatements in order to maintain the definition and
required qualities of regulated capital, especially if the fair
value option is used.
Article 2 b
For institutions subject to the present Regulation other than
those subject to IFRS, revaluation differences on tangible
and financial fixed assets shall be deducted from core
capital net of tax deducted. 45% of such differences before
tax shall be included in supplementary capital.
Article 2 c
Notwithstanding the provisions relating to fixed assets set
forth in Articles 2a and 2b, institutions subject to the
Selected French Banking and Financial Regulations – 2013
b) Items which fulfil the following conditions:
−
they can be freely used by an institution subject to the
present Regulation in order to cover risks normally
associated with the carrying on of banking activities,
where the losses or capital losses have not yet been
identified;
−
−
they appear in the books of the institution;
their amount is fixed by the management within the
meaning of Article L. 511-13 of the Monetary and
Financial Code and verified by the auditors or, in other
countries, by those persons whose profession is of a
similar nature.
The following in particular may appear among these items:
−
−
−
−
fully mutualised guarantee funds;
other mutual guarantee funds and public funds
allocated for the guaranteeing of types of credit
operation, to the extent of 8 per cent of the risks which
they cover;
non-repayable public or private subsidies;
the latent reserve which appears in the financial
accounts relating to leases, in respect of those
institutions which are not required to calculate own
funds on a consolidated basis.
c) Funds deriving from the issue of securities, in particular
perpetual debt, and funds deriving from loans, which meet
the following conditions:
−
they can only be repaid on the initiative of the borrower
and with the prior agreement of the General Secretariat
of the Commission bancaire;
−
the issue or loan contract gives an institution subject to
the present Regulation the option to defer the payment
of interest;
113
−
the lender’s claims on an institution subject to the
present Regulation are subordinated to those of all the
other creditors;
−
the issue or loan contract provides that the debt and the
non-paid interest shall allow losses to be absorbed, the
institution subject to the present Regulation then being
in a position to continue its activities.
Only amounts actually received shall be taken into account.
d) Funds deriving from the issue of subordinated
borrowings or subordinated debt securities which, although
not satisfying the conditions set out in c), meet the ones
below:
−
−
−
if the contract stipulates a specific maturity date for
repayment, the initial life must be not less than five
years; if no maturity is fixed, the debt may only be
repaid subject to five years’ notice, unless it is no
longer considered as own funds or unless the prior
consent of the General Secretariat of the Commission
bancaire is formally required for early repayment. The
General Secretariat of the Commission bancaire may
authorise the early repayment of these funds provided
that the request for repayment is made on the initiative
of the issuer and that the solvency of an institution
subject to the present Regulation is not affected;
the loan contract does not contain a clause stipulating
that, in specific circumstances, other than the
winding-up of an institution subject to the present
Regulation, the debt must be repaid before the agreed
maturity;
in the event of the winding-up of an institution subject
to the present Regulation, these securities or loans may
only be repaid after settlement of all the other debts
existing on the date of winding-up or contracted for the
requirements thereof.
Only funds actually received shall be taken into account. In
addition, the amount up to which they may be included in
own funds shall be gradually reduced during at least the
last five years remaining before maturity, in accordance
with a pre-established schedule.
e) For the application of the Order of 20 February 2007 the
positive amounts resulting from the difference between the
sum of valuation adjustments and collective write-downs
relating to the exposures concerned and the expected losses
calculated in accordance with Article 68 of said Order, up
to 0.6% of the amounts of their weighted exposures.
Valuation adjustments and collective write-downs entering
into the aforementioned calculation shall only be included
in supplementary own funds in accordance with the
preceding indent. To this end, the amounts of the weighted
exposures do not include those calculated for the
securitisation positions with a weighting of 1250% in
accordance with Title V of the Order of 20 February 2007.
subordinated debt securities, as referred to in Article 4 d),
may only be included to the extent of 50 per cent of the
amount of original own funds.
Article 5 a
The deductions referred to in Articles 6, 6a and 6c hereafter
are made up to 50% from core own funds and 50% from
supplementary own funds, after taking into account the
limits mentioned in Article 5. Where 50% of the sum of the
items referred to in Articles 6, 6a and 6c exceed the sum of
the supplementary own funds, the excess shall be deducted
from the core own funds.
Notwithstanding the preceding paragraph and until 31
December 2012, supervised institutions may apply the
deductions referred to in Article 6, II, to the sum of the own
funds when equity holdings, subordinated claims or any
other item that are included in the own funds have been
acquired before 1 January 2007.
Article 5 b
I. For the application of Title VII of the Order of 20
February 2007, own funds shall include the core and
supplementary own funds remaining after meeting all the
requirements for credit and operational risks in
accordance with the Order of 20 February 2007, plus the
ancillary own funds defined in paragraph III hereafter.
In order to calculate core and supplementary own funds,
the deductions prescribed in Article 6b shall be made first
from the supplementary own funds.
II. If they are used to meet the requirements set forth in
Articles 292-1 to 292-3 of the Order of 20 February
2007, the supplementary own funds remaining after
meeting all the credit and operational risk requirements
prescribed in the Order of 20 February 2007 and the
ancillary own funds defined in paragraph III hereafter
must not exceed 250% of the remaining core own
funds.
The limit of 250% of the remaining own funds referred
to in the preceding paragraph shall be lowered to 200%
if the undertaking subject to this Regulation is an
investment firm
III. Ancillary own funds shall comprise:
a) the interim profits derived from the trading book
calculated according to the valuation rules set forth in
Title VII of the Order of 20 February 2007, net of any
foreseeable expenses or dividends and less any net
losses on other business, provided that none of those
amounts has already been taken into account in the
calculation of the own funds for purposes of the
above-mentioned amended Regulation 90-02;
b) the subordinated loan stock with an initial maturity of
at least two years that meets the following conditions;
Article 5
Supplementary own funds may only be included in the
calculation of own funds up to the amount of original own
funds.
−
the amounts borrowed must be fully paid up and the
loan agreement shall not include any clause providing
that the debt will become repayable before the agreed
repayment date, unless the General Secretariat of the
Commission Bancaire approves;
In addition, those elements of these additional own funds
which have the character of subordinated borrowings or
−
neither the principal of nor the interest on such
subordinated loan stock may be repaid if such
114
Selected French Banking and Financial Regulations – 2013
repayment would mean that the own funds of the
institution would then fail to meet the overall
requirements defined in Article 2 of the Order of 20
February 2007.
Each institution shall notify the General Secretariat of
the Commission Bancaire of all repayments on such
subordinated loan stock as soon as its own funds fall
below 120% of its overall requirements.
The part of subordinated loan stock or debt no longer
included in the additional capital because of the
progressive reduction prescribed in Article 4 (d) of the
above-mentioned amended Regulation 90-02 may be
included in the items listed in this paragraph, if the
above-mentioned requirements are met
IV. The sum of the own funds defined in Article 1 of the
above-mentioned Regulation 90-02 that are used to cover
the credit and operational risks in accordance with the
Order 20 February 2007 and the own funds requirements
set forth in 5b I, 5b II and 5b III above shall constitute the
institution’s overall own funds.
Article 6
I - Equity holdings, subordinated claims that take one of
the forms referred to in c) and d) of Article 4 of this
Regulation and in III b) of Article 5b of the abovementioned Regulation 90-02 of 23 February 1990 as
amended and any item constituting the own funds of
institutions referred to in points i) to iii) of f) of Article 1 of
Regulation 2000-03 of 6 September 2000 shall be deducted
in the following manner:
−
where the equity holding exceeds 10 per cent of the
capital of the institution in which it is held or enables a
significant influence to be exercised over this
institution, its total amount shall be deducted together
with the subordinated claims and any item constituting
its own funds held in respect of this institution;
−
the total amount of the other equity holdings and
subordinated claims and any item constituting its own
funds shall be deducted to the extent of the portion
which exceeds 10 per cent of the own funds of the
institution which holds them, calculated before the
deductions stipulated in this Article.
II – Equity interests within the meaning of Article L. 51120-II of the Monetary and Financial Code held in entities
belonging to the insurance sector within the meaning of
Article L. 517-2-I of the Monetary and Financial Code and
subordinated claims on such entities shall be deducted.
However, for the application of management standards
other than those set forth in Regulation 88-01 of 22
February 1988 as amended relating to liquidity, Regulation
90-06 of 20 June 1990 as amended relating to equity
holdings in the capital of enterprises and Regulation 98-04
of 7 December 1998 relating to equity interests taken by
investment firms other than portfolio management
companies in existing or new undertakings, institutions
subject to this Regulation may choose not to deduct the
items referred to in the first paragraph from their own funds
and, in that case, are subject to a supplementary capital
adequacy requirement according to the conditions of the
"accounting consolidation" method set forth at Section II of
the Appendix to Regulation 2000-03 of 6 September 2000.
Selected French Banking and Financial Regulations – 2013
However, the Commission Bancaire may decide to require
the deduction of these items from the own funds of
institutions subject to this Regulation if it deems it
necessary for the purposes of prudential supervision, in
particular when the equity interests are held in entities
whose activity may be regarded as equivalent to activities
belonging to the banking and investment services sector,
such as those authorised by branches 14 (credit) and 15
(guarantee) of Article R. 321-1 of the Insurance Code.
III – For the application of management standards other
than those set forth in Regulation 88-01 of 22 February
1988 as amended relating to liquidity, the last indent of
Article 1 of Regulation 90-02, Regulation 90-06 of 20 June
1990 as amended relating to equity holdings in the capital
of enterprises and Regulation 98-04 of 7 December 1998
relating to equity interests taken by investment firms other
than portfolio management companies in existing or new
undertakings, parent undertakings within the meaning of
Article 1 of Regulation 2000-03 and the institutions under
their exclusive or joint control may choose not to deduct
the items referred to in paragraphs I and II of this article in
order to calculate their own funds on a non-consolidated
basis. However, the Commission Bancaire may decide to
require the deduction of such items from the nonconsolidated own funds of these institutions if it deems it
necessary for the purposes of prudential supervision.
IV – When an equity interest is held temporarily in another
institution referred to at Article 1f, i) to iii) of the
aforementioned Regulation 2000-03 or in an entity
belonging to the insurance sector within the meaning of
Article L. 517-2-I of the Monetary and Financial Code for
the purposes of a financial assistance operation designed to
reorganise and rescue the entity, the Commission Bancaire
may allow the credit institution subject to this Regulation to
derogate from the deduction rules set forth in this article.
V – For the application of the management standard
described in Article 1 of this Regulation, a credit institution
subject to this Regulation need not deduct, in the
calculation of its core capital, the elements mentioned in
paragraphs I and II of this Article when these elements are
held by other credit institutions, financial establishments,
insurance or reinsurance companies belonging to the same
application scope for supervision on a consolidated basis or
‘supplementary’ supervision in the meaning of Regulation
no. 2000-03 of 6 September 2000.
Article 6 a
For the application of the Order of 20 February 2007,
supervised institutions shall deduct their securitisation
exposures weighted at 1250% in accordance with said
Order, where such exposures are not included in the
calculation of the amounts of the weighted exposures.
Article 6 b
Asset items and off-balance sheet commitments granted by
an institution subject to the present Regulation to its senior
managers
or
principal
shareholders,
including
commitments that guarantee performance of an obligation
contracted by the senior managers or principal
115
shareholders, shall be deducted from the items referred to
in Articles 2 to 4 above.
calculated by applying the provisions of Articles 7-2 and 16
of the Decree of 20 February 2007 on capital adequacy.
By way of an exception from Article 10 below, financial
accounting methods shall be used to calculate the deduction
of leasing or similar transactions within the meaning of the
second paragraph of Article L. 313-1 of the Monetary and
Financial Code.
IV. – The present article shall not apply to the following:
I. – For the purposes of the present article, the following
are deemed to be senior managers:
a) the persons referred to in Articles L. 511-13 and
L. 532-2 of the Monetary and Financial Code;
b) any person entrusted with managerial or administrative
powers or any member of the supervisory board of a
company governed by Book II of the Commercial Code
or any other person performing equivalent functions
under the terms of the laws or by-laws governing the
institution subject to this Regulation, and their standing
representatives, their spouse and their ascendants and
descendants in the first degree;
a) transactions entered into with the senior managers or
principal shareholders that have a rating better than 4
on the rating scale of the Banque de France or whose
securities and bank debt have a rating at least equal to
the rating set forth in Appendix I to the present
Regulation;
b) transactions entered into with the senior managers or
principal shareholders and guaranteed explicitly in
favour of the institution subject to this Regulation by a
company that has a rating mentioned in paragraph a)
above;
c) transactions entered into between institutions affiliated to
the same central body as mentioned in Article L. 51130 of the Monetary and Financial Code;
d) commitments relating to legal entities over which the
institution subject to this Regulation exercises
exclusive control in accordance with Regulation 200003 of 6 September 2000 aforesaid;
c) any person entrusted with managerial or administrative
powers in a legal entity that directly or indirectly
exercises exclusive or joint control over the institution
subject to this Regulation within the meaning of
Regulation 2000-03 of 6 September 2000 relating to
prudential supervision on a consolidated basis;
e) commitments relating to legal entities over which the
institution subject to this Regulation exercises joint
control, if such control is shared with persons other
than those deemed to be principal shareholders under
the terms of section II of the present article;
d) any person entrusted with managerial or administrative
powers in a legal entity over which the institution
subject to this Regulation directly or indirectly
exercises exclusive or joint control within the meaning
of Regulation 2000-03 of 6 September 2000 aforesaid;
f) the share of exposure to a single beneficiary within the
meaning of Article 3 of Regulation 93-05 of 21
December 1993 aforesaid not exceeding 3% of the own
funds of the institution subject to this Regulation, minus
the items referred to at Articles 6 and 6a where relevant;
e) any legal entity over which a senior manager as defined
in the preceding paragraphs exercises exclusive or joint
control;
g) for any calculation of own funds carried out before 1
January 2007, the asset items and commitments arising
from transactions entered into before 1 April 2001 and
transactions entered into subsequently if they arise
from commitments assumed before that date.
f) any person acting as an intermediary between the
institution subject to this Regulation and a senior
manager as defined in the preceding paragraphs.
II. – For the purposes of the present article, the following
are deemed to be principal shareholders:
a) any person or group of persons holding jointly or
separately, directly or indirectly, over one tenth of the
voting rights calculated as set forth at Article 4 of
Regulation 96-16 relating to changes in the situation of
credit institutions and investment firms other than
portfolio management companies;
b) any legal entity over which the persons or groups of
persons referred to in paragraph a) above directly or
indirectly exercise exclusive or joint control within the
meaning of Regulation 2000-03 of 6 September 2000
aforesaid.
III. – The deductions set forth in the present article shall be
calculated by applying the provisions of Articles 4, 5, 6 and
7 of Regulation 93-05 of 21 December 1993 as amended on
supervising large exposures. However, deductions relating
to documentary credits, granted or confirmed, are
116
V. – For branches of credit institutions having their
headquarters in a country that is not a signatory to the
agreement on the European Economic Area, the provisions
of Article 6b shall apply to the branch’s transactions with
the senior managers appointed in France mentioned in
Article L. 511-13 of the Monetary and Financial Code.
The Commission Bancaire may extend the same provisions
to transactions entered into with the headquarters, with
persons who are responsible for the management or hold
over one tenth of the voting rights of the legal entity and
with persons over which the entity exercises exclusive or
joint control in at least one of the following cases:
a) the institution is not subject in its home country to
solvency and large exposure requirements deemed by
the Commission Bancaire to be at least as strict as the
rules in force in France;
b) the competent authorities of the country in which the
institution has its headquarters consider that it does not
comply satisfactorily with the standards laid down in
the fields referred to in a) above.
Selected French Banking and Financial Regulations – 2013
Article 6 c
For the purpose of applying the Order of 20 February 2007,
supervised institutions that use the Internal Ratings Based
approach for the exposure risk shall deduct the following
items:
−
−
the negative amounts resulting from the difference
between the sum of the valuation adjustments and
collective write-downs relating to the exposures
concerned and the expected losses calculated in
accordance with Article 68 of said Order.
the amounts of the expected losses calculated in
accordance with Article 67-1 of said Order for the
equity exposures whose weighted amounts shall be
calculated pursuant to the simplified weighted method.
Article 7
Where an institution subject to the present Regulation
calculates the amount of its own funds on a consolidated
basis, the items referred to in Articles 1 to 6b shall be
included to the extent of their totals as these result from the
consolidation carried out in accordance with the rules laid
down in the above-mentioned Regulation 2000-03 of
6 September 2000.
Core own funds shall then include the consolidation
differences specified in the above-mentioned Regulation:
− the counterpart, in consolidated reserves, of goodwill;
− differences arising from consolidation by the equity
method;
− translation difference;
− minority interests.
When goodwill is recorded on the assets side of the
consolidated balance sheet, it shall be deducted from core
capital, including when it is included in the value of
securities accounted for by the equity method.
For the purposes of Article 6, securities consolidated by the
equity method shall be deducted from own funds at their
consolidated book value excluding goodwill already
deducted.
Where an institution subject to this Regulation is subject to
a supplementary capital adequacy requirement in
accordance with Article 6-II, paragraph 2, it shall deduct
from its core capital the contribution of entities belonging
to the insurance sector to consolidated earnings and
reserves, booked as an equity method difference
The prudential restatements under IFRS set forth at Articles
2a and 2c do not concern the items included in the equity
method difference. However, the Commission Bancaire
reserves the option of applying these prudential
restatements to the equity method difference if inclusion of
all or some of such items seems inappropriate or liable to
mislead from the standpoint of the objectives of prudential
supervision.
Notwithstanding points 2 and sqs. of the present article and
until 31 December 2012, institutions subject to a
supplemental requirement concerning capital adequacy
may carry out the deductions referred to in Article 6, II, on
the global amount of their own funds when the equity
holdings, subordinated claims or any other item
Selected French Banking and Financial Regulations – 2013
constitutive of own funds has been acquired before 31
December 2006.
This provision shall enter into force on 31 December 2006.
Article 8
Articles 4e), 6a and 6c only apply in the framework of
Order 20 February 2007.
Article 9
If, when the calculation of own funds is made, the
institution anticipates that it will incur a fiscal charge on all
or some of the items specified in Articles 2 and 3 and
Article 4 a) and b), in particular on the day when it decides
to earmark these items for the offsetting of losses, the
amount of this possible fiscal charge shall be deducted
from the amount of each of these items.
Article 10
The items included in the calculation of own funds are
drawn from the individual accounts of the supervised
institutions according to the rules laid down in
Regulation 91-01 of 16 January 1991 or in Regulation
97-03 of 21 February 1997.
Where institutions are subject to supervision on a
consolidated basis, these documents are drawn from the
consolidated accounts prepared according to the rules laid
down in Regulation 2000-03 of 6 September 2000.
Article 11
− Deleted
− Deleted
− See Article 5 of Regulation 88-01
− Deleted
Article 12
The provisions for general banking risks shall be recorded
separately on the liabilities side of the balance sheets of
institutions subject to the present Regulation other than
those subject to IFRS in a special item headed accordingly.
The amount by which transfers to exceed transfers from the
provisions for general banking risks or the amount by
which transfers from exceed transfers to the provisions for
general banking risks shall be recorded separately, to the
debit or credit respectively of the profit and loss account, in
special items headed accordingly.
Institutions must be able to furnish the Commission
bancaire with all evidence concerning the provisions for
general banking risks.
Article 13
Institutions subject to the present Regulation shall report
the composition of their own funds to the Commission
bancaire in accordance with formats specified by it.
The conditions which the items taken into account for the
purposes of Articles 2 to 8 must fulfil shall, where
appropriate, be detailed in a Commission bancaire
instruction.
117
The Commission Bancaire may object to the inclusion of
certain items if it considers that the conditions specified in
Articles 2 to 9 have not been satisfactorily fulfilled or that
the inclusion of some or all of these items would be
inappropriate or likely to mislead from the standpoint of the
objectives of prudential supervision.
Article 14
The Commission bancaire may temporarily authorise an
institution subject to the present Regulation to exceed, in
exceptional circumstances, the limits laid down in
Article 5, while allowing it a period of time in which to
regularise its situation.
Under the same conditions as those set out in the foregoing
paragraph, the Commission bancaire may authorise an
institution not to deduct from its own funds all or part of
the items referred to in Article 6b.
If necessary, the Commission bancaire may also allow the
supervised institution whose own funds fall under the
amount mentioned in Article 1 a further period for it to
bring its situation into compliance.
Appendix I
List of recognised rating organisations
and minimum acceptable rating categories
referred to in point IV of Article 6b (Order of 20
February 2007
(long term)
1.3.2.CAPITAL ADEQUACY
REGULATION 97-04 OF 21 FEBRUARY 1997,
RELATING TO THE MANAGEMENT STANDARDS
APPLICABLE TO INVESTMENT FIRMS OTHER
THAN PORTFOLIO MANAGEMENT COMPANIES
As amended by Regulation 2001-01 of 26 June 2001 and
the Orders of 15 May 2006,
20 February 2007 and 11 September 2008
Prudential Supervision of Market Risks
Article 1
Investment firms mentioned in Article L. 531-4 of the
Monetary and Financial Code, other than portfolio
management companies mentioned in Article L. 532-9 and
investment firms which have neither funds nor securities
belonging to their customers and which only provide,
whether cumulatively or not, the investment service(s)
referred to in points 1 and 5 of Article L. 321-1 of said
Code must at all times have capital as defined in Article 5b
of Regulation 90-02 equal at least to the total of client
positions divided by 150. The total of client positions
includes positions on regulated markets in financial
instruments and over-the-counter positions, as well as, for
the other positions:
−
the debit balances on cash accounts and uncovered
short positions on the spot market in the name of
clients that are effectively held with the undertaking,
−
in the case of other clients, the sum of the long and
short positions, plus the debit balance on settlement
accounts or minus the credit balance on settlement
accounts.
(short term)
Canadian Bond Rating
Service
B++low
A-3
Dominion Bond Rating
Service
BBBlow
R-2
Duff and Phelps, Inc.
BBB-
F-3
Article 2
BBB-
F-3
See Regulation 95-02 of 21 July 1995.
Fitch Investors Service,
Inc.
Article 3
IBCA Notation
BBB-
A3
Japan Credit Rating
Agency, Ltd
BBB-
J-2
Moody’s France
Baa3
P-3
Moody’s Investor
Services
Baa3
P-3
Nippon Investor
Services, Inc.
BBB-
A-3
Standard and
Poor’s-Adef
BBB3
T1
Standard and Poor’s
International
BBB-
A-3
The Japan Bond
Research Institute
BBB-
A-2
Thomson Bankwatch
BBB-
A3
118
See Regulation 91-05 of 15 February 1991.
Supervising Large Exposures
Article 4
See Regulation 93-05 of 21 December 1993.
Article 5
The investment firms referred to in Article L. 531-4 of the
Monetary and Financial Code other than the portfolio
management companies referred to in Article L. 532-9 of
said Code and other than investment firms that do not hold
funds or securities belonging to customers and that provide
exclusively or cumulatively the investment service(s)
referred to in points 1 and 5 of Article L. 321-1 of said
Code to the persons referred to in Article L. 442-2, point 4
of the Monetary and Financial Code and the persons
referred to in Article L. 542-1 of said Code shall at all
times ensure that the total value of the positions of any one
client is less than 15 times the amount of their overall own
funds as defined in the amended Regulation 90-02
aforesaid.
Selected French Banking and Financial Regulations – 2013
However, this rule shall not apply when the client:
–
–
–
exercises exclusive control over the investment firm or
the person referred to in the first indent of this Article;
is exclusively controlled by the investment firm or the
person referred to in the first indent of this Article;
is exclusively controlled by a parent company which
also exclusively controls the investment firm or the
person referred to in the first indent of this Article.
ORDER OF
20 FEBRUARY 2007 RELATING TO
CAPITAL REQUIREMENTS FOR
CREDIT INSTITUTIONS AND
INVESTMENT FIRMS
As amended by Orders of 19 October 2007,
11 September 2008, 29 October 2009, 25 August 2010,
13 December 2010 and 23 November 2011
TITLE I
Internal Control
GENERAL PROVISIONS
Article 6
Deleted.
Implementation
Article 1
The entities subject to this regulation, referred to
hereinafter as supervised institutions, are:
Article 7
The investment firms referred to in Article 1 of this
Regulation authorised as of the date of entry into force of
the Act of 2 July 1996 aforesaid [inserted in the Monetary
and Financial Code] shall be immediately subject to the
provisions of this Regulation. Other investment firms shall
be subject to the provisions of this Regulation on 1 July
1997.
L. 522-2, II of the Monetary and Financial Code;
Article 8
The general decisions of the Conseil des Bourses de
Valeurs 90-15 of 18 December 1990 relating to rules for
hedging the exposure of sociétés de bourse and 90-16 of 18
December 1990 relating to the rules for dividing the
exposure of sociétés de bourse shall be repealed as of 1
July 1997.
- investment firms listed in Article L. 531-4 of the
Monetary and Financial Code, with the exception of
portfolio management companies referred to in Article
L. 532-9 of the Monetary and Financial Code, and of
investment firms that do not hold funds or securities
belonging to their customers and that only provide, whether
cumulatively or not, the investment service(s) referred to in
points 1 and 5 of Article L. 321-1 of said Code.
Article 9
This Regulation shall not apply to:
- financial holding companies as well as mixed financial
holding companies supervised by the Autorité de contrôle
prudentiel on a consolidated basis in accordance with
Regulation 2000-03;
–
branches in France of the undertakings mentioned in
Article L. 532-18 of the Monetary and Financial Code;
–
to investment firms whose programme of operations is
limited to providing investment services concerning
financial instruments involving commodities. These
undertakings shall file monthly statements showing the
positions taken on the commodities markets with the
General Secretariat of the Autorité de contrôle
prudentiel according to a model layout set by the
General Secretariat.
Article 10
The Autorité de contrôle prudentiel may authorise an
investment firm to temporarily depart from the provisions
of this Regulation and give it a deadline for bringing its
situation into compliance. It shall stipulate the adaptations
to the references to the various Regulations of the Comité
de la Réglementation Bancaire et Financière necessary for
the application of this Regulation.
- credit institutions;
- payment institutions granting loans mentioned in Article
- payment institutions granting the loans mentioned in
Article L. 522-2, II of the Monetary and Financial Code,
- the persons mentioned in Point 4 of Article L. 442-2 and
Point 5 of Article L. 542-1 of the Monetary and Financial
Code.
This Order applies on a consolidated basis to supervised
institutions supervised on a consolidated basis by the
Autorité de contrôle prudentiel in accordance with
Regulation 2000-03.
The Autorité de contrôle prudentiel shall specify the
necessary adjustments, where appropriate, for including a
given financial holding company in consolidated
supervision.
Article 2-1
Supervised institutions shall be required to maintain a
solvency ratio of at least 8% at all times.
This solvency ratio shall be equal to the ratio of total own
funds to the sum of:
- risk-weighted exposures, for credit risk and dilution risk;
and
Selected French Banking and Financial Regulations – 2013
119
- capital requirements imposed under the prudential
supervision of market risk and operational risk, multiplied
by 12.5.
For the purposes of this Order, own funds shall be
determined in accordance with Regulation 90-02 of 23
February 1990 of the Autorité de contrôle prudentiel on
own funds.
Article 2-2
Risk-weighted exposures amounts for credit risk and
dilution risk exposures in the banking book shall be
calculated using the Standardised Approach for credit risk
set out in Title II, or the Internal Ratings Based Approach
subject to the conditions set out in Title III.
Subject to Article 6a of Regulation 90-02, risk-weighted
exposures for securitisation positions, calculated as
provided in Title V, shall be included in the total riskweighted exposures of supervised institutions for the
calculation of capital requirements for credit risk and
dilution risk.
Article 2-3
The capital requirement for market risk shall be calculated
in accordance with Title VII.
Article 2-4
The capital requirement for operational risk shall be
calculated using the Basic Indicator Approach or the
Standardised Approach set out in Title VIII, or the
Advanced Measurement Approach subject to the conditions
specified in Title VIII.
Article 3-1
By derogation to Article 2-1, subject investment firms that
are not authorised to provide the investment services listed
in points 3, 5, and 6 of Article L. 321-1 of the Monetary
and Financial Code shall be required to maintain own funds
at a level that is always equal to or greater than the higher
of the following two amounts:
a) the sum of the capital requirements set out in Articles 22 and 2-3;
b) one quarter of their preceding year’s fixed overheads, or,
when a firm has not completed a full year’s business, one
quarter of the fixed overheads projected in its business
plan. Within the meaning of this Order, ‘fixed overheads’
includes staff costs, taxes linked to the compensation of
employees, other taxes, and external services as defined by
the accounting rules applicable to investment firms. The
Autorité de contrôle prudentiel may adjust this requirement
in the event of a material change in the firm’s activity
relative to the preceding year.
Article 3-2
By derogation to Article 2-1, subject investment firms that
are authorised to provide the investment service shall be
required to maintain own funds at a level that is always
equal to or greater than the sum of the amounts referred to
in points (a) and (b) of Article 3-1to in point 3 of Article
L. 321-1 of the Monetary and Financial Code shall be
required to maintain own funds at a level that is always
120
equal to or greater than the sum of the amounts referred to
in points (a) and (b) of Article 3-1, provided that:
- they deal exclusively for their own account as a
counterparty to a customer’s order or for the purpose of
gaining entrance to a clearing and settlement system in the
capacity of settlement agent, or to a regulated market, with
the view to executing customers’ orders; or
- they do not hold funds or securities belonging to their
customers, they deal exclusively for their own account,
they do not deal for the account of customers, and the
execution and settlement of their transactions take place
under the responsibility of a clearing institution and are
guaranteed by that clearing institution.
Article 3-3
When all of the investment firms in a group fall within the
class of investment firms referred to in Article 3-1 and the
group does not include any credit institutions:
a) the parent investment firm shall be required at all times
to hold consolidated own funds equal to or greater than the
greater of the following two amounts:
i) the sum of the requirements in Articles 2-2 and 2-3;
ii) one quarter of its fixed overheads, under the conditions
set out in point (b) of Article 3-1.
The provisions of Article 295 apply to the calculation of
these requirements.
b) the financial holding company referred to in Article 3 of
Regulation 2000-03 shall be required at all times to hold
consolidated own funds equal to or greater than the larger
of the following two amounts:
i) the sum of the requirements in Articles 2-2 and 2-3;
ii) one quarter of its fixed overheads, under the conditions
set out in point (b) of Article 3-1.
The provisions of Article 295 apply to the calculation of
these requirements.
Article 3-4
When all of the investment firms in a group fall within the
class of investment firms referred to in Articles 3-1 and 3-2
and the group does not include any credit institutions:
a) the parent investment firm shall be required at all times
to hold consolidated own funds equal to or greater than the
sum of the requirements in paragraphs (a) and (b) of Article
3-1. The provisions of Article 295 apply to the calculation
of these requirements;
b) the financial holding company referred to in Article 3 of
Regulation 2000-03 shall be required at all times to hold
consolidated own funds equal to or greater than the sum of
the requirements in paragraphs (a) and (b) of Article 3-1.
The provisions of Article 295 apply to the calculation of
these requirements.
Article 3-5
By derogation to Article 2-1, payment institutions granting
credits mentioned in Article L. 522-2 , II of the Monetary
and Financial Code shall be required to maintain own funds
at a level that is always equal to or greater than the sum of
Selected French Banking and Financial Regulations – 2013
the amounts referred to in Article 28 of the Order of 29
October 2009 relating to the prudential regulation of
payment institutions and the requirements for the
standardised approach for credit risks.
Article 4-1
In applying this Order:
a) ’exposure’ means an asset or off-balance sheet item;
b) ’institutions’, for the purposes of Titles II and III, means
credit institutions and investment firms, including
recognised credit institutions and investment firms of third
countries. For the purposes of this paragraph, ‘recognised
credit institutions and investment firms of third countries’
are those that satisfy the following conditions:
- they are authorised by the competent authorities of the
third country;
- they would be considered credit institutions or investment
firms if they were established in a Member State;
- they are subject to prudential regulation and supervision
equivalent to the regime in force in France;
c) ’operational risk’ means the risk of loss resulting from
inadequate or failed internal processes, people, and internal
systems, or from external events, including events with a
low probability of occurrence but a high loss. This
definition includes legal risk but excludes strategic and
reputation risk;
d) ’dilution risk’ means the risk that an amount receivable
is reduced as the result of any form of discount or
cancellation granted to the obligor;
e) ’Probability of Default’ (PD) means the probability of
default of a counterparty over a one-year period;
f) ’loss’, for the purposes of the provisions relating to credit
risk, means economic loss, including material discounting
effects, as well as material direct and indirect costs
associated with collecting on the instrument;
g) ’Loss Given Default’ (LGD) means the ratio of the loss
on an exposure due to the default of a counterparty, to the
exposure amount at the time at default;
h) ’Credit Conversion Factor’ (CCF) means the ratio of the
currently undrawn amount of a commitment that will be
drawn and outstanding at the time of default, to the
currently undrawn amount of the commitment. The extent
of the commitment shall be determined by the advised
limit, unless the unadvised limit is higher;
i) ’Expected Loss’ (EL), for the purpose of the provisions
relating to credit risk, means the ratio of the amount
expected to be lost for credit or dilution risk over the year
to come as a result of counterparty default, to the exposure
value of the exposure;
j) ’funded credit protection’ means collateral or an
equivalent security interest in which the reduction in the
credit risk of an exposure derives from the supervised
institution’s right, in the event of the default of the
counterparty or the occurrence of other specified credit
events relating to the counterparty, to liquidate, retain, or
obtain transfer or ownership of amounts or assets;
Selected French Banking and Financial Regulations – 2013
k) ’unfunded credit protection’ means a technique of credit
risk mitigation in which the reduction of the credit risk of
an exposure derives from the commitment of a third party
to pay an amount in the event of the default of the borrower
or the occurrence of other specified events;
l) ’cash-assimilated instrument’ means a certificate of
deposit or other similar instrument issued by the lending
supervised institution;
m) ’securitisation’ means a transaction or structure
whereby the credit risk associated with an exposure or pool
of exposures is subdivided into tranches that have the
following characteristics:
i) payments in the transaction or structure depend on the
cash flows generated by the exposure or pool of exposures;
ii) the subordination of tranches determines the distribution
of losses throughout the life of the transaction or scheme;
ma) Re-securitisation: a securitisation in which the credit
risk associated with a portfolio of underlying exposures is
subdivided into tranches and where at least one of the
underlying exposures is itself a securitisation position;
n) ’securitisation position’ means an exposure to a
securitisation transaction or structure. Securitisation
positions include exposures arising from interest-rate or
foreign-exchange derivatives contracts;
na) Re-securitisation position: an exposure to a resecuritisation operation;
o) ’recognised exchange’ means an exchange, whatever the
country in which it is established, that satisfies the
definition of regulated market in Article L. 421-3 of the
Monetary and Financial Code and that has a clearing
mechanism that permits daily margin calls for the contracts
listed in Appendix II;
p) ’Member State’ means any State that is a member of the
European Union or a signatory to the agreement on the
European Economic Area;
q) ’external credit assessments’, for the purpose of the
provisions relating to credit risk, means an assessment of
credit provided by an external credit assessment institution
recognised by the Autorité de contrôle prudentiel and used
as provided in Chapter IV of Title II and, as applicable, in
Chapter V of Title V;
r) ’public sector entities’ means non-commercial
administrative bodies responsible to central governments,
regional governments, or local authorities; authorities that
exercise responsibilities similar to those of regional and
local authorities; or any other body with similar
characteristics;
s) ’valuation adjustment’ means a specific provision
corresponding to the decline in the value of an asset
associated with credit risk and recorded in accounting
statements either directly in the form of a partial write-off
or through an allowance account;
t) ’residual value at risk’ in a finance lease agreement or a
lease agreement of a financial nature means an estimate of
the value of the leased asset at the end of the lease period;
121
i) provided that the contractual terms do not rule out that
this value could be added to the amortisation of the lessor’s
initial investment under the agreement, in particular when it
appeared reasonably certain at the origination of the
agreement that the leased asset would be sold to the lessee
and this certainty has disappeared during the course of the
lease;
ii) and in the absence of a guarantee by the lessee or by a
third party unrelated to the lessor, satisfying all of the
conditions listed in Title IV relating to the eligibility of
credit protection providers, to bear any possible shortfall in
this value relative to the unamortised portion of the
financial outstanding at the end of the agreement;
u) ’banking book’ means all of the assets or off-balance
sheet items that do not belong in the trading book, as that
term is defined in Title VII;
v) ’exposure value’: for assets, in the context of the
Standardised Approach for credit risk, exposure value
means the accounting value after deduction of any general
provisions under the terms established by the Autorité de
contrôle prudentiel and, in the context of the Internal
Ratings Based Approach for credit risk, means the
accounting value excluding any value adjustment of
unrealised gains or losses not included in the profit and in
the own funds, and gains or losses on the covered assets.
For off-balance sheet items, exposure value shall mean the
nominal value;
w) ’finance lease agreements’ means lease agreements
whose effect, at the beginning of the agreement, is to
transfer to the lessee the quasi-totality of risks and benefits
inherent in the ownership of the leased asset, where the
agreements are entered into by supervised institutions that
are subject to IFRS standards – i.e., institutions that publish
their consolidated accounts according to international
accounting standards within the meaning of Regulation
(CE) 1606-2002;
x) ’lease agreements of a financial nature’ means lease
agreements, lease agreements with an option to purchase,
and lease-purchase agreements. It also includes lease
agreements without a purchase option where the aim is to
provide a renter with movable property or real estate
acquired by the lessor at the renter’s request, and where the
lessor is not, in principle, in the business of retaining the
property at the conclusion of the agreement. This includes,
in particular, lease agreements in which the discounted
value of expected minimum payments corresponds to the
value of the leased asset, where the agreements are entered
into by supervised institutions that are not subject to IFRS
standards;
Article 4-2
For the application of this Order, the definitions in Article 1
of Regulation 2000-03 shall apply.
Article 4-3
Except where the provisions of this Order provide
otherwise, assets and off-balance-sheet items shall be
valued in accordance with the accounting framework to
which the supervised institution is subject.
Article 5
The Autorité de contrôle prudentiel can at any time waive
the application of the provisions of this Order to a
supervised institution temporarily, by granting it an
extension of time to regularise its situation.
The Autorité de contrôle prudentiel can prohibit a
supervised institution from applying a provision of this
Order, the application of which is subject to specific
conditions, if the Autorité de contrôle prudentiel judges
that those conditions have not been satisfactorily fulfilled.
Article 5-1
The branches of credit institutions that have their head
office in another State that is party to the Agreement on the
European Economic Area are deemed to be in compliance
with requirements if the following conditions are met:
- Home country regulation and supervision in this regard
take into account the risks borne abroad in an equivalent
manner to the provisions in force in France.
- The head office undertakes to supervise itself the
transactions of the branch in France, in accordance with the
regulations in force in its home country and under the
supervision of the competent authority in its home country.
- The head office confirms that it will ensure that its branch
in France has sufficient funds to cover its liabilities.
- The competent authority in its home country gives its
agreement to the request, confirms that the institution is
compliant and undertakes to inform the Autorité de
contrôle prudentiel of any significant change in the
aforementioned conditions.
- The Autorité de contrôle prudentiel verifies that the above
conditions are met and, provided that French credit
institutions are able to benefit from equivalent treatment
from the competent authority in the home country, grants
branches that request it the benefit of this Article.
y) ’minimum payments in finance lease agreements or
lease agreements of a financial nature’ means payments
that the lessee is or can be required to make over the course
of the agreement, as well as, where applicable:
The institutions concerned inform the Autorité de contrôle
prudentiel of any relevant change to ensure that the abovementioned conditions continue to be satisfied on a lasting
basis.
i) the guaranteed value of the leased asset at the end of the
agreement, when that guarantee is provided by the lessee or
by a third party unrelated to the lessor who satisfies all of
the conditions listed in Title IV relating to the eligibility of
credit protection providers; or
ii) the sale price of the asset to the lessee, where there is a
reasonable certainty that the asset will be sold to the lessee.
The Autorité de contrôle prudentiel may withdraw the
benefit of this Article from an institution if it considers that
one of these conditions is no longer being met. It may also
refuse to allow a supervised institution the benefit of the
present article when it considers that the prudential
supervision regime, in areas other than solvency
requirements, is not equivalent to that applicable in France.
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Article 6
The Autorité de contrôle prudentiel shall establish the
method and frequency for reporting the elements of the
solvency ratio to it, along with any other information
relevant to its assessment of a supervised institution’s
capital adequacy and internal capital.
borrowing transactions, or long settlement transactions, or
margin lending transactions, may be calculated, as
applicable:
La Autorité de contrôle prudentiel may require any
institution to calculate its solvency ratio at additional dates
specified by the Autorité de contrôle prudentiel in order to
satisfy supervisory needs: in particular, to enable the
Autorité de contrôle prudentiel to monitor the impact on
the solvency ratio of the distribution of own funds within
the group to which the institution belongs.
- as provided in Section 3, Chapter 4 of Title IV on the use
of internal models to capture the effect of netting
mechanisms on such transactions.
TITLE II
Article 7-7
The exposure value for finance lease agreements and lease
agreements of a financial nature, corresponding to their
accounting value, can be decomposed into two elements:
the discounted value of minimum lease payments on the
one hand and, if relevant, a fraction of the residual value at
risk equal to 1/t where t equals the higher of 1 and the
number of residual full years in the contract, on the other.
Distinct weights are applied to these two elements, the
fraction of the residual value at risk taken into account
being considered as a tangible asset.
STANDARDISED APPROACH FOR CREDIT
RISK
CHAPTER I
GENERAL PROVISIONS
Article 7-1
The exposure value of an asset shall be determined taking
into account the effects of any credit risk mitigation
techniques.
Article 7-2
The exposure value of an off-balance-sheet item listed in
Appendix I is a percentage of its value, reflecting the
effects of any credit risk mitigation techniques. The
percentage shall be determined as a function of the risk
category to which the item belongs:
- 100% of its value if it is in the full-risk category;
- 50% of its value if it is in the medium category;
- 20% of its value if it is in the moderate-risk category;
- 0% of its value if it is in the low-risk category.
These percentages are referred to as supervisory credit
conversion factors (CCFs).
Article 7-3
For exposures in the form of securities or commodities
sold, posted, or lent under repurchase transactions; or
securities or commodities lending or borrowing; or margin
lending, if the supervised institution uses the Financial
Collateral Comprehensive Method to reflect the effect of
financial collateral as provided in Title IV, the exposure
value shall take into account volatility adjustments in
accordance with Articles 178-2 to 178-6.
Article 7-4
The exposure value of derivative instruments listed in
Appendix II shall be determined in accordance with the
methods set out in Title VI, taking into account the effects
of novation agreements or netting agreements as provided
in that Title.
Article 7-5
The exposure value for asset sale and repurchase
transactions, or securities or commodities lending or
Selected French Banking and Financial Regulations – 2013
- as provided in Chapter V of Title VI on valuation
methods using internal models; or
Article 7-6
The exposure value for exposures to a central clearing
house may be set equal to zero, subject to the conditions set
out in Section 2, Chapter I of Title VI.
When the sale of the leased asset to the lessee appears
reasonably certain at the beginning of the agreement, the
supervised institution shall confirm at least annually that
the sale remains reasonably certain.
Article 8-1
The risk-weighted exposure amount shall be calculated by
assigning a risk weight to each exposure as provided in this
Title.
Elements deducted from own funds as provided in
Regulation 90-02 shall be excluded from the calculation of
risk-weighted exposure amount.
Article 8-2
Except where the provisions of this Title provide otherwise,
exposures of supervised institutions shall be risk-weighted
at 100%.
Article 8-3
The application of risk weights shall be based on the
exposure class referred to in Chapter II to which the
exposure is assigned and, where applicable, on its credit
quality as provided in Chapter IV.
For real estate loans granted for the acquisition or
improvement of residential property and secured by a
mortgage or equivalent collateral, and for finance lease
agreements or lease agreements of a financial nature
concerning real estate, if the transaction is with a
counterparty whose risk weight is lower than the risk
weight that would result from the application of the
preceding paragraph, supervised institutions shall assign
the risk-weight that applies to an exposure to that
counterparty.
123
Article 8-4
The effects of credit risk mitigation techniques shall be
taken into account as provided in Title IV.
Article 8-5
In the case of asset sale and repurchase transactions, other
sales with a commitment to repurchase, and forward
purchase commitments, the risk weights shall be those for
the assets themselves and not to the counterparties to the
transactions.
Article 9
Institutions subject to IFRS standards, before applying risk
weights, apply adjustments to the denominator of the
solvency ratio that match the adjustments made to the
numerator of the solvency ratio. These adjustments are
detailed in an Instruction issued by the Autorité de contrôle
prudentiel and are applied to all of the instruments involved
in the adjustment to the numerator.
Article 10
The Autorité de contrôle prudentiel may prohibit the
assignment of a risk weight to an asset or an off-balance
sheet item if it judges that this item does not fulfil the
applicable conditions in a satisfactory manner.
CHAPTER II
PRUDENTIAL TREATMENT FOR EACH
EXPOSURE CATEGORY
Article 11
The following treatment applies to exposures to central
governments and central banks:
a) without prejudice to the provisions of this Article,
supervised institutions shall apply a risk weight of 100%;
b) supervised institutions that use external
assessments shall apply the following risk weights:
Credit quality step
1
2
3
4
5
6
credit
Risk-weight category
0%
20%
50%
100%
100%
150%
c) exposures to the European Central Bank shall be
assigned a risk-weight of 0%;
d) exposures to central governments and central banks of
Member States that are denominated and funded in the
domestic currency shall be assigned a risk-weight of 0%;
e) when the competent authorities of a third country
authorise the use of risk weights lower than 100%, or lower
than the risk weight referred to in paragraph (a) for
exposures to its central government or central bank that are
denominated and funded in the domestic currency,
supervised institutions may apply the same risk weight to
their exposures to those central governments and central
banks, provided that the regulatory and prudential
supervisory regimes in the third country are judged by the
124
Autorité de contrôle prudentiel to be equivalent to those in
force in France;
f) supervised institutions that use external credit
assessments issued by an Export Credit Agency shall apply
the following risk weights:
Minimum export insurance
premiums
0
1
2
3
4
5
6
7
Risk-weight category
0%
0%
20%
50%
100%
100%
100%
150%
g) credit assessments issued by a Credit Export Agency
may be used if either of the following two conditions is
satisfied:
- the assessments are issued by a Credit Export Agency that
participates in the OECD ‘Arrangement on Guidelines for
Officially Supported Export Credits’;
- the Export Credit Agency publishes its credit assessments
and subscribes to the OECD agreed methodology, and the
credit assessment is associated with one of the eight
minimum export insurance premiums (MEIP) that the
OECD agreed methodology establishes.
Article 12
The following treatment shall apply to exposures to
regional governments and local authorities:
a) without prejudice to the following paragraphs,
supervised institutions shall apply to exposures to regional
governments and local authorities the risk weights that
apply to exposures to institutions, unless point d is
applicable;
b) supervised institutions shall apply to their exposures to
regional governments and local authorities in other
Member States the treatment accorded by the competent
authorities of those States;
c) when the competent authorities of a third country riskweight exposures to their regional governments and local
authorities like exposures to their central government and
central bank, supervised institutions may assign the same
risk weight to their own exposures to the third country’s
regional governments and local authorities, provided that
the regulatory and prudential supervisory regimes in the
third country are judged by the Autorité de contrôle
prudentiel to be equivalent to those in force in France;
d) Without prejudice to the preceding paragraphs, the
exposures to the regional governments and local authorities
of Member States denominated and financed in the
borrower’s currency are weighted at 20%.
Selected French Banking and Financial Regulations – 2013
Article 13
The following treatment shall apply to exposures to public
sector entities:
a) exposures to public sector entities shall be risk-weighted
like exposures to institutions, unless they are treated as
exposures to central governments based on their level of
risk;
b) supervised institutions shall treat their exposures to
public sector entities established in other Member States in
the same way as the competent authorities of those States;
c) when the competent authorities of a third country riskweight exposures to public sector entities established in
their territory in the same way as exposures to institutions,
supervised institutions may assign the same risk weight to
their exposures to those entities, provided that the
regulatory and prudential supervisory regimes in the third
country are judged by the Autorité de contrôle prudentiel to
be equivalent to those in force in France.
Article 14
The following treatment shall apply to exposures to
multilateral development banks:
a) exposures to multilateral development banks shall be
treated as exposures to institutions. For the purposes of this
paragraph, the Inter-American Investment Corporation, the
Black Sea Trade and Development Bank and the Central
American Bank for Economic Integration shall be
considered to be multilateral development banks;
b) supervised institutions shall assign a 0% risk weight to
exposures to the following multilateral development banks:
- the International Bank for Reconstruction and
Development;
- the International Finance Corporation;
- the Inter-American Development Bank;
- the Asian Development Bank;
- the African Development Bank;
- the Council of Europe Development Bank
- the Nordic Investment Bank;
- the Caribbean Development Bank;
- the European Bank for Reconstruction and Development;
- the European Investment Bank;
- the European Investment Fund;
- the Multilateral Investment Guarantee Agency;
- the International Facility for Vaccination;
- the Islamic Bank for Development;
c) a risk weight of 20% shall be assigned to the portion of
unpaid capital subscribed to the European Investment
Fund.
Article 15
Exposures to the following international organisations shall
be assigned a 0% risk weight:
- the European Community;
- the International Monetary Fund;
- the Bank for International Settlements.
Article 16
The following treatment shall apply to institutions:
Selected French Banking and Financial Regulations – 2013
a) exposures to institutions shall be risk-weighted
according to the credit quality step of the State in which the
institution is incorporated, subject to the following
conditions:
Credit quality step of the State
1
2
3
4
5
6
Risk-weight category
20%
50%
100%
100%
100%
150%
b) exposures to institutions incorporated in a State that does
not have an external credit assessment shall be riskweighted at 100%;
c) exposures to institutions with an original effective
maturity of three months or less shall be risk-weighted at
20%;
d) a risk weight that is one category less favourable that the
risk weight applied to central governments shall be
assigned to exposures to institutions that have a remaining
maturity of three months or less and that are denominated
and funded in the borrower’s currency. This risk weight
may not be less than 20%;
e) investments in the components of the own funds of other
institutions shall be risk-weighted at 150%, unless they
have been deducted from own funds as provided in
Regulation 90-02;
f) exposures of an supervised institution to its parent
undertaking, its subsidiaries, one of more subsidiaries of its
parent undertaking, or another entity affiliated with the
group for networks of credit institutions endowed with a
central body, including their subsidiaries, shall be riskweighted at 0% providing the following conditions are
satisfied:
(i) the counterparty is a supervised institution, a financial
institution, an asset management company, or an ‘other
undertaking’ as defined in Article 1(f)(v) of
Regulation 2000-03;
(ii) the counterparty is within the perimeter of
consolidation of the group to which the supervised
institution belongs;
(iii) the counterparty is subject to the same risk evaluation,
measurement, and control procedures as the supervised
institution;
(iv) the counterparty is established in the same Member
State as the supervised institution;
(v) there is no obstacle to the transfer of own funds or of
the repayment of liabilities from the counterparty to the
supervised institution.
The provisions of this article do not apply to a supervised
institution’s exposures in the form of investments in the
components of the own funds of other institutions in the
same group.
g) Exposures to institutions in the form of minimum
reserves required by the European Central Bank or by
national central banks shall be risk-weighted like exposures
to the central government or the central bank of the State
where the institution is incorporated, provided that:
125
- the reserves are held in accordance with Regulation (EC)
No 1745/2003 of 12 September 2003 of the European
Central Bank relating to minimum reserves, or equivalent
national rules;
- in the event of the bankruptcy or insolvency of the
institution where the reserves are held, the reserves are
promptly and fully repaid and are not made available to
meet other liabilities of the institution;
h) exposures to financial institutions authorised and
supervised by the competent authorities responsible for the
authorisation and supervision of credit institutions, and
subject to prudential requirements equivalent to those
applied to credit institutions, shall be risk weighted as
exposures to institutions.
Article 17
The following treatment shall applies to corporate
exposures:
a) when supervised institutions use external credit
assessments, subject to the conditions in Chapter 4, the
following risk weights shall apply:
Credit quality step
1
2
3
4
5
6
Risk-weight category
20%
50%
100%
100%
100%
150%
knowledge of the supervised institutions, exceed EUR 1
million. This amount includes past-due exposures but does
not include real estate loans secured by a mortgage or
equivalent collateral. Supervised institutions shall take
reasonable steps to obtain this knowledge.
The discounted value of minimum payments for finance
lease agreements or lease agreements of a financial nature
with retail customers shall be eligible for treatment as retail
exposures.
Transferable securities shall not qualify for this treatment.
b) retail exposures shall be risk-weighted at 75%.
Article 19
The following treatment shall apply to real estate loans
granted for the acquisition or improvement of residential
property and secured by a first mortgage or equivalent
collateral:
a) exposures or portions of exposures that are fully and
completely secured by a mortgage or equivalent collateral
on residential property that is or will be occupied or let by
the owner shall be risk-weighted at 35%, without prejudice
to the provisions of Title IV of this Order.
For the purposes of this paragraph, when the owner of the
residential property is a société civile immobilière that
consists exclusively of natural persons who are not acting
in a professional capacity, the shareholders of the société
civile immobilière shall be considered to be the owners;
b) corporate exposures for which external credit
assessments are not available shall be risk-weighted by
supervised institutions at 100%, or at 150% when
exposures to the State in which the corporate is
incorporated are risk-weighted at 150%;
b) the discounted value of minimum payments for finance
lease agreements or lease agreements of a financial nature
concerning residential property shall be risk-weighted at
35%; any fraction of the residual value at risk taken into
account in exposures shall be risk-weighted at 100%
c) corporate exposures for which there is a short-term credit
assessment shall be risk-weighted as follows, subject to the
conditions in Article 37-4:
c) the application of the provisions in the preceding two
paragraphs shall be subject to the following conditions:
Credit quality step
1
2
3
4
5
6
Risk weight
category
20%
50%
100%
150%
150%
150%
Article 18
The following treatment shall apply to retail exposures:
a) exposures that satisfy the following conditions are
eligible for treatment in the retail exposure class:
i) the exposure is to one or more natural persons, or to a
small or medium-sized entity;
ii) the exposure must be one of a significant number of
exposures managed in a similar fashion;
iii) the total amount owed by the obligor, or by the same
beneficiary within the meaning of Article 3 of Regulation
93-05, to the supervised institution or to one of the entities
of the group to which it belongs, must not, to the
126
i) the value of the property does not depend materially on
the credit quality of the obligor;
ii) the risk on the borrower does not depend materially on
the performance of the underlying property, but rather on
the capacity of the borrower to repay the debt from other
revenue sources. For purposes of this paragraph, the
shareholders of sociétés civiles immobilières can be
considered as the borrower;
iii) the minimum requirements relating to the eligibility of
real estate assets as collateral, set out in Section 2, Chapter
II of Title IV, and the valuation rules set out in Section 5,
Chapter II of Title IV, are satisfied.
The 35% risk weight shall apply only to exposures or
portions of exposures whose value, assessed on a regular
basis, is less than 80% of the value of the asset pledged as
collateral;
d) the Autorité de contrôle prudentiel may waive
subparagraph (ii) of paragraph (c) if the real estate market
is sufficiently developed and its loss rates are sufficiently
low to justify such treatment.
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When the competent authorities of another Member State
apply the above provision, supervised institutions may
assign a risk weight of 35% to transactions with
counterparties incorporated in that State, provided that the
conditions in paragraph (c) are satisfied.
The treatment described in this Article shall also apply to
exposures that represent commitments associated with
mortgage equity withdrawal (hypothèque rechargeable) or
reverse mortgage (prêt viager hypothécaire) products. In
this case, the institution shall provide in advance on the
measures put in place to comply with the provisions of
Title IV of this Order.
Article 20
Without prejudice to the provisions of Title IV, real estate
loans that are granted for the acquisition or improvement of
real estate for business use and that are secured by a
mortgage or equivalent collateral shall be risk-weighted
according to the risk-weight category of the counterparty.
Article 21
The following treatment shall apply to exposures arising
from finance lease agreements or lease agreements of a
financial nature concerning commercial real estate:
a) supervised institutions shall assign a 50% risk weight to
the discounted value of minimum payments for the contract
when the property is located in French territory.
Any fraction of the residual value at risk taken into account
in exposures is risk-weighted at 100%.
Without prejudice to the provisions of Title X, the 50% risk
weight shall apply to the part of the exposure that does not
exceed the smaller of the following two amounts:
i) 50% of the market value of the underlying real estate
asset; or
ii) 60% of the mortgage lending value of the underlying
real estate asset, whichever is lower.
A risk weight of 100% shall be assigned to the portion of
the exposure that exceeds these limits.
total outstanding amount of all finance lease agreements
and lease agreements of financial nature;
ii) the total losses generated each year by all finance lease
agreements and lease agreements of a financial nature does
not exceed 0.5% of the total outstanding amount of all
finance lease agreements and lease agreements of financial
nature.
If either of these two conditions ceases to be satisfied for a
given year, the waiver shall be withdrawn until such time
as both conditions are again satisfied.
When the competent authorities of another Member State
apply the preceding waiver, supervised institutions may
apply the waiver to their transactions with counterparties
incorporated in that State.
Article 22
The following treatment shall apply to exposures that are
past due by more than 90 days, or by more than the number
of days defined in Title X:
a) the risk weight of the unsecured part of a past-due
exposure shall be:
i) 150% if value adjustments represent less than 20% of the
unsecured part of the exposure gross of value adjustments;
ii) 100% if value adjustments do not represent less than
20% of the unsecured part of the exposure gross of value
adjustments,
Unless special circumstances indicate that the delinquency
is due to factors that are unrelated to the situation of the
obligor.
For the purpose of this Article, the secured portion of an
exposure shall be that portion which is covered by
collateral and guarantees listed in Title IV;
b) real estate loans that are granted for the acquisition or
improvement of residential property, and that are secured
by a mortgage or equivalent collateral, shall be riskweighted at 100% if they are 180 days past due, subject to
the provisions of Title X.
b) When the competent authorities in another Member
State apply the preceding treatment, supervised institutions
shall apply it to their transactions with counterparties
incorporated in that State;
If value adjustments represent at least 20% of exposures
gross of value adjustments, the risk weight shall be reduced
to 50%;
c) this treatment shall be subject to the conditions in
subparagraphs (i), (ii), and (iii) of paragraph (c) of
Article 19.
c) exposures arising from finance lease agreements or lease
agreements of a financial nature concerning commercial
real estate shall be risk-weighted at 100% if they are more
than 180 days past due, subject to the provisions of Title X.
The Autorité de contrôle prudentiel may waive the
provisions of subparagraph (ii) of paragraph (c) of Article
19 if the market for finance leases and leases of a financial
nature concerning commercial real estate is sufficiently
developed, provided that loss rates satisfy the following
limits:
i) the losses generated each year by those finance lease
agreements and lease agreements of a financial nature
whose financial outstanding is less than or equal to 50% of
the market value or 60% of the mortgage lending value of
the underlying real estate asset does not exceed 0.3% of the
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Article 23
The treatment of exposures associated with particularly
high risk shall be as follows:
a) equity exposures and investments in the components of
the own funds of other institutions shall be risk-weighted at
150%;
b) supervised institutions shall assign the following risk
weights to high-risk exposures that are not more than 90
days past due:
127
- 100% if value adjustments are no less than 20% of the
unsecured part of the exposure gross of value adjustments;
- 50% if value adjustments are no less than 50% of the
unsecured part of the exposure gross of value adjustments.
Article 24
The risk weights assigned to covered bonds and other
assets benefiting from the preference mentioned in
subparagraph 2 of paragraph I of Article L. 515-13 of the
Monetary and Financial Code, along with similar bonds
issued by an institution whose head office is in a Member
State, shall be based on the risk weights assigned to senior
unsecured exposures to the institution that issues them, as
follows:
- if a risk weight of 20% is assigned to exposures to the
institution, a risk weight of 10% shall be assigned to these
assets;
- if a risk weight of 50% is assigned to exposures to the
institution, a risk weight of 20% shall be assigned to these
assets;
- if a risk weight of 100% is assigned to exposures to the
institution, a risk weight of 50% shall be assigned to these
assets;
- if a risk weight of 150% is assigned to exposures to the
institution, a risk weight of 100% shall be assigned to these
assets;
the provisions of the preceding paragraph shall also apply
to:
- covered bonds and other assets that benefit from the
preference mentioned in subparagraph 2 of paragraph I of
Article L. 515-13 of the Monetary and Financial Code and
that are issued before 31 December 2007;
- similar bonds issued before that date by an institution
whose head office is in a Member State.
Article 25
Exposures to securitisation positions shall be risk-weighted
according to the provisions of Title V.
Article 26
The following treatment shall apply to exposures in the
form of investments in units in Collective Investment
Undertakings (CIU):
a) supervised institutions that use external credit
assessments to risk-weight their units in CIUs shall apply
the following risk weights:
Credit quality step
Risk-weight category
1
2
3
4
5
6
20%
50%
100%
100%
150%
150%
b) where the supervised institution is aware of the
underlying exposures of the CIU, it may risk-weight them
using a ‘look-through’ approach. An average risk weight
for the CIU shall be calculated as provided in this Title;
128
c) where the supervised institution is not aware of the
underlying exposures of the CIU, it may calculate an
average risk weight for the CIU as provided in this Title, as
follows: it will be assumed that the CIU invests, to the
maximum extent allowed under its mandate, in the
exposure classes attracting the highest capital requirement,
and then continues making investments in descending order
until the maximum total investment limit is reached;
d) for the purposes of the two preceding paragraphs,
supervised institutions may rely on a third party to calculate
and report the risk weight assigned to units in the CIU.
Supervised institutions should verify the correctness of the
calculation and report;
e) supervised institutions may assign the risk weights
specified in paragraphs (b) to (d) if the following eligibility
criteria are met:
i) the CIU is managed by a company that is supervised by
an authority in a Member State, or by an authority in a third
country whose supervision is judged by the Autorité de
contrôle prudentiel to be equivalent to the provisions in
force in France;
ii) the CIU’s prospectus, or an equivalent document such as
a statement of management authority, includes:
- the categories of assets in which the CIU is authorised to
invest;
- if investment limits apply, the relative limits applied to
investments and the methodologies used to calculate them;
iii) the business of the CIU is communicated in an annual
report that permits an assessment to be made of its balance
sheet, income, and operations;
f) if a competent authority of a Member States recognises a
CIU in a third country as eligible, as set out in paragraph
(e) above, that CIU may be treated in accordance with
paragraphs (b) to (d);
g) supervised institutions shall assign a risk weight of
150% to exposures in CIUs considered high-risk that invest
exclusively in the instruments mentioned in paragraph (a)
of Article 23, and also to exposures in leveraged funds
(transferable securities CIUs with simplified investment
rules allowing high leverage), funds-of-alternative funds
(transferable securities CIUs with simplified investment
rules for investments in alternative funds), contractual
mutual funds, futures funds (fonds communs de placement
d’intervention sur les marchés à terme), and venture capital
funds (fonds communs de placement à risque).
Article 27
The following treatment shall apply to items other than
those in the exposure categories described in the preceding
articles:
a) intangible assets shall be risk-weighted at 100%;
b) accrued interest and adjustment accounts for which an
institution is unable to determine the counterparty shall be
risk-weighted at 100%;
c) cash items in the course of collection shall be riskweighted at 20%. Cash in hand and equivalent cash items
shall be risk-weighted at 0%;
Selected French Banking and Financial Regulations – 2013
d) gold reserves held physically or on an allocated basis to
the extent backed by bullion liabilities shall receive a 0%
risk weight;
e) where a supervised institution sells credit protection for a
basket of exposures in the form of a credit derivative
triggered by the nth default, the risk weights specified in
Title V shall apply if the instrument has an external credit
assessment.
If the instrument does not have an external credit
assessment, the risk weights of the exposures in the basket
shall be aggregated, excluding n-1 exposures, up to a
maximum of 1250% and then multiplied by the nominal
amount of the protection provided by the credit derivative
in order to obtain the required amount.
The n-1 exposures to be excluded from the aggregation
shall be determined on the basis that they shall include
those exposures each of which produces a lower riskweighted exposure amount than the risk-weighted exposure
amount of any of the exposures included in the
aggregation.
CHAPTER III
RECOGNITION OF EXTERNAL CREDIT
ASSESSMENT INSTITUTIONS
Article 28
The Autorité de contrôle prudentiel recognises External
Credit Assessment Institutions (ECAIs) based on criteria
set out in this chapter.
Any fraction of the residual value at risk taken into account
in exposures shall be risk-weighted at 100%.
Article 29-1
The ECAI shall demonstrate that its methodology for
assigning credit assessments is rigorous, continuous, and
subject to a procedure for validation based on historical
data and applicable to all credit assessments.
Article 29-2
Backing-testing should have been conducted for at least
one year, for each segment of the market.
The ECAI shall make available to the Autorité de contrôle
prudentiel the extent of contacts it has with members of the
executive body of the entities that it assesses.
Article 30-1
The ECAI shall demonstrate that its methodology is free
from political influence or economic pressures that could
influence its credit assessments.
Article 30-2
The ECAI shall demonstrate the independence of its
methodology, particularly with respect to the following
factors:
a) ownership and organisation structure;
b) financial resources;
c) staffing and expertise;
d) corporate governance.
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Article 31-1
The ECAI shall demonstrate that its credit assessments are
subject to ongoing review, and reflect changes in financial
conditions. It shall conduct such a review after any
significant event, and at least annually.
Article 31-2
In the course of recognition process, the Autorité de
contrôle prudentiel shall verify that ECAIs conduct
ongoing reviews of their credit assessments for each market
sector.
Article 31-3
ECAIs shall inform the Autorité de contrôle prudentiel of
any material change in their methods for assessing credit
risk.
Article 32
ECAIs shall demonstrate that the principles of the
methodology used to formulate their credit assessments are
publicly available, so as to allow supervised institutions to
assess their validity.
Article 33-1
ECAIs shall demonstrate that their credit assessments are
recognised as reliable and credible by potential users.
Article 33-2
Credibility shall be assessed in terms of the following
factors:
a) the ECAI’s market share;
b) the revenues generated by the ECAI, and more
generally, its financial resources;
c) the use of its assessments in setting prices;
d) the use of its assessments by at least two credit
institutions for bond issuance or in the management of
credit risk.
Article 34
ECAIs shall demonstrate that they provide access to their
assessments on equivalent terms to resident institutions,
and to all credit institutions that are authorised to conduct
business in the European Economic Area and that have a
legitimate interest in these assessments.
Article 35
The Autorité de contrôle prudentiel shall decide which
credit quality steps the credit assessments of an ECAI shall
be associated with, taking the following factors into
account:
- quantitative factors, such as the long-term default rates
associated with each assessment category. Recently
established ECAIs, and those that do not have a long record
of default data, shall communicate to the Autorité de
contrôle prudentiel their estimates of the long-term default
rate associated with each assessment category;
- qualitative factors, such as the population of issuers
covered, the granularity of credit assessments, the meaning
of each assessment category, and the definition of default
adopted.
129
The Autorité de contrôle prudentiel shall compare the
default rates for each of an ECAI’s assessment categories
with reference default rates. These reference default rates
shall be calculated based on the default data of other
ECAIs, for a population of issuers of equivalent credit risk.
When the Autorité de contrôle prudentiel believes that the
default rates experienced for the credit assessment category
of an ECAI is materially and systematically higher than the
reference rates, it shall assign that category to a higher
credit quality step.
The Autorité de contrôle prudentiel may decide to restore
the credit assessment category to its initial credit quality
step if the ECAI demonstrates that the default rate
calculated is no longer materially and systematically higher
than the reference rates.
CHAPTER IV
THE USE OF EXTERNAL CREDIT ASSESSMENTS
Article 36-1
Each subject establishment shall designate one or more
ECAIs recognised by the Autorité de contrôle prudentiel to
be used for the determination of risk weights for its
exposures.
Supervised institutions may use unsolicited credit
assessments issued by ECAIs, subject to the conditions
specified when they are recognised by the Autorité de
contrôle prudentiel.
A supervised institution that designates an ECAI
recognised by the Autorité de contrôle prudentiel must use
that ECAI’s credit assessments consistently for all
exposures in the same exposure class.
The use of external credit assessments must be consistent
and continuous over time.
A supervised institution may use only the external credit
assessments of an ECAI that covers both principal and
interest.
If only one external credit assessment is available for a
given exposure, supervised institutions shall use it to
determine the risk weight for that item.
Article 362
If two external credit assessments are available and they
give rise to different risk weights, the higher risk weight
shall be assigned.
Article 37-2
Where there is no credit assessment that applies directly to
an exposure, but there is a general credit assessment for the
issuer, or a credit assessment for a specific issuing program
to which the item constituting the exposure does not
belong, that credit assessment shall be used if the following
conditions are satisfied:
i) it produces a higher risk weight;
ii) it produces a lower risk weight, but the exposure ranks:
- at least equal in all respects to specific issuing program;
- at least equal to senior unsecured exposures to that issuer.
The preceding provisions do not preclude the application of
the provisions of Article 24 relating to covered bonds.
Article 37-3
External credit assessments applied to a firm that is part of
a consolidated group within the meaning of
Article L. 233-16 of the Commercial Code shall not be
used for other firms within the group.
Article 37-4
Short-term credit assessments shall be used only to riskweight short-term exposures to corporates.
Short-term credit assessments shall be used only for the
short-term exposure to which they refer.
If a short-term exposure that has an external credit
assessment is risk-weighted at 150%, all unrated unsecured
exposures to the same obligor shall also be risk-weighted at
150%, whether they are short-term or long-term.
If a short-term exposure that has an external credit
assessment is risk-weighted at 50%, all unrated short-term
exposures shall be risk-weighted no lower than 100%.
Article 37-5
An external credit assessment that refers to an exposure
denominated in one currency may not be used to derive the
risk weight for an exposure denominated in another
currency, even if both exposures are to the same obligor.
When an exposure results from the participation of a credit
institution in a loan granted by a Multilateral Development
Bank whose preferred creditor status is recognised in the
market, the supervised institution may use an external
credit assessment for that exposure even if the exposure is
denominated in the obligor’s domestic currency.
Article 37-1
If more than two external credit assessments are available,
the supervised institution shall refer to the two assessments
that give rise to the lowest risk weights and apply the
higher of the two risk weights.
Where there is an external credit assessment for a specific
issuing program, supervised institutions shall that credit
assessment to risk-weight that exposure.
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TITLE III
INTERNAL RATINGS BASED APPROACH
FOR CREDIT RISK
CHAPTER I
GENERAL PROVISIONS
Section 1
Approval Procedure
Article 38-1
To calculate their risk-weighted exposure amounts,
supervised institutions shall use:
a) own estimates of the probability of default (PD) in the
Foundation IRB Approach;
b) own estimates of PD, loss given default (LGD), and
credit conversion factors (CCF) in the Advanced IRB
Approach.
The use of the Foundation and Advanced IRB Approaches
is subject to the approval of the Autorité de contrôle
prudentiel, as set forth below.
Article 38-2
In order to receive approval to use the IRB Approaches,
supervised institutions must have systems for managing
and rating credit risk exposures that are based on sound
principles and implemented with integrity, as reflected in
the satisfaction of the following qualitative standards:
a) the supervised institution’s rating systems shall provide
for a meaningful assessment of obligor and transaction
characteristics, a meaningful differentiation of risk, and
accurate and consistent quantification of risk;
b) internal ratings and estimates of default probabilities and
losses used in the calculation of capital requirements, along
with associated systems and processes, shall play an
essential role in the institution’s risk management and
decision-making process, as well as in its credit approval
process, internal capital allocation, and corporate
governance;
c) supervised institutions shall have a credit risk control
unit responsible for its rating systems. This unit shall carry
out its control functions on an ongoing and independent
basis;
d) supervised institutions shall collect and store all data that
can provide effective support to its credit risk measurement
and management process;
e) supervised institutions shall document their rating
systems and the rationale for their choice of in the design of
those systems;
f) supervised institutions shall validate their internal rating
systems.
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Article 38-3
When a subject EU parent institution and its subsidiaries
apply the IRB Approach on a unified basis, the Autorité de
contrôle prudentiel may allow the minimum requirements
of Chapter V to be met at the level of the group.
Article 38-4
Without prejudice to the provisions of Title X, a supervised
institution requesting approval to use the Foundation IRB
Approach shall demonstrate that it has been using internal
rating systems that are broadly in line with the minimum
requirements set out in Chapter V to measure and manage
risks in the IRB exposure classes in question for at least
three years prior to approval.
Without prejudice to the provisions of Title X, a supervised
institution requesting approval to use the Advanced IRB
Approach shall demonstrate that it has been estimating and
using own estimates of LGDs and CCFs in a manner
broadly consistent with the minimum requirements set out
in Chapter V for at least three years prior to approval.
Article 38-5
Supervised institutions that have received approval to use
the Foundation or Advanced IRB Approach may not revert
to the Standardised Approach for credit risk, except for
demonstrated good cause and with the prior approval of the
Autorité de contrôle prudentiel.
Supervised institutions that have received approval to use
the Advanced IRB Approach may not revert to the
Foundation IRB Approach, except for demonstrated good
cause and with the prior approval of the Autorité de
contrôle prudentiel.
If the requirements of this Title cease to be satisfied, the
supervised institution shall present to the Autorité de
contrôle prudentiel a plan for a timely return to
compliance, unless it can demonstrate that the effects of its
non-compliance are not material.
Article 39-1
Without prejudice to the provisions of Section 3,
supervised institutions shall implement the IRB
Approaches for all exposures, as set forth below.
Article 39-2
The Autorité de contrôle prudentiel may grant approval to
supervised institutions to implement IRB Approaches
sequentially, over a reasonable period of time, for each of
the exposure classes listed in Section 2, within the same
business unit, or for different business units within the
same group; as well as for the use of own estimates of
LGDs or CCFs for the calculation of risk weights for
exposures to corporates, institutions, and central
governments and central banks.
In the case of retail exposures, sequential implementation
may be by sub-portfolio.
Article 39-3
In the context of sequential implementation of IRB
Approaches, once a supervised institution uses IRB
Approaches for any given exposure class, it must apply the
provisions of Title III to the equity exposure class.
131
Article 39-4
The
timeframe
and conditions
for sequential
implementation of IRB Approaches shall be approved by
the Autorité de contrôle prudentiel.
Article 40-5
Any credit obligation that does not fall within the exposure
classes listed above shall be assigned to the corporate
exposure class.
Conditions shall be designed to ensure that sequential
implementation is not used selectively for the purpose of
reducing minimum capital requirements.
Article 40-6
The methodology used by the supervised institution for
assigning exposures to the different exposure classes shall
be appropriate and consistent over time.
Article 39-5
During the period of sequential implementation, supervised
institutions shall ensure that credit risk mitigation
techniques used in the context of intra-group transactions
are not motivated by considerations of regulatory arbitrage.
SECTION 2
EXPOSURE GARANTIES
Article 40-1
Each exposure shall be assigned to one of the following
exposure classes, as set forth below:
a) central governments and central banks;
b) institutions;
c) corporates;
d) retail;
e) equity;
f) securitisation positions;
g) other non credit-obligation assets .
Article 40-2
The following exposures shall be treated as exposures to
central governments and central banks:
a) exposures to regional governments and local authorities
or to public-sector entities that are treated as exposures to
central governments as provided in Title II;
b) exposures to multilateral development banks and
international organisations that attract a risk weight of 0%
as provided in Title II.
Article 40-3
The following exposures shall be treated as exposures to
institutions:
a) exposures to regional governments and local authorities
or to public-sector entities that are not treated as exposures
to central governments as provided in Title II;
b) exposures to public-sector entities that are treated as
exposures to institutions as provided in Title II;
c) exposures to multilateral development banks that do not
attract a risk weight of 0% as provided in Title II.
Article 40-4
When an ECAI is recorded as credit rating agency in
accordance with regulation (EC) No. 1060/2009 of 16
September 2009 of the European Parliament and of the
Council on credit rating agencies, the Autorité de contrôle
prudentiel shall consider that the objectivity, independence,
constancy and transparency requirements are met with
regard to its assessment method..
132
Article 41
Exposures that satisfy all of the following conditions are
eligible for inclusion in the retail exposure class:
a) the exposure is to one or more natural persons, or to a
small or medium-sized entity. In the latter case, the total
amount owed by the obligor, or by the same beneficiary
within the meaning of Article 3 of Regulation 93-05, to the
supervised institution or to one of the entities of the group
to it belongs, does not, to the knowledge of the supervised
institutions, exceed EUR 1 million. This amount includes
past-due exposures but does not include real estate loans
secured by a mortgage or equivalent collateral. Supervised
institutions shall take reasonable steps to obtain this
knowledge.
b) the supervised institution’s risk management systems
treat exposures consistently over time and uniformly from
one exposure to the next;
c) exposures are not managed individually like exposures
falling within the corporate exposure class;
d) each exposure represents one of a significant number of
similarly managed exposures.
That fraction of the exposure value of lease financing
agreements or lease agreements of a financial nature with
retail customers that corresponds to the discounted value of
minimum payments under the terms of the agreements is
eligible for treatment as a retail exposure.
The retail exposure class includes the following subportfolios:
- revolving exposures to retail customers;
- real estate loans to retail customers secured by a mortgage
or equivalent collateral;
- other exposures to retail customers.
Article 42
Exposures that convey a subordinated, residual claim on
the assets or income of the issuer, or that have a similar
economic substance, are treated as equity exposures.
Article 43
Within the corporate exposure class, supervised institutions
shall separately identify Specialised Lending exposures.
These have the following characteristics:
a) the exposure is to an entity created specifically to
finance or operate physical assets;
b) the contractual arrangements give the institution a
significant degree of control over the assets and the income
they generate;
Selected French Banking and Financial Regulations – 2013
c) the primary source of repayment of the obligation is the
income generated by the assets being financed, rather than
the independent capacity of a broader commercial
enterprise.
Specialised Lending exposures include project finance,
object finance and commodities finance, income-producing
real estate, and high-volatility commercial real estate.
Section 2
Exposure Guaranties
Article 44-1
Subject to the approval of the Autorité de contrôle
prudentiel, supervised institutions may use the
Standardised Approach for credit risk for the following
exposures:
a) exposures to central governments and central banks, and
institutions, when the number of significant counterparties
is limited and it would be unduly burdensome for the
supervised institution to implement a rating system for
these counterparties;
b) exposures in business units or exposure classes that are
not material in terms of their size and perceived risk
profile;
c) exposures to the central government of the Member
States and to their regional governments, local authorities,
and administrative bodies, provided that:
i) there is no difference in risk between the exposures to the
central government and exposures to these other bodies, as
a result of specific public arrangements;
ii) exposures to the central government are risk-weighted at
0%, as provided in Title II;
d) equity exposures to the shares of entities whose credit
obligations are risk-weighted at 0%, as provided in Title II;
e) equity exposures held in the context of legislated
programmes that aim at promoting specified sectors of the
economy, that provide significant subsidies to the
supervised institution for the investment, and that involve
some form of government oversight and restrictions on the
equity investments. The amount of exposures subject to this
treatment is limited to 10% of the own funds of the
supervised institution;
f) exposures to institutions in the form of minimum
reserves required by the European Central Bank or by
national central banks, subject to the conditions paragraph
(g) of Article 16;
g) exposures covered by guarantees provided in the context
of mutual guarantee schemes, or provided by or counterguaranteed by entities such as those listed in Article 192-2.
Article 44-2
Supervised institutions may assign a 0% risk weight to
exposures to their parent undertaking, their subsidiaries,
one of more subsidiaries of their parent undertaking, or
another entity affiliated with the group for networks of
credit institutions endowed with a central body, including
Selected French Banking and Financial Regulations – 2013
their subsidiaries, subject to the conditions in paragraph (f)
of Article 16.
Article 44-3
The Autorité de contrôle prudentiel may grant approval to
supervised institutions to apply the Standardised Approach
to equity exposures for which that treatment has been
approved in other Member States.
Article 45
For the purposes of paragraph (b) of Article 44-1, the
equity exposure class of a supervised institution shall be
considered material if the aggregate value of equity
exposures, excluding equity exposures held under the
legislative programmes referred to in paragraph (e) of
Article 44-1, exceeds 10% of the supervised institution’s
own funds on average over the preceding year. If the
number of these equity exposures is less than 10 individual
holdings, that threshold shall be 5% of the supervised
institution’s own funds.
CHAPTER II
RISK-WEIGHTED EXPOSURES
Section 1
Risk-weights for exposures to corporates, institutions,
and central governments and central banks
Article 46
Supervised institutions using the Foundation IRB Approach
shall use own estimates of PD, and the values for LGDs
and CCFs set out in Articles 84 and 76.
Supervised institutions using the Advanced IRB Approach
shall use own estimates of PDs, LGDs, and CCFs as
provided in Chapter V.
Article 47
Risk weighted exposure amounts shall be calculated
according to the following formulas:
RW = (LGD * N[(1-R)-0,5 * G(PD) + (R/(1-R))0,5 *
G(0,999)] - PD * LGD) * (1-1,5*b)-1 * (1+(M-2,5)
*b) * 12,5 * 1,06
R = 0,12x(1-EXP(-50*PD)) / (1-EXP(-50)) + 0,24*
[1-(1-EXP(-50*PD)) / (1-EXP(-50))]
b = (0,11852 – 0,05478 * In(PD))2
where:
- RW is the risk weight;
- R is the correlation;
- b is the maturity adjustment;
- PD is the probability of default;
- LGD is the loss given default;
- M is the maturity;
- N(x) is the cumulative distribution function for a standard
normal random variable;
- G(z) is the inverse cumulative distribution function for a
standard normal random variable.
The risk-weighted exposure amount is equal to the risk
weight (RW) multiplied by the exposure value.
133
When PD = 0, RW shall be equal to 0.
When PD = 100%, i.e., in the event of default, the
following treatment shall be applied:
a) RW = 0 for supervised institutions that use the
Foundation IRB Approach;
b) RW = Max{0, 12,5 * (LGD-ELBE)} for supervised
institutions that use the Advanced IRB Approach. ELBE is
the supervised institution’s best estimate of expected loss
for the defaulted exposure, as defined in Article 129.
Article 48
The risk weighted exposure amount for exposures that meet
the requirements set out in Articles 188 and 192-4 may be
adjusted according to the following formula for treatment
of default:
Risk-weighted exposure amount = RW * exposure value *
(0.15 + 160*PDpp)]
where:
- PDpp = PD of the protection provider;
- RW shall be calculated using the risk-weight formula in
the preceding paragraph, using the PD of the obligor, the
LGD associated with a comparable direct exposure to the
protection provider, and a maturity adjustment (b)
calculated using the lower of the PD of the protection
provider and the PD of the obligor.
Article 49
For exposures to firms where the total annual sales for the
consolidated group of which the firm is a part is less than
EUR 50 million, supervised institutions may use the
following correlation formula to calculate risk weights for
corporate exposures:
R = 0,12*(1-EXP(-50*PD)) / (1-EXP(-50)) + 0,24 * [1-(1EXP(-50*PD)) / (1-EXP(-50))] – 0,04 * (1-(S-5) / 45)
where S is the total consolidated annual sales in millions of
euros.
Reported sales of less than EUR 5 million shall be treated
as if they were equivalent to EUR 5 million. For purchased
receivables, the total consolidated annual sales shall be the
weighted average by individual exposures of the pool.
When total consolidated annual sales is not a meaningful
indicator of firm size, and total assets is a more meaningful
indicator, supervised institutions shall substitute the total
assets of the group for total consolidated annual sales.
Article 50-1
When supervised institutions cannot demonstrate that their
PD estimates for Specialised Lending exposures meet the
minimum requirements set out in Chapter V, they shall
apply the following risk weights:
Remaining
maturity
Less than
2.5 years
Equal to or
greater
than
2.5
years
134
Strong
Good
Weak
Default
70%
Satisfacto
ry
115%
50%
250%
0%
70%
90%
115%
250%
0%
Supervised institutions shall assign the above risk weights
to Specialised Lending exposures in accordance with the
Appendix III based on the following factors: financial
strength, political and legal environment, transaction and/or
asset characteristics, the strength of the sponsor and
developer including any public private partnership income
stream, and the security package.
Article 50-2
The Autorité de contrôle prudentiel may grant approval to a
supervised institution to apply a risk weight of 50% to all
exposures in the ‘strong’ category and a risk weight of 70%
to all exposures in the ‘good’ category, whatever their
remaining maturity, provided that the institution’s methods
for assigning Specialised Lending exposures to supervisory
categories are more strict than those set out in Appendix
III.
Article 50-3
When justified by market conditions, the Autorité de
contrôle prudentiel may require the application of higher
risk weights for high-volatility commercial real estate.
Article 51
For purchased corporate receivables, supervised institutions
shall comply with the minimum requirements set out in
Articles 141 to 144.
For purchased corporate receivables that meet the above
requirements and also satisfy the conditions set out in
Article 54-5, and where it would be unduly burdensome for
a supervised institution to apply to those receivables the
risk quantification standards for corporate exposures set out
in Chapter V, it shall apply the risk quantification standards
for retail exposures set out in Chapter V.
For purchased corporate receivables, refundable purchase
discounts, collateral, or partial guarantees that provide firstloss protection to the institution for default losses or
dilution losses may be treated as first-loss positions as
provided in Title V applicable to institutions using the
approach based on internal ratings.
Article 52
Where a supervised institution sells credit protection for a
basket of exposures in the form of a credit derivative
triggered by the nth default, the risk weights specified in
Title V shall apply if the instrument has an external credit
assessment.
If the instrument does not have an external credit
assessment, the risk weights of the exposures in the basket
are aggregated, excluding n-1 exposures, for which the sum
of the expected loss multiplied by 12.5 and the riskweighted exposure does not exceed the nominal amount of
protection provided by the credit derivative, multiplied by
12.5.
The n-1 exposures to be excluded from the aggregation are
determined on the basis that they shall include those
exposures each of which produces a lower risk-weighted
exposure amount than the risk-weighted exposure amount
of any of the exposures included in the aggregation.
Selected French Banking and Financial Regulations – 2013
Section 2
Risk-weights for retail exposures
Article 53
Supervised institutions shall use own estimates of PDs and
own estimates of LGDs and CCFs as provided in
Chapter V.
Article 54-1
Risk weighted exposure amounts for retail exposures shall
be calculated according to the following formulas:
R = 0,03*(1-EXP(-35*PD)) /(1-EXP(-35)) +
0,16*[1-(1-EXP(-35*PD)) / (1-EXP(-35))]
RW = (LGD*N[(1-R)-0,5*G(PD)+(R/(1-R))0,5 *
G(0,999)] - PD*LGD)*12,5*1,06
where:
- N(x) is the cumulative distribution function for a standard
normal random variable;
- G(z) is the inverse cumulative distribution function for a
standard normal random variable.
The risk-weighted exposure amount is equal to the risk
weight (RW) multiplied by the exposure value.
When PD = 100%, i.e., in the event of default, RW = Max
{0, 12,5 * (LGD - ELBE)}. ELBE is the supervised
institution’s best estimate of expected loss for the defaulted
exposure, as defined in Article 129.
Article 54-2
The risk-weighted exposure amounts for exposures to small
and medium-sized entities classified in the retail exposure
class that satisfy the requirements listed in Articles 188 and
192-4 may be adjusted using the formula in Article 48.
Article 54-3
For the sub-portfolio of retail estate loans secured by a
mortgage or equivalent collateral, a correlation of 0.15
shall be substituted for the figure produced by the
correlation formula in Article 54-1.
A correlation of 0.15 shall also be used for exposures that
represent commitments associated with home equity loan
(hypothèque rechargeable) or reverse mortgage (prêt
viager hypothécaire) products, provided that the risk
parameters for these products are generally similar to those
for real estate loans.
Article 54-4
A correlation of 0.04 shall be applied to qualifying
revolving retail exposures as defined below that meet the
following conditions:
a) the exposures are to natural persons;
b) the exposures are revolving, are not covered by any
credit protection, and are unconditionally cancellable by
the supervised institution to the extent they are not drawn
immediately. In this context, revolving exposures are
defined as credits where’ customers outstanding balances
Selected French Banking and Financial Regulations – 2013
are permitted to fluctuate based on their decisions to
borrow and repay, up to a limit established by the
supervised institution. Undrawn commitments may be
considered as unconditionally cancellable if the contractual
terms permit the supervised institution to cancel them to the
full extent allowable under consumer protection and related
legislation.
c) the maximum exposure in the form of credit extended to
a given natural person in the sub-portfolio is EUR 100,000
or less;
d) the supervised institution can demonstrate to the Autorité
de contrôle prudentiel that the use of the correlation
formula in this Article is limited to portfolios that have
exhibited low volatility of loss rates, relative to their
average level of loss rates, especially within low PD bands.
Supervised institutions shall monitor the volatility of loss
rates in the retail revolving exposure sub-portfolio to
ensure that this treatment is consistent with the underlying
risk characteristics of the sub-portfolio.
Article 54-5
To be eligible for the retail treatment, purchased
receivables shall satisfy the minimum requirements set out
in Articles 141 to 144 and the following conditions:
a) the supervised institution has purchased the receivables
from unrelated third-party sellers, and its exposures do not
include any exposures that are directly or indirectly
originated by the supervised institution itself.
b) the purchased receivables are generated on an arm’slength basis between the seller and the obligor. As such,
inter-company accounts receivables and receivables subject
to contra-accounts between firms that buy and sell to each
other are ineligible.
c) the purchasing supervised institution has a claim on all
proceeds from the purchased receivables or a pro-rata
interest in the proceeds.
d) the portfolio of purchased receivables is sufficiently
diversified.
Article 55
For purchased receivables, refundable purchase discounts,
collateral, or partial guarantees that provide first-loss
protection to the institution for default losses or dilution
losses may be treated as first-loss positions as provided in
Title V applicable to institutions using the approach based
on internal ratings.
Article 56
For pools comprising different sub-portfolios of purchased
receivables, the retail risk weight function producing the
highest capital requirements for this type of exposure shall
apply where the purchasing supervised institution cannot
distinguish exposures secured by a mortgage or equivalent
collateral and qualifying revolving retail exposures from
other retail exposures.
135
Section 3
Risk weights for equity exposures
Article 57-1
Risk-weighted exposure amounts for equity exposures are
calculated using the simple risk weight approach set out in
Articles 58-1 to 58-3 or the internal models approach
described in Articles 59-1 to 59-3.
Article 57-2
With the prior approval of the Autorité de contrôle
prudentiel, supervised institutions may apply one of the
two above methods to different portfolios, provided that
they already use them for the purposes of internal
management. They shall demonstrate to the Autorité de
contrôle prudentiel that the choice of method is applied
consistently and is not motivated by considerations of
regulatory arbitrage.
Article 58-1
In the simple risk weight approach, risk-weighted exposure
amounts are equal to the exposure value multiplied by the
following risk weights:
- 190% for private equity exposures in sufficiently
diversified portfolios;
- 290% for exchange traded equity exposures;
- 370% for all other equity exposures.
Article 58-2
Short cash positions and derivative instruments held in the
non-trading book are permitted to offset long positions in
the same individual stocks, line by line, provided that these
instruments have been explicitly designated as hedges of
specific equity exposures and that they have a residual
maturity of at least one year. Other short positions are to be
treated as if they are long positions, with the relevant risk
weight applied to the absolute value of each position. In the
context of maturity mismatched positions, the method that
applies is that for corporate exposures as set out in
Article 90.
Article 58-3
Supervised institutions using the simple risk weight
approach may take unfunded credit protection into account,
subject to the conditions in Title IV. For the purposes of
Article 195-4, they shall apply, by substitution, the PD of
the protection provider for the part of the exposure covered
by the protection, a maturity of 5 years, and an LGD of
65% for private equity exposures in sufficiently diversified
portfolios and 90% for all other equity exposures.
Article 59-1
In the internal models approach for equities:
a) supervised institutions shall compare the risk-weighted
exposure amounts at the individual exposure level,
calculated line by line, using the internal models approach
referred to in paragraph (c) (ii), with limits corresponding
to the risk-weighted exposure amounts that would result
from the application of the simple risk weight approach
using the following risk weights:
136
- 190% for private equity exposures in sufficiently
diversified portfolios;
- 200% for exchange traded equity exposures;
- 300% for all other equity exposures.
b) supervised institutions shall distinguish, within their
portfolio, between:
i) equities for which the risk-weighted exposure amounts
calculated using the internal models approach referred to in
paragraph (c)(ii) are less than the above limits;
ii) other equities for which the risk-weighted exposure
amounts calculated using the internal models approach are
greater than the above limits;
c) the risk-weighted exposure amounts shall be equal to the
sum of:
i) the risk-weighted exposure amounts calculated
using the simple risk weight approach and the risk
weights in paragraph a) for the equities referred to in
paragraph (b)(i); and
ii) the risk-weighted exposure amounts for the
equities referred to in paragraph (b)(ii), calculated as
the potential loss on the supervised institution’s
equity exposures using internal value-at-risk models
subject to the 99th percentile, one-tailed confidence
interval of the difference between quarterly returns
and an appropriate risk-free rate computed over a
long-term sample period, multiplied by 12.5.
Article 59-2
For the purpose of paragraph (c) (ii) of the preceding
Article, the recognition of underlying gains by supervised
institutions applying the internal models approach to equity
exposures is subject to the approval of the Autorité de
contrôle prudentiel, which shall determine whether such
recognition is consistent with supervisory objectives, and
which shall make its approval subject to the satisfaction of
conditions to that effect.
Article 59-3
Supervised institutions using the internal models approach
for equities may take into account unfunded credit
protection obtained on an equity position.
Section 4
Risk weights for other non credit-obligation assets
Article 60
Risk-weighted exposure amounts shall be equal to 100% of
exposure values.
Section 5
Dilution risk for purchased receivables
Article 61
For receivables purchased with full recourse to the seller
for default risk and dilution risk, supervised institutions
may treat the exposure as a collateralised exposure instead
of applying the treatment set out in this section.
Selected French Banking and Financial Regulations – 2013
Article 62
Risk weights for dilution risk shall be calculated according
to the formula in Article 47, using a PD, LGD, and
exposure value determined in accordance with Chapter IV,
and a maturity of one year.
If supervised institutions can demonstrate to the Autorité de
contrôle prudentiel that dilution risk is not material, it need
not be recognised.
Section 6
Risk weights for exposures in the form of investments in
units in a Collective Investment Undertaking.
Article 63-1
Where exposures in the form of an investment in a unit in
a Collective Investment Undertaking (CIU) meet the
criteria set out in paragraphs (e) and (f) of Article 26, and
supervised institutions are aware of all or a part of the
underlying exposures of the CIU, they shall take those
underlying exposures directly into account in calculating
risk-weighted exposure amounts and expected loss
amounts, using a ‘look-through’ approach.
Article 63-2
Where supervised institutions do not meet the conditions
for using the IRB Approaches of all or a part of the
underlying exposures of the CIU, the risk weighted
exposure amounts and expected loss amounts shall be
calculated using the following method, without prejudice
to the provisions of Article 63-1 concerning the exposures
that meet the conditions of use of internal notations:
a)
for equity exposures, the simple risk weight approach
applies.
b) for all other underlying exposures, the Standardised
Approach for credit risk applies, subject to the
following modifications:
i)
the following exposures have a double risk weighting:
-
exposures having a specified risk
weight, for non noticed exposures;
exposures corresponding to the credit
quality step immediately above the
credit quality step that would normally
be assigned to them.
These risk weights shall not exceed 1 250 %.
ii) For all other exposures, the risk weight shall be
multiplied by 1, 1 with a minimum of 5%.
Where, for purposes of point a, the supervised
institution cannot set a distinction between the
exposures in the form of private equity investments,
quoted shares and other types of shares, it shall treat
such exposures as « exposures on other shares”.
Without prejudice to Article 394, Article 44-1 can
apply where these exposures, linked to direct exposures
of the institution in this category of exposures, are not
.
relevant in the meaning of Article 45
Selected French Banking and Financial Regulations – 2013
Article 64
Where exposures in the form of a investments in units of a
CIU do not meet the criteria set out in paragraphs (e) and
(f) of Article 26, or supervised institutions are not aware of
all of the underlying exposures of the CIU, they shall look
through to the underlying exposures and calculate riskweighted exposure amounts and expected loss amounts
using the simple risk weight approach set out in Articles
58-1 to 58-3. If, for those purposes, supervised institutions
are unable to differentiate between private equity exposures
in sufficiently diversified portfolios, exchange-traded
equity exposures, and other equity exposures, they shall
treat the exposures concerned as other equity exposures.
For these purposes, non-equity exposures are assigned to
one of the following exposure classes: private equity
exposures in sufficiently diversified portfolios, exchange
traded equity, or other equity. Unknown exposures are
assigned to the other equity exposure class.
Article 65
As an alternative to the method set out in Article 64,
supervised institutions may calculate themselves, or may
rely on a third party to calculate and report the average
risk-weighted exposure amounts based on the underlying
exposures of the CIUs, provided that the supervised
institutions verify the correctness of the calculation and the
report. The calculation shall be made using the approaches
described at Article 63-2:
The alternative method described in the previous paragraph
applies to the portion of the CIU’s underlying exposures
that the supervised institution is not aware of or that it may
not reasonably become aware of.
In particular, it applies when directly taking account of
underlying exposures to calculate the risk-weighted
exposure amounts and the expected loss amounts, in
accordance with the methods described in this section,
would represent an excessive constraint for the institution.
CHAPTER III
CALCULATION OF EXPECTED LOSSES
Section 1
Methods of calculation
Article 66-1
For exposures to corporates, institutions, central
governments and central banks, and for retail exposures,
the amount of expected loss is equal to EL multiplied by
the exposure value, where EL = PD * LGD.
When the probability of default is 100%, i.e., in the case of
default, EL shall be set equal to ELBE as defined in Article
129, if the supervised institution uses own estimates of
LGDs.
For exposures receiving the double-default treatment set
out in Article 48, EL shall be zero.
Article 66-2
For Specialised Lending exposures for which supervised
institutions apply the approach set out in Articles 50-1 to
50-3, EL values shall be determined according to the
following table:
137
Remaining
maturity
Less than
2.5 years
Equal to
or greater
than 2.5
years
Strong
Good
Satisfactory
Weak
Default
0%
0.4%
2.8%
8%
50%
0.4%
0.8%
2.8%
8%
50%
Where competent authorities have granted general approval
to a supervised institution generally to assign a risk weight
of 50% to exposures in the ‘strong’ category and a risk
weight of 70% to exposures in the ‘good’ category, the EL
values for those categories shall be set at 0% and 0.4%
respectively.
Article 67-1
The expected loss amounts for equity exposures whose risk
weighted exposure amounts are calculated using the simple
risk weight approach shall be equal to the exposure value
multiplied by the following EL values:
CHAPTER IV
RISK PARAMETERS
Section 1
Exposure value
Subsection 1
Exposures to corporates, institutions, central
governments and central banks,
and retail customers
Article 69
The exposure value of an asset is equal to its balance-sheet
value. The exposure value is based on the drawn and
undrawn amounts in accordance with Articles 76 to 79.
- 0.8% for private equity exposures in sufficiently
diversified portfolios;
- 0.8% for exchange traded equity exposure;
- 2.4% for all other equity exposures.
Article 70-1
When supervised institutions use master novation
agreements or master netting agreements for repurchase
transactions or for securities or commodities lending or
borrowing transactions, exposure values shall be calculated
in accordance with the provisions Title IV or the provisions
of Chapter V of Title VI relating to valuation using the
Internal Models approach.
Article 67-2
The expected loss amounts for equity exposures whose
risk-weighted exposure amounts are calculated using the
internal models approach shall be zero.
Article 70-2
When loans and deposits of the same counterparty are
subject to on-balance sheet netting, the exposure values
shall be determined in accordance with Title IV.
Article 67-3
The expected loss amounts for dilution risk of purchased
receivables shall be set equal to EL multiplied by the
exposure value, where EL = PD * LGD.
Article 71
The exposure value of lease financing agreements or lease
agreements of a financial nature, corresponding to their
accounting value, can be broken down into two elements:
the discounted value of minimum lease payments and, if
relevant, a fraction of the residual value at risk equal at 1/t
where t equals the higher value between 1 and the residual
number of full years in the contract..
Article 67-4
For other non credit-obligation assets, EL = 0.
Section 2
Treatment of expected losses
Article 68
The expected loss amounts calculated in accordance with
Articles 66-1, 66-2, and 67-3 shall be subtracted from the
sum of value adjustments and general provisions related to
these exposures. The expected loss amounts for securitised
exposures and the value adjustments and provisions related
to these exposures shall not be included in this calculation.
Positive and negative margins shall be treated according to
Articles 4(e) and 6c of Regulation 90-02.
Where institutions calculate risk-weighted exposure
amounts for counterparty credit risk under Title VI, the
value adjustments made to take account of the credit
quality of the counterparty may be included in the sum of
value adjustments and collective provisions made for
positions in the trading book.
Subject to the approval of the Autorité de contrôle
prudentiel, if the credit risk of the counterparty is
adequately taken into account in the valuation of a position
in the trading book, the expected loss amount associated
with the counterparty credit risk shall be zero.
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The fraction of the residual value at risk taken into account
is included in the exposure category of other assets that do
not correspond to credit obligations.
When the sale of the leased asset to the lessee appears
reasonably certain at the beginning of the agreement, the
supervised institution shall confirm at least annually that
the sale remains reasonably certain.
Article 72
For the derivative instruments listed in Appendix II,
exposure value is determined in accordance with the
methods set out in Title VI.
Article 73
The exposure value for purchased receivables shall be the
outstanding amount of the receivables, as determined by
application of Article 69, minus the capital requirements
for dilution risk before taking account of the effects of
credit risk mitigation.
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Article 74
For exposures in the form of securities or commodities
sold, posted, or lent under repurchase transactions,
securities or commodities lending or borrowing
transactions, long settlement transactions, or margin
lending transactions, the exposure value shall be the value
of the securities or commodities concerned, calculated in
accordance with Article 4-3. If the supervised institutions
use the Financial Collateral Comprehensive Method for
taking into account the effect of financial collateral as
provided in Title IV, the exposure value shall take volatility
adjustments into account in accordance with Articles 178-2
to 178-6.
The exposure value for asset sale and repurchase
transactions, securities or commodities lending or
borrowing transactions, long settlement transactions, and
margin lending transactions can, as appropriate, be
calculated:
- as provided in Chapter V of Title VI on valuation using
the Internal Model method; or
- as provided in Section 3, Chapter 4 of Title IV on the use
of internal models to capture the effect of netting
mechanisms on such transactions.
Article 75
The exposure value for exposures to a central clearing
house may be set equal to zero, subject to the conditions in
Section 2, Chapter I of Title VI.
Article 76
The exposure value of the following items shall be
calculated as the committed but undrawn amount
multiplied by a CCF. Supervised institutions shall use the
following CCFs:
a) for credit lines that are unconditionally cancellable at
any time by the supervised institution without prior notice,
or that effectively permit automatic cancellation in the
event of deterioration in the borrower’s credit-worthiness, a
CCF of 0% shall apply, provided that the supervised
institutions actively monitor the financial condition of the
obligor, and that their internal control systems enable them
to detect immediately any deterioration in the credit quality
of the obligor. Undrawn retail credit lines may be
considered as unconditionally cancellable if the contractual
terms permit the supervised institution to cancel them to the
full extent allowable under consumer protection and related
legislation.
b) for short-term letters of credit arising from the
movement of goods, a CCF of 20% shall apply for both the
issuing and confirming institutions.
c) for undrawn purchase commitments for revolving
purchased receivables that are unconditionally cancellable
or that effectively permit automatic cancellation at any time
by the institution without prior notice, a CCF of 0% shall
apply, provided that the supervised institutions actively
monitor the financial condition of the counterparties, and
that their internal control systems enable them to detect
immediately any deterioration in the credit quality of the
counterparties;
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d) for other credit lines, note issuance facilities (NIFs), and
revolving underwriting facilities (RUFs), a CCF of 75%
shall apply.
Article 77
Where a commitment refers to the extension of another
commitment, the lower of the two CCFs associated with
the individual commitment shall be used.
Article 78
For all off-balance sheet items other than those mentioned
above, the exposure value shall be a percentage of their
value determined as a function of the risk category to
which the item belongs, in accordance with Appendix I,
specifically:
- 100% of its value if it is in the full-risk category;
- 50% of its value if it is in the medium category;
- 20% of its value if it is in the medium/low-risk category;
- 0% of its value if it is in the low-risk category;
These percentages are referred to as supervisory CCFs.
Article 79
Without prejudice to the provisions of Article 39-2,
supervised institutions that apply the Advanced IRB
Approach shall use own estimates of CCFs for the various
off-balance sheet items, subject to the conditions set out in
Chapter V, with the exception of the items listed in
Appendix I that fall within the full-risk category, for which
a supervisory CCF of 100% applies.
Subsection 2
Equity exposures
Article 80
For supervised institutions using the simple risk weight
approach set out in Articles 58-1 to 58-3, the exposure
value is the value recorded on the balance sheet, subject to
the following conditions:
a) for investments held at fair value with changes in value
flowing directly through income and into own funds, the
exposure value is the fair value presented on the balance
sheet;
b) for investments held at fair value with changes in value
not flowing through income but into a tax-adjusted separate
component of equity, the exposure value is the fair value
presented on the balance sheet, after deduction of any latent
gains not included in regulatory capital;
c) for investments held at historical cost or at the lower of
cost or market value, the exposure value is the historical
cost or market value presented on the balance sheet
Subsection 3
Other non credit-obligation assets
Article 81
The exposure value of other non credit-obligation assets is
their accounting value.
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Section 2
Exposures to corporates, institutions, and central
governments and central banks
Subsection 1
Probability of default
Article 82-1
The PD of an exposure to a corporate or an institution shall
be at least 0.03%.
Subsection 2
Loss Given Default
Article 84
Supervised institutions applying the Foundation IRB
Approach shall use the following LGD values:
a) 45% for senior exposures without eligible collateral;
b) 75% for subordinated exposures without eligible
collateral;
The PD of obligors in default shall be 100%.
Article 82-2
Supervised institutions using the Foundation IRB Approach
shall take unfunded credit protection into account as
provided in Title IV.
Supervised institutions using the Advanced IRB Approach
may take unfunded credit protection into account by
adjusting PD, subject to the provisions of Article 86.
Article 82-3
For purchased corporate receivables for which a supervised
institution cannot demonstrate that its PD estimates meet
the minimum requirements set out in Chapter V, the PDs
for these exposures shall be determined according to the
following methods:
a) for senior claims, PD shall correspond to the supervised
institution’s estimate of EL, divided by LGD;
b) for subordinated claims, PD shall be the supervised
institution’s estimate of EL.
If a supervised institution uses the Advanced IRB
Approach and it can decompose its EL estimates for
purchased corporate receivables into PDs and LGDs in a
reliable manner, it may use its PD estimates for the
purchased receivables.
Article 83
For dilution risk of purchased corporate receivables, PD
shall be set equal to the EL estimate for dilution risk.
If a supervised institution uses the Advanced LGD
approach and it can decompose its EL estimates for dilution
risk of purchased corporate receivables into PDs and LGDs
in a reliable manner, it may use PD estimates for purchased
receivables.
Supervised institutions using the Foundation IRB Approach
shall take unfunded credit protection into account as
provided in Title IV
Supervised institutions using the Advanced IRB Approach
for dilution risk on purchased corporate receivables may
take unfunded credit protection into account by adjusting
PD, subject to the provisions of Article 86.
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c) 11.25% for covered bonds and other assets benefiting
from the preference, mentioned in subparagraph 2 of
paragraph I of Article L. 515-13 of the Monetary and
Financial Code, along with similar bonds issued by an
institution whose head office is in a Member State.
Until 31 December 2010, the above rate shall be reduced to
11.25% when the following conditions, relating to sociétés
de crédit foncier and other institutions that issue similar
bonds and that have their head office in a Member State,
are satisfied:
- exposures to public legal persons, such as those referred
to in Article L. 515-15 of the Monetary and Financial
Code, along with secure and liquid securities and
instruments referred to in Article L. 515-17 of the
Monetary and Financial Code, qualify for the highest credit
quality step issued by an ECAI recognised by the Autorité
de contrôle prudentiel;
- the share of Fonds Communs de Créances does not
exceed 20% of the nominal amount of covered bonds and
other assets benefiting from an equivalent preference;
- ships are not recognised as eligible assets; or
- covered bonds and other assets benefiting from the
preference mentioned in subparagraph 2 of paragraph I of
Article L. 515-13 of the Monetary and Financial Code, or
similar bonds issued by an institution whose head office is
in a Member State, qualify for the highest credit quality
level established by an ECAI recognised by the Autorité de
contrôle prudentiel for that category of bonds;
d) 45% for senior purchased corporate receivables, if the
supervised institution cannot demonstrate that its PD
estimates meet the minimum requirements set in Chapter
V;
e) 100% for subordinated purchased corporate receivables,
if the supervised institution cannot demonstrate that its PD
estimates meet the minimum requirements set in Chapter
V;
f) 75% for the dilution risk of purchased corporate
receivables.
Supervised institutions that apply the Foundation IRB
Approach shall take into account the effects of any
collateral and guarantees, as provided in Title IV.
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Article 85
For dilution and default risk, if a supervised institution uses
the Advanced IRB Approach and it can decompose its EL
estimates for purchased corporate receivables into PDs and
LGDs in a reliable manner, it may use its LGD estimates
for the purchased corporate receivables.
Article 86
Supervised institutions using the Advanced IRB Approach
shall take unfunded credit protection into account by
substituting PD and (if relevant) LGD estimates, or by
adjusting LGD estimates, subject to the minimum
requirements set out in Chapter V and with the prior
approval of the Autorité de contrôle prudentiel. They may
not assign guaranteed exposures an adjusted PD or LGD
such that the adjusted risk weight would be lower than that
of a comparable direct exposure to the protection provider.
Article 87
Notwithstanding the provisions of Articles 84 and 86, for
the purposes of double-default treatment, the LGD for a
comparable direct exposure to the protection provider shall
be the LGD associated with an unhedged facility to:
- the obligor if the available evidence and the structure of
the guarantee indicate that, in the event of a joint default of
the obligor and the protection provider, the amount
recovered would depend on the financial condition of the
guarantor or obligor;
- the guarantor in all other cases.
Subsection 3
Maturity
Article 88
Supervised institutions using the Foundation IRB Approach
shall assign exposures arising from repurchase transactions
or securities or commodities lending or borrowing
transactions a maturity value (M) of 0.5 years, and to all
other exposures a maturity of 2.5 years.
Article 89-1
Supervised institutions using the Advanced IRB Approach
shall calculate the value of M for each of these exposures in
accordance with paragraphs (a) to (g), subject to the
provisions of Articles 89-2 and 90. In all cases, M shall be
no greater than 5 years.
a) For an instrument subject to a cash flow schedule, the
value of M shall be calculated using the following formula:
M = MAX 1; MIN t * CFt / CFt ;5
t
t
where CFt denotes the cash flows (principal, interest
payments and fees) contractually payable by the obligor in
year t;
b) for derivatives covered by a master novation agreement
or a master netting agreement, M shall be equal to the
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weighted average remaining maturity of each exposure
weighted by its notional amount, but no less than one year.
c) for fully or nearly fully collateralised derivative
instruments, for fully or nearly-fully collateralised margin
lending transactions, the maturity M shall be equal to the
weighted average remaining maturity weighted by the
transactions but not less than ten days; and for repurchase
transactions and securities or commodities borrowing or
lending transactions that are covered by a master netting
agreement, M shall be equal to the weighted average
remaining maturity weighted by the transactions, but no
less than 5 days.
d) if a supervised institution uses own PD estimates for
purchased corporate receivables, M for drawn amounts
shall be equal to the weighted average maturity of the
purchased receivables, but no less than 90 days.
The same value of M shall also be applied to undrawn
amounts under a committed purchase facility, provided the
facility contains effective covenants, early amortisation
triggers, or other features that protect the purchasing
supervised institution against a significant deterioration in
the quality of the receivables it is required to purchase
under the terms of the purchase agreement.
In the absence of such protection, M for undrawn amounts
shall be equal to the sum of the maximum possible maturity
for a receivable under terms of the purchase agreement and
the remaining maturity of the purchase agreement, but no
less than 90 days;
e) for any instrument other than those mentioned in this
paragraph, or when a supervised institution is not in a
position to calculate the value of M in accordance with
paragraph (a), M shall be equal to the maximum remaining
number of years that the obligor is permitted to take to fully
discharge its contractual obligations, but no less than one
year;
f) for supervised institutions using the Internal Model
Method for counterparty credit risk set out in Title VI, the
value of M for exposures to which this method is applied
and that are included in a netting set within which the
maturity of the longest-dated contract is greater than one
year, shall be determined using the following formula:
tk ≤1year EffectiveEEk * Δtk * dfk +maturity
EEk * Δtk * dfk
k =1
tk >1an
M = MIN
;5
tk ≤1year
EffectiveEEk * Δtk * dfk
k =1
where:
dfk = the risk-free discount factor for future time period tk.
A supervised institution that uses an internal model to
calculate a one-sided credit valuation adjustment (CVA)
may, subject to the approval of the Autorité de contrôle
prudentiel, take as the value of M the effective credit
duration estimated by the model.
Subject to the provisions of Article 89-2, the formula
mentioned at point a shall apply to netting sets in which all
contracts have an original maturity of less than one year.
141
For the purposes of double-default treatment, the value of
M shall be the effective maturity of the credit protection,
but not less than one year.
Article 89-2
Notwithstanding the provisions of paragraphs (a), (b), (c),
(d) and (e) of the preceding Article, M shall be at least one
day for:
d)
–
–
–
–
fully or nearly fully collateralised derivative
instruments;
fully or nearly fully collateralised margin lending
transactions; and
repurchase transactions and securities or commodities
lending or borrowing transactions,
that are subject to daily margin calls and daily
revaluation and that allow for the prompt liquidation
or setoff of collateral in the event of default or failure
to satisfy a margin call;
as well as any other items which are not part of the
obligor’s ongoing financing.
Article 90
Maturity mismatches shall be treated according to the
provisions of Title IV.
Section 3
Retail exposures
Subsection 1
Probability of Default
Article 91
The PD of a retail exposure shall be at least 0.03%.
For obligors in default, or when a transaction-bytransaction approach is used for defaulted claims, PD shall
be 100%.
Article 92
For dilution risk of purchased receivables, PD shall be set
equal to EL estimates for dilution risk. If a supervised
institution can reliably decompose its EL estimates for
dilution risk of purchased receivables into PDs and LGDs,
the PD estimate may be used.
Article 93
Supervised institutions may take unfunded credit protection
into account by adjusting PDs, subject the provisions of
Article 95.
For dilution risk, where supervised institutions do not use
own estimates of LGDs, the taking into account of
unfunded credit protection shall be subject to compliance
with the provisions of Title IV.
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Subsection 2
Loss Given Default
Article 94
Supervised institutions shall provide own estimates of
LGDs, in accordance with the minimum requirements set
out in Chapter V and with the prior approval of the Autorité
de contrôle prudentiel. For dilution risk of purchased
receivables, an LGD value of 75% shall be used. If a
supervised institution can reliably decompose its EL
estimates for dilution risk of purchased receivables into
PDs and LGDs, the LGD estimate may be used.
Article 95
Supervised institutions shall take unfunded credit
protection into account by substituting PD and (if relevant)
LGD estimates or by adjusting LGD estimates for a given
exposure or pool of exposures, subject to the minimum
requirements set out in Chapter V and with the prior
approval of the Autorité de contrôle prudentiel. Supervised
institutions may not assign exposures covered by
guarantees or credit derivatives an adjusted PD or LGD
such that the adjusted risk weight would be lower than that
of a comparable direct exposure to the protection provider.
Article 96
Notwithstanding the provisions of the preceding paragraph,
for the purposes of double-default treatment, the LGD for a
comparable direct exposure to the protection provider shall
be the LGD associated with an unhedged facility to:
- the obligor, if the available evidence and the structure of
the guarantee indicate that, in the event of a joint default of
the obligor and the protection provider, the amount
recovered would depend on the financial condition of the
obligor;
- the guarantor in all other cases.
Chapter V
MINIMUM REQUIREMENTS
Section 1
Rating system
Subsection 1
General provisions
Article 97-1
‘rating system’ means all of the methods, processes,
controls, and data collection and IT systems that support
the assessment of credit risk, the rating of exposures or
their assignment to a grade or pool, and the quantification
of default and loss estimates for a given type of exposure.
Article 97-2
Supervised institutions shall periodically review the criteria
and processes for rating exposures or for assigning them to
a pool, in order to determine whether they remain
appropriate for the composition of the portfolio and
external conditions.
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Article 97-3
When a supervised institution uses more than one rating
system, the rationale for using a particular rating system for
a type of obligor or transaction shall be documented and
should reflect the level of risk.
Article 97-4
When a supervised institution uses direct estimates of risk
parameters, these may be considered as the outputs of a
classification by rating grade on a continuous rating scale.
Subsection 2
Rating system design for exposures to corporates,
institutions, and central governments and central banks
Article 98
The rating system shall satisfy the following requirements:
a) it shall take into account the risk characteristics of the
obligor and the transaction;
b) it shall include an obligor rating scale that reflects
exclusively the quantification of the risk of obligor default.
This scale shall have a minimum of seven grades for nondefaulted obligors and one grade for defaulted obligors.
‘Obligor grade’ means a risk category within a rating
system’s obligor rating scale to which obligors are assigned
on the basis of a specified and distinct set of rating criteria
from which estimates of PD are derived;
c) supervised institutions shall document the relationship
between obligor grades associated with a level of default
risk, and the criteria used to determine that level;
d) supervised institutions whose portfolios are concentrated
in a particular market segment and a given range of default
risk shall have a sufficient number of obligor grades within
that range to avoid undue concentrations of obligors in a
given grade;
e) where there are large concentrations within a single
grade, the institution shall demonstrate that the obligor
grade covers a reasonably narrow PD band and that the
default risk posed by all obligors to whom that grade is
assigned falls within that band.
Article 99
To be granted approval to use own estimates of LGDs,
supervised institutions must have a rating system that
satisfies the following requirements:
a) the rating system incorporates a distinct facility rating
scale which exclusively reflects LGD-related transaction
characteristics.
‘Facility grade’ means a risk category within a rating
system’s facility scale to which exposures are assigned on
the basis of a specified and distinct set of rating criteria
from which own estimates of LGD are derived;
b) the definition of grades shall include a description of the
methods for assigning exposures and the criteria used to
distinguish the level of risk across grades.
c) where there are large concentrations within a given
facility grade, the institution shall demonstrate that the
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facility grade covers a reasonably narrow LGD band and
that the risk posed by all exposures in the grade falls within
that band.
Article 100
Supervised institutions that risk-weight Specialised
Lending exposures as provided in Articles 50-1 to 50-3
shall be exempt from the requirement to have an obligor
rating scale which reflects exclusively the quantification of
PDs for these exposures. For these exposures and for the
purposes of the provisions of Articles 50-1 to 50-3, they
shall have at least four grades for non-defaulted obligors
and at least one grade for defaulted obligors.
Subsection 3
Rating system design for retail exposures
Article 101
The rating system shall satisfy the following requirements:
a) it shall reflect both obligor and transaction risk, and shall
capture all relevant obligor and transaction characteristics;
b) the level of risk differentiation shall ensure the
assignment to each grade or pool of a sufficient number of
exposures to allow for meaningful quantification and
validation of the loss characteristics of that grade or pool
level. The distribution of exposures and obligors across
grades or pools shall be such as to avoid excessive
concentrations;
c) supervised institutions shall demonstrate that the system
for assigning exposures to grades or pools provides for:
- a meaningful differentiation of risk;
- the grouping of sufficiently homogenous exposures;
- accurate and consistent estimation of loss characteristics
at the level of each grade or pool.
For purchased receivables, this grouping shall reflect the
seller’s underwriting policies;
d) institutions shall consider the following risk factors
when assigning exposures to grades or pools:
- the risk characteristics of the obligor;
- the risk characteristics of the transaction, including
product or collateral types. Supervised institutions shall
explicitly address cases where several exposures benefit
from the same collateral;
- delinquencies, unless the supervised institution
demonstrates to the Autorité de contrôle prudentiel that
delinquency is not a material risk factor.
Subsection 4
Rating or assignment of exposures
Article 102
Supervised institutions’ rating systems shall have specific
definitions, processes, and criteria for rating exposures or
assigning them to different pools. The following
requirements shall be satisfied.
a) the definitions and criteria shall be sufficiently detailed
to allow those charged with assigning ratings to assign
obligors or facilities posing similar risk to the same grade
143
or pool, in a consistent fashion across business lines,
departments, and geographic location;
b) the documentation of the rating process shall allow third
parties:
- to understand the methods used to assign exposures to
grades or pools;
- to evaluate the appropriateness of the assignments; and
- and to replicate grade and pool assignments, if necessary.
c) The criteria used shall also be consistent with internal
lending standards and the policies for handling troubled
obligors and facilities.
Article 103
Supervised institutions shall take all relevant information
into account in assigning obligors and facilities to different
grades or pools. Information shall be current and shall
enable the supervised institution to forecast the future
performance of the exposure. The less information a
supervised institution has, the more conservative shall be
its rating and assignment policies. If a supervised
institution uses an external rating as a primary factor
determining an internal rating assignment, it shall ensure
that it considers other relevant information.
Article 104
The rating of exposures to corporates, institutions, and
central governments and central banks shall be conducted
using the following methods:
a) each obligor shall be assigned to an obligor grade as part
of the credit approval process;
b) for supervised institutions using the Advanced IRB
Approach, each exposure shall also be assigned to a facility
grade as part of the credit approval process;
c) supervised institutions using the methods set out Articles
50-1 to 50-3 for assigning risk weights to Specialised
Lending exposures shall assign each of these exposures to a
grade in accordance with Article 100;
d) each distinct legal entity to which the supervised
institution is exposed shall be separately rated. The
supervised institution shall put in place procedures for
rating individual clients that take account of their
membership in a group of counterparties considered as a
single beneficiary within the meaning of Article 3 of
Regulation 93-05;
e) the same obligor grade shall be assigned to different
exposures to the same obligor, whatever the nature of the
transaction. The only exceptions are:
i) where there is country transfer risk;
ii) where guarantees extended to an exposure imply an
adjusted obligor grade;
iii) where the exchange of client data is prohibited by bank
secrecy, consumer protection, or any other regulation.
Article 105
Each retail exposure shall be assigned to a grade or a pool
as part of the credit approval process.
144
Article 106
Supervised institutions shall document the situations in
which human judgement may override the input parameters
or the results of the rating system. In particular:
a) supervised institutions shall indicate which personnel are
responsible for approving such overrides;
b) supervised institutions shall analyse changes in the credit
quality of exposures that have been the object of such
overrides. This analysis shall include an assessment of the
appropriateness of the adjustments made by the person
responsible for the override.
Subsection 5
Integrity of the rating or assignment process
Article 107
The rating process for exposures to corporates, institutions,
and central governments and central banks shall satisfy the
following requirements:
a) the assignment of ratings and the periodic review of
those assignments shall be conducted or approved by an
independent party that does not directly benefit from
decisions to extend or renew the credits;
b) supervised institutions shall update their ratings of
exposures at least annually. High-risk obligors and problem
exposures shall be subject to more frequent review;
c) supervised institutions shall assign a new rating to any
obligor or exposure for which material new information
becomes available;
d) supervised institutions shall put in place an effective
process permitting them to obtain and update relevant
information on obligor characteristics that affect default
probabilities, and on transaction characteristics that affect
LGDs and CCFs.
Article 108
For retail exposures, supervised institutions shall, at least
annually, update obligor and facility ratings and
assignments to pools based on the risk factors set out in
Article 101. Supervised institutions shall review at least
annually a representative sample of individual exposures
within each pool in order to ensure that exposures continue
to be assigned to the correct pool.
Subsection 6
Use of models
Article 109
If a supervised institution uses a statistical model or any
other mechanical method to assign exposures to different
rating grades or pools, the following conditions must be
met:
a) the supervised institution shall demonstrate to the
Autorité de contrôle prudentiel that the model has good
predictive power and that its use does not result in a
distortion of capital requirements. The input variables shall
form a consistent and effective basis for making
predictions. The model shall not have material biases;
Selected French Banking and Financial Regulations – 2013
b) the supervised institution shall have a process for vetting
inputs to the model which includes an assessment of the
accuracy, completeness, and appropriateness of the data;
estimates are assigned to rating grades, obligors, exposures,
or pools;
b) the data sources used to estimate the model;
c) the supervised institution shall demonstrate that the data
used to build the model are representative of all of its
obligors or exposures;
d) the supervised institution shall put in place a regular
programme of model validation that includes monitoring
the model’s performance and reliability, reviewing the
specification of the model, and assessing model outputs
against outcomes.
e) in order to confirm the results produced by the model
and ensure that the model is used appropriately, the
statistical model shall be complemented by expert
judgement and analysis. Review procedures shall permit
the supervised institution to detect and limit errors resulting
from weaknesses in the model. Expert judgement shall take
into account all relevant information not considered by the
model;
f) the supervised institution shall document how model
results and expert judgement are combined.
Subsection 7
Documentation of rating systems
Article 110
Supervised
institutions
documentation, including:
shall
have
d) any circumstances under which the model does not work
correctly.
Article 112
The use of a model obtained from a third-party vendor that
claims proprietary technology does not exempt supervised
institutions from the requirements of this Chapter relating
to rating systems, and in particular from the requirement to
provide appropriate documentation.
Subsection 8
Data maintenance
Article 113-1
For exposures to corporates, institutions, and central
governments and central banks, supervised institutions
shall collect and store the following information:
a) a complete history of the ratings assigned to obligors and
to recognised guarantors;
appropriate
a) the design and operational details of their rating systems.
This documentation shall attest to compliance with the
minimum requirements set out in this Chapter, and address
topics including portfolio differentiation, rating criteria, the
responsibilities of the persons charged with rating and
assigning obligors and exposures, the frequency with which
ratings and assignments are reviewed, and the methods for
overseeing the rating process
b) the rationale for and analysis supporting the choice of
rating criteria;
c) all major changes in the risk rating process. This
documentation shall take into account changes made to the
risk rating process as the result of any observations made
by the Autorité de contrôle prudentiel to the supervised
institution;
d) the entire system for rating and assigning exposures and
the associated internal control structure;
e) the specific definitions of default and loss used by the
supervised institutions. The documentation should
demonstrate that these definitions are consistent with the
definitions set out in this Order.
Article 111
If the supervised institution employs statistical models in
its rating process, it shall document the methodology,
specifying:
a) the details of the theories, assumptions, mathematical
foundations, and empirical analysis on the basis of which
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c) a rigorous statistical process used to validate the model,
including out-of-time and out-of-sample performance tests;
b) the dates the ratings were assigned;
c) the methodology and the principal data used to derive
the ratings;
d) the identity of the person who assigned the ratings;
e) identification of defaulted obligors and exposures;
f) the date and circumstances of these defaults;
g) data on the default probabilities and loss rates associated
with rating grades and ratings migrations;
h) for supervised institutions using the Foundation IRB
Approach, data comparing the realised values of LGD with
the values set in Article 84 and the realised values of CCFs
with the values set in Article 76.
Article 113-2
Supervised institutions that use the Advanced IRB
Approach shall collect and store the following information:
a) a complete history of facility ratings and the LGD and
CCF estimates associated with each rating scale;
b) the dates the ratings were assigned and the estimates of
LGD and CCFs were made;
c) the methodology and principal data used to derive
facility ratings and LGD and CCF estimates;
d) the identity of the person who assigned the facility
ratings and the person who provided LGD and CCF
estimates;
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e) data on the estimated and realised LGDs and CCFs
associated with each defaulted exposure;
f) data on the LGD associated with each exposure before
and after evaluation of the effects of a guarantee or credit
derivative, if the supervised institutions adjust their
estimates of LGD to take account of the effects of these
credit risk mitigation techniques;
g) data on the components of loss recorded for each
defaulted exposure, including the amount recovered, the
source of recovery, and the administrative costs of
recovery.
Article 114
For retail exposures, supervised institutions shall collect
and store the following information:
a) data used in the process of assigning exposures to grades
or pools;
b) data on the estimates of PDs, LGDs, and CCFs
associated with each grade or pool;
c) the identity of defaulted obligors and exposures;
d) for all defaulted exposures, data on the grades or pools
to which the exposure was assigned for credit risk during
the year prior to default and the realised outcomes on LGD
and CCF;
e) data on loss rates recorded for the sub-portfolio of
qualifying revolving retail exposures.
Subsection 9
Stress tests used in assessing capital adequacy
Article 115
Supervised institutions shall have a programme of relevant
stress tests used to assess the adequacy of internal capital.
These stress tests shall make it possible to identify events
or changes in economic conditions that could have
unfavourable effects on the institution’s credit exposures
and to assess its liability to withstand such changes.
Article 116
Supervised institutions shall regularly perform a credit risk
stress test to assess the impact of the model assumptions on
its total capital requirements for credit risk. The stress test
used by the supervised institution shall have the following
characteristics:
It is relevant and reasonably conservative, considering at
least the effect of a mild recession which could last two or
three quarters;
Supervised institutions shall assess the migration of
exposures from one rating grade to another as a function of
the assumptions made in the different scenarios;
The stress portfolios shall cover the great majority of the
supervised institution’s exposures.
Supervised institutions shall provide the General
Secretariat of the Autorité de contrôle prudentiel with a
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description of the assumptions and principle methodologies
used in the stress tests, in the form of an appendix on stress
testing to the report on measurement and monitoring of
exposures referred to in Article 43 of regulation 97-02.
Article 117
Supervised institutions applying the treatment of doubledefault risk shall take into account as part of their stress
testing framework of the impact of deterioration in the
credit quality of protection providers, and, in particular,
shall consider the case of protection providers who cease to
satisfy the eligibility criteria.
Section 2
Risk quantification
Subsection 1
Definition of default
Article 118-1
A particular obligor is in default when one of the following
two conditions is satisfied:
a) the supervised institution considers that the obligor is
unlikely to pay its credit obligations to the institution, the
parent undertaking, or any of its subsidiaries in full,
without recourse by the supervised institution to actions
such as realising security;
b) the obligor is more than 90 days past due on a credit
obligation to the supervised institution, the parent
undertaking, or any of its subsidiaries, unless the specific
circumstances indicate that the delinquency is due to causes
unrelated to the obligor’s financial condition.
Article 118-2
For overdrafts, days past due are counted from when:
- the obligor has breached an authorised limit that has been
brought to its attention by the supervised institution;
- or the obligor has been advised that its current
outstandings exceed a limit set by the supervised institution
in the context of its internal control system;
- or the obligor has drawn credit without authorisation.
- In place of the above criteria, supervised institutions may
count days past due from when the overdraft has been the
subject of a request on the part of the supervised institution
for full or partial repayment from the obligor, provided that
this request for repayment is in the context of a rigorous
daily monitoring of overdrafts by the institution and a
documented procedure setting criteria for issuing such
requests.
Days past due for credit cards are counted from the
contractual payment due date.
Article 118-3
Without prejudice to the provisions of Title X, for
exposures to lessees of real property in finance lease
agreements and lease agreements of a financial nature, the
number of days past due for purposes of paragraph (b) of
Article 118-1 shall be 90.
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For exposures to acquirers of residential property, central
governments, regional governments and local authorities,
and public sector entities, when the counterparty is
incorporated in French territory, the number of days past
due for purposes of paragraph (b) of Article 118-1 shall be
180.
When justified by the needs of the internal rating system,
and when such treatment does not lead to regulatory
arbitrage, supervised institutions may use a number of days
past due greater than 90 for retail exposures, exposures to
central governments, regional governments and local
authorities, and public sector entities, and also, until 31
December 2011, for corporate exposures, when the
counterparties are incorporated in other Member States.
The number of days past due shall not be greater by that set
by the competent authorities in the other Member State.
For retail exposures, the definition of default may be
applied at the facility level.
Article 119
The following elements shall be taken as indicators that an
obligor is unlikely to pay its credit obligations in full:
a) the supervised institution puts the credit obligation on
non-accrued status;
b) the supervised institution makes a value adjustment
motivated by the perception of a significant decline in the
quality of the credit obligation subsequent to the extension
of credit;
c) the supervised institution sells the credit obligation at a
material economic loss as a result of the deterioration in its
credit quality;
d) the supervised institution consents to a forced
restructuring of the credit obligation which is likely to
result in a diminished financial obligation caused by the
material forgiveness or postponement of principal, interest
or (where relevant) fees;
e) the supervised institution has requested the opening of a
collective legal proceeding against the obligor or an obligor
of its parent undertaking or its affiliates, or has stated a
claim on such obligors in such a proceeding;
f) the obligor has requested or obtained the benefit of
protection from proceedings that could avoid or delay the
repayment of its credit obligation to the supervised
institution, its parent undertaking, or any of its subsidiaries.
Article 120
Supervised institutions that use external data that are not
consistent with the definition of default shall demonstrate
to the Autorité de contrôle prudentiel that they have made
appropriate adjustments in order to achieve broad
equivalence with the definition of default.
Article 121
If supervised institutions consider that a defaulted exposure
no longer has the characteristics set out in Articles 118-1 to
118-3, that exposure shall be reclassified and treated as a
non-defaulted exposure. In the event that the definition of
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default is subsequently triggered, the supervised institution
shall consider than another default has occurred.
Subsection 2
Overall requirements for estimation
Article 122-1
Estimates of the risk parameters PD, LGD, and CCF, as
well as of expected loss, shall incorporate all appropriate
data, information, and methods, in accordance with the
following provisions:
a) the estimates shall be derived using historical experience
and empirical evidence, and not based purely on
judgemental considerations;
b) the estimates shall be plausible and shall be based on the
material factors determining the evolution of the different
risk parameters;
c) the less data a supervised institution has, the more
conservative shall be its estimations;
d) supervised institutions shall be able to provide a history
of their loss experience broken down in terms of default
frequency, LGD, CCFs, or loss if they use EL estimates, by
the factors they considers as the drivers of the different risk
parameters;
e) supervised institutions shall demonstrate that their
estimates are based on long-run experience;
f) any changes in lending practices or the process for
pursuing recoveries during the observation periods referred
to in this Chapter shall be taken into account;
g) supervised institutions’ estimates shall reflect any
technical advances, new data, and any other information, as
soon as they become available;
h) supervised institutions shall review their estimates when
new information comes to light, and at least once annually.
Article 122-2
For purchased receivables, estimates shall reflect all
relevant information available to the supervised institution
regarding the quality of the underlying receivables,
including data provided by the seller or by external sources
for similar pools. The purchasing supervised institution
shall verify any data furnished by the seller upon which it
bases its estimates.
Article 122-3
Supervised institutions shall add a margin of conservatism
to their estimates to take account of the expected range of
estimation errors. Where data and methods are less
satisfactory and the expected range of errors is larger, the
margin of conservatism shall be larger.
Article 122-4
Where supervised institutions use different estimates for
the calculation of risk weights and for internal purposes,
they shall document the rationale for their choice and
demonstrate its reasonableness to the Autorité de contrôle
prudentiel.
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Article 122-5
Supervised institutions may use data collected prior to the
effective date of this Order provided they have
demonstrated to the Autorité de contrôle prudentiel that
they have made appropriate adjustments to the data to
achieve broad equivalence with the definition of default or
loss.
Article 123-1
The population of exposures shall satisfy the following
requirements:
a) the population of exposures represented in the data used
for estimation, as well as the lending standards used by the
supervised institution when the credit was granted and any
other relevant characteristics, shall be comparable with
those of the exposures and standards currently in force.
b) supervised institutions shall demonstrate that the
economic or market conditions that underlie the data are
relevant to current and foreseeable conditions;
c) the number of exposures in the sample and the reference
period used for quantification shall be sufficient to provide
the supervised institutions with confidence in the accuracy
and robustness of their estimates;
Article 123-2
If a supervised institution uses a data set that is pooled
across more than one institution, it shall demonstrate that:
a) the rating systems and criteria of the other supervised
institutions in the pool are similar to its own;
b) the pool is representative for the portfolio for which the
pooled data is used;
c) the pooled data are used consistently over time for the
calculation of estimates;
d) it has a sufficient understanding of its rating systems,
including the ability to monitor and audit the rating process
effectively in conformance with Article 37-2 of Regulation
97-02. A supervised institution using pooled data shall
remain responsible for the integrity of its rating systems
and shall maintain full control over them.
Subsection 3
Requirements specific to estimating PDs
Article 124
PD estimates for exposures to corporates, institutions, and
central governments and central banks shall satisfy the
following requirements:
a) supervised institutions shall estimate PDs for each
obligor grade from long-run averages of one-year default
rates;
b) for purchased corporate receivables, supervised
institutions may estimate expected losses for each obligor
grade from long-run averages of one-year realised default
rates;
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c) if a supervised institution derives long-run average
estimates of PDs and LGDs for purchased corporate
receivables from an estimate of expected loss and an
appropriate estimate of PD or LGD, the process for
estimating total losses shall meet the standards for
estimation of PDs and LGDs set out in this Chapter. The
outcome shall be consistent with the concept of LGD set
out in Article 126-1;
d) PD estimation techniques must be based on a supporting
analysis. Supervised institutions shall recognise the
importance of expert judgment in combining the results
produced by different techniques and in making necessary
adjustments;
e) if a supervised institution uses data from its own default
experience to estimate own PDs, it shall demonstrate in its
analysis that those estimates reflect its underwriting
standards and any differences between the rating system
that generated the data and the current rating system.
Where underwriting standards or rating systems have been
modified, the supervised institution shall add a greater
margin of conservatism in its estimates of PDs;
f) if a supervised institution maps the rating grades in its
internal rating system to the credit quality levels used by an
ECAI or similar organisation, the following requirements
must be satisfied:
- mappings shall be based on a comparison between the
institution’s internal rating criteria and those used by the
external organisation, and on a comparison of the internal
and external ratings of any common obligors;
- the supervised institution shall avoid any bias or
inconsistency in its mapping approach and at the level of its
underlying data;
- the criteria and data used by the external organisation in
calculating its estimates shall be oriented exclusively to
default risk and not to the characteristics of the transaction;
- the supervised institution’s analysis shall include a
comparison of the default definitions used, subject to the
requirements set out in subsection 1. The supervised
institution shall document the approach used to establish
the mapping between external assessments and internal
ratings;
g) a supervised institution that uses statistical default
prediction models may estimate PDs as the average of
default-probability estimates for individual obligors in a
given rating grade. The supervised institution’s use of
default probability models for this purpose shall meet the
standards set out in Article 109;
h) the length of the underlying historical observation period
used shall be at least five years for at least one of the data
sources used by the supervised institution, whether the
institution uses external, internal, or pooled data sources. If
the available observation period for one data source spans a
longer period than the other sources, the longer period shall
be used, provided the corresponding data are relevant.
Supervised institutions may use a historical observation
period of at least two years when they first receive approval
the Autorité de contrôle prudentiel to use the Foundation
IRB Approach. This shall increase by one year each year
until the data cover a period of five years.
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Article 125
PD estimates for retail exposures shall satisfy the following
requirements:
a) supervised institutions shall estimate PDs by obligor
grade or pool, from long-run averages of one-year default
rates. PD estimates may also be derived from realised
losses and appropriate estimates of LGDs.
b) supervised institutions shall regard the internal data that
they use to rate exposures or to assign them to a pool as the
primary source of information for estimating loss
characteristics. They may use external data, including
pooled data, or statistical models for quantification,
provided a strong link is demonstrated between:
i) the supervised institution’s process for assigning
exposures to grades or pools and the process used by the
external data source;
ii) the supervised institution’s risk profile and the
composition of the external data.
For purchased retail receivables, supervised institutions
may use external and internal reference data. They shall use
all relevant data sources as points of comparison.
c) If a supervised institution derives long-run average
estimates of PD and LGD from an estimate of total losses
and an appropriate estimate of PD or LGD, the process for
estimating total losses shall meet the overall standards for
estimating PD and LGD set out in this Chapter. The
outcome shall be consistent with the concept of LGD set
out in Article 126-1;
d) the underlying historical observation period shall be at
least five years for at least one of the data sources used by
the supervised institution, whether the institution uses
external, internal, or pooled data sources. If the available
observation period for one data source spans a longer
period than for the other sources, the longer period shall be
used, provided the corresponding data are relevant.
Supervised institutions may use a historical observation
period of at least two years when they are first granted
approval by the Autorité de contrôle prudentiel to use IRB
Approaches. This shall increase by one year each year until
the data cover a period of five years.
e) Supervised institutions shall identify and analyse
expected changes in risk parameters over the life of credit
exposures, including seasoning effects.
Section 4
Requirements specific to estimating LGD
Article 126-1
Supervised institutions shall estimate LGDs by facility
grade or pool on the basis of the average realised LGD by
facility grade or pool. They shall take into account all
observed defaults in the various data sources, using an
average weighted by the number of defaults observed.
Article 122
Supervised institutions shall use LGD estimates that are
appropriate for an economic downturn if they are more
conservative than the long-run average. To the extent that
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LGD values by grade or pool are expected to remain
relatively stable over time, supervised institutions shall
make adjustments to their estimates of risk parameters by
grade or pool to limit the impact of an economic downturn
on their own funds.
Article 127
If estimates of LGD reflect the presence of collateral, the
following conditions shall be satisfied:
a) supervised institutions shall take account of the degree of
dependence between the risk of the obligor and the risk
associated with the collateral or collateral provider. Where
there is a significant degree of dependence, supervised
institutions shall apply a conservative treatment;
b) in estimating LGD, supervised institutions shall treated
conservatively cases where the underlying obligation and
the collateral are not denominated in the same currency;
c) LGD estimates shall not be based solely on the estimated
market value of the collateral. These estimates shall take
into account the cost of any delays in gaining control over
the collateral and liquidating it;
d) supervised institutions shall establish rules and
procedures for collateral management, legal certainty, and
risk management that are generally consistent with the
requirements set out in Title IV.
Article 128
If a supervised institution using the Internal Model Method
or the Standardised Method for counterparty credit risk
under Title VI takes account of collateral in the calculation
of exposure value, its estimates of LGD shall not reflect the
amounts expected to be recovered on the collateral.
Article 129
When exposures are in default, supervised institutions shall
take into account:
a) the best estimate of expected losses (ELBE) for each
exposure, given current economic circumstances and the
characteristics of the exposure, and
b) any additional unexpected losses that could occur during
the recovery period.
Article 130
To the extent that unpaid late fees have been capitalised in
the supervised institution’s income statement, they shall be
added to the supervised institution’s measure of exposure
and loss.
Article 131
For exposures to corporates, institutions, and central
governments and central banks, estimates of LGD shall be
based on data collected over a minimum of five years for at
least one data source, when supervised institutions are first
granted approval by the Autorité de contrôle prudentiel to
use the Advanced IRB Approach. This shall increase by
one year each year until the data cover a period of seven
years.
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If the available observation period for one data source
spans a longer period than for the other sources, the longer
period shall be used, provided the corresponding data are
relevant.
Article 132
For retail exposures, the following requirements must be
satisfied:
a) LGD estimates may be derived from realised losses and
appropriate estimates of PDs;
b) notwithstanding paragraphs (c) and (d) of Article 133,
supervised institutions shall reflect future drawings either
in their CCFs or in their LGD estimates;
c) for purchased retail receivables, supervised institutions
may use internal and external reference data to estimate
LGDs;
d) estimates of LGD shall be based on data collected over a
minimum of five years.
Notwithstanding Article 126-1, supervised institutions need
not assign the same importance to all historical data if they
demonstrate to the Autorité de contrôle prudentiel that the
more recent data are a better predictor of loss rates.
Supervised institutions may use a historical observation
period of at least two years when they are first granted
approval by the Autorité de contrôle prudentiel to use IRB
Approaches. This shall increase by one year each year until
the data cover a period of five years.
Subsection 5
Requirements specific to estimating CCFs
Article 133
Supervised institutions that use own estimates of CCFs
shall satisfy the following requirements:
a) CCFs shall be estimated for each facility grade or pool
on the basis of average expected CCFs. This average,
calculated for all facility ratings or pools, is weighted by
the defaults observed in the various data sources;
b) supervised institutions shall use CCF estimates that are
appropriate for an economic downturn if those estimates
are more conservative than the long-run average. To the
extent that LGDs values by grade or pool are expected to
remain relatively stable over time, supervised institutions
shall make adjustments to their estimates of risk parameters
by grade or pool to limit the impact of an economic
downturn on their own funds;
c) estimates of CCFs shall reflect the possibility of
additional drawings by the obligor up to and after the time
a default event is triggered;
d) where supervised institutions can reasonable foresee a
stronger positive correlation between the default frequency
and the magnitude of the CCF, the estimate of the CCF
shall incorporate a larger margin of conservatism;
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e) supervised institutions shall adhere to specific policies
for monitoring customer accounts and payments, as well as
policies for monitoring and managing new drawing in
circumstances short of default, particularly when there are
violations of specific contractual terms or other events
considered as technical defaults;
f) supervised institutions shall put in place appropriate
systems and procedures for monitoring credit lines, current
outstandings against committed lines, and changes in
outstandings per obligor and per grade. They shall be able
to monitor outstanding balances on a daily basis;
g) when supervised institutions use different estimates of
CCFs for the calculation of risk weighted exposure
amounts and for internal purposes, they shall document the
rationale for their choice and demonstrate its
reasonableness to the Autorité de contrôle prudentiel.
Article 134-1
CCF estimates for exposures to corporates, institutions, and
central governments and central banks shall be based on
data collected over a minimum of five years for at least one
data source when supervised institutions are first granted
approval by the Autorité de contrôle prudentiel to use the
Advanced IRB Approach. This shall increase by one year
each year until the data cover a period of seven years. If the
available observation period for one data source spans a
longer period than for the other sources, the longer period
shall be used, provided the corresponding data are relevant.
Article 134-2
For retail exposures, estimates of CCFs shall be based on
data collected over a minimum of five years.
Notwithstanding paragraph (a) of Article 133, supervised
institutions need not assign the same importance to all
historical data if they demonstrate to the Autorité de
contrôle prudentiel that the more recent data are a better
predictor of drawings.
Supervised institutions may use a historical observation
period of at least two years when they are first granted
approval by the Autorité de contrôle prudentiel to use IRB
Approaches. This shall increase by one year each year until
the data cover a period of five years.
Article 135
For retail exposures, notwithstanding paragraphs (c) and
(d) of Article 133, supervised institutions shall reflect
future drawings either in their CCFs or in their LGD
estimates;
Subsection 6
Minimum requirements for assessing unfunded credit
protection
Article 136-1
For retail exposures and exposures to corporates,
institutions, and central governments, central banks and the
enterprises that meet the requirements mentioned at Article
186 g, where the supervised institution uses own estimates
of LGD, the requirements of this subsection shall not apply
to guarantees provided by institutions and central
governments and central banks if the supervised institution
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has received approval to apply the Standardised Approach
for credit risk to exposures to these entities. In that case, the
requirements set out in Title IV shall apply.
exposures and eligible purchased receivables, this
paragraph shall apply to the process of assigning exposures
to grades or pools.
Article 136-2
For guarantees provided by retail customers, the
requirements of this subsection apply to the assignment of
exposures to grades or pools and the estimation of PD.
Article 140
The criteria listed in Article 138 shall address the payout
structure of the credit derivative and conservatively assess
its impact on the level and timing of recoveries. Supervised
institutions shall consider other forms of residual risk.
Article 136-3
Credit institutions shall have clear and precise criteria
defining the types of protection providers recognised for
the calculation of risk weighted exposure amounts. These
protection providers shall be subject to the provisions set
out in Articles 102 to 108.
Article 137
Guarantees recognised by supervised institutions using own
estimates of LGD shall satisfy the following requirements:
a) they shall be evidenced in writing;
b) they shall be non-cancellable on the part of the
protection provider;
c) they shall remain in force until the obligation is satisfied
in full;
d) they shall be legally enforceable in a jurisdiction where
the guarantor has assets to attach and enforce a judgement.
The Autorité de contrôle prudentiel may deny recognition
of a conditional guarantee.
Supervised institutions shall demonstrate that the
assignment criteria adequately address any potential
reduction in the risk mitigation effect.
Article 138
To reflect the impact of guarantees on the calculation of
risk-weighted exposures amounts, supervised institutions
shall have clearly specified criteria for adjusting grades,
pools, or LGD estimates, and in the case of retail exposures
and eligible purchased receivables, for adjusting the
process of assigning exposures to grades or pools. These
criteria shall comply with the minimum requirements set
out in Articles 102 and 108, and shall address:
- the ability and willingness of the protection provider to
perform under the guarantee;
- the likely timing of payments from the protection
provider;
- the degree of correlation between the protection
provider’s ability to perform under the guarantee and the
obligor’s ability to repay; and
- the degree of residual risk to the obligor.
Article 139
The minimum requirements set out in this subsection shall
also apply to single-name credit derivatives. In the case of a
mismatch between the underlying obligation and the
reference asset specified in the credit derivative contract, or
between the underlying obligation and the asset used to
determine whether a credit event has occurred, the
requirements set out in Article 192-3 shall apply. For retail
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Subsection 7
Minimum requirements for purchased receivables
Article 141
The structure of the facility shall ensure that the supervised
institution has effective ownership and control of all cash
remittances from the receivables under all foreseeable
circumstances. When the obligor makes payments directly
to a seller or servicer, the supervised institution shall verify
regularly that these payments are forwarded in full and
within the contractually agreed terms. ‘Servicer’ means an
entity that manages a pool of purchased receivables or the
underlying credit exposures on a day-to-day basis.
Supervised institutions shall have procedures to ensure that
ownership of the receivables and cash receipts is protected
against bankruptcy stays or legal challenges that could
materially delay the lender’s ability to liquidate or assign
the receivables or retain control over cash receipts.
Article 142
Supervised institutions shall monitor both the quality of the
purchased receivables and the financial condition of the
seller and servicer. In particular, supervised institutions
shall:
a) assess the correlation between the quality of the
purchased receivables and the financial condition of the
seller and servicer, and put in place procedures that provide
adequate safeguards to protect against such contingencies,
including the assignment of an internal risk rating for each
seller and servicer;
b) have clear and effective procedures for determining
seller and servicer eligibility. Supervised institutions or
their agent shall conduct periodic reviews of sellers and
servicers to verify the accuracy of their reports, detect
possible fraud or operational weaknesses, and verify the
quality of the seller’s credit policies and the servicer’s
collection policies and procedures. Supervised institutions
shall document the findings of these reviews;
c) assess the characteristics of the purchased receivables
pools, including over-advances; the history of the seller’s
arrears, bad debts, and bad debt allowances; payment
terms; and potential contra accounts;
d) have effective procedures for monitoring, on an aggregate
basis, concentrations of risk in a single-obligor within a pool
of purchased receivables, and across all of the pools;
e) ensure that they receive timely and sufficiently detailed
reports from the servicer concerning ageing and dilution of
receivables, so as to ensure compliance with eligibility
criteria and advancing policies for purchased receivables,
and monitor and confirm the seller’s terms of sale and
dilution.
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Article 143
Supervised institutions shall have effective systems and
procedures:
a) for detecting as early as possible any deterioration in the
seller’s financial condition and in the quality of purchased
receivables, and for addressing emerging problems proactively; and in particular for identifying covenant
violations and enabling the institution to initiate legal
action and to deal with problem purchased receivable;
b) for governing the control of purchased receivables,
credit, and cash. These procedures shall specify all material
elements of the receivables purchase programme, including
advancing
rates,
eligible
collateral,
necessary
documentation, concentration limits, and the handling of
cash receipts. These elements shall take appropriate
account of all relevant and material factors, including the
financial condition of the seller and the servicer, risk
concentrations, and trends in the quality of the purchased
receivables and the seller’s customer base. Internal systems
shall ensure that funds are advanced only against the
presentation of specified supporting collateral and
appropriate documentation.
Article 144
Supervised institutions shall put in place an effective
process for assessing compliance with all internal policies
and procedures. This process shall include:
a) regular audits of all critical phases of the receivables
purchase programme;
b) verification of the separation of duties between the
assessment of the seller and servicer and the assessment of
the obligor, and between the assessment of the seller and
servicer and the field audit of the seller and servicer;
c) an evaluation of back-office operations, with particular
focus on the qualifications and experience of staff, staffing
levels, and supporting automated systems.
Section 3
Validation of internal estimates
Article 145
Supervised institutions shall put in place reliable systems to
validate the accuracy and consistency of rating systems,
rating processes, and the estimation of all relevant risk
parameters. They shall demonstrate to the Autorité de
contrôle prudentiel that their internal validation process
enables them to assess the performance of internal rating
and risk estimation systems consistently and meaningfully.
Article 146
To that end, supervised institutions shall use:
a) back-testing that enables them to make regular
comparisons between realised default rates and estimated
PDs for each grade. Where realised default rates are outside
the expected range for that grade, supervised institutions
shall analyse the reasons for the deviation. Supervised
institutions that use the Advanced IRB Approach shall
perform analogous analysis for their estimates of LGD and
CCFs. These comparisons shall use historical data that
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cover as long a period as possible. Supervised institutions
shall document the methods and data used in such
comparisons, and shall update their analysis and
documentation at least once annually.
b) comparisons with relevant external data sources. This
analysis shall be based on data that are appropriate to the
portfolio, are updated regularly, and cover a relevant
observation period. Supervised institutions’ internal
assessments of the performance of their rating systems
shall be based on as long a period as possible.
Article 147
The methods and data used in quantitative validation shall
be consistent over time. Supervised institutions shall
document any change in methods or data used in estimation
or validation, whether it involves data sources or periods
covered.
Article 148
Supervised institutions shall have robust internal standards
for addressing situations where differences between
realised and estimated PDs, LGDs, CCFs, and total losses
are significant enough to call into question the validity of
the estimates. These internal standards shall take account of
business cycles and any other similar variability in
observed default rates. Where realised values continue to
be higher than expected values, supervised institutions shall
revise their estimates upward to reflect observed default
and loss rates.
Section 4
Calculation of risk-weighted exposures for equity
exposures in the IRB Approach
Subsection 1
Capital charges and risk quantification
Article 149
Supervised institutions
requirements:
shall
satisfy
the
following
a) the estimate of potential loss shall be sufficiently robust
in response to adverse market movements impacting the
long-term risk profile of the supervised institution’s equity
exposures;
b) the data used to represent distributions of returns shall
reflect the longest possible sample period composed of
relevant data representing the risk profile of the supervised
institution’s equity exposures. These data shall be sufficient
to provide conservative, statistically reliable, and robust
loss estimates that are not based purely on subjective
considerations;
c) supervised institutions shall demonstrate to the Autorité
de contrôle prudentiel that the shock employed provides a
conservative estimate of potential losses over a relevant
long-term market or business cycle. Supervised institutions
shall combine empirical analysis of available data with
adjustments based on a variety of factors in order to attain
model outputs that achieve appropriate realism and
conservatism. In constructing Value at Risk (VaR) models
for estimating potential quarterly losses, supervised
institutions may use quarterly data or convert shorter
Selected French Banking and Financial Regulations – 2013
horizon period data to a quarterly equivalent, using an
analytically appropriate method supported by empirical
evidence and a well-developed and documented analysis
and thought process. This approach shall be applied
conservatively and consistently over time. Where only
limited relevant data are available, supervised institutions
shall add appropriate margins of conservatism;
d) the internal models used shall capture all material risks
associated with equity returns, including both general
market risk and the specific risk of the supervised
institution’s equity portfolio. These models shall explain
historical price variation, capture both the magnitude of and
changes in the composition of potential concentrations, and
be sufficiently robust in response to adverse market
environments. The population of risk exposures represented
in the data used for estimation shall be closely matched to,
or at least comparable with, those of the supervised
institution’s equity exposures;
e) the internal model shall be appropriate for the risk
profile and complexity of the supervised institution’s
portfolio. Where a supervised institution has material
holdings with values that are highly non-linear in nature,
the internal model shall be designed to capture the risks
associated with such instruments appropriately;
f) the mapping of individual positions to proxy risk factors,
market indices, or risk factors shall be clear and rigorous;
g) supervised institutions shall demonstrate through
empirical analyses the relevance of the risk factors used,
including their ability to capture both general and specific
risk;
h) the estimates of the volatility of returns on equity
exposures shall incorporate all relevant and available data,
information, and methods. Independently reviewed internal
data or data from external sources, including pooled data,
shall be used;
c)
A rigorous and comprehensive
programme shall be put in place.
stress-testing
Subsection 2
Risk management and controls
Article 150
Supervised institutions shall set policies, procedures, and
controls that enable them to ensure the integrity of internal
models and the modelling system including at least the
following elements:
a) internal models shall be fully integrated with information
and management systems and the management of equity
positions in the banking book. Internal models shall be
fully integrated into the supervised institution’s risk
management system if they are used particularly in:
- measuring and assessing the performance of the equity
portfolio;
- allocating economic capital to equity exposures;
- evaluating overall capital adequacy;
- evaluating methods for managing investments;
Selected French Banking and Financial Regulations – 2013
b) management systems, procedures, and control functions
shall be put in place to ensure periodic independent review
of all elements of the internal modelling process, including
the approval of model revisions, the validation of model
inputs, and the review of model results. These reviews shall
assess the accuracy, exhaustiveness, and appropriateness of
model inputs and results, and shall focus on detecting and
limiting potential errors associated with known weaknesses
of the model and identifying other weaknesses. This review
shall be conducted by an independent internal unit;
c) appropriate systems and procedures for monitoring
investment limits and the amounts of equity exposures;
d) the units responsible for the design and application of
the model shall be functionally independent from the units
responsible for managing individual investments;
e) the persons responsible for each aspect of the modelling
process shall be sufficiently qualified. Sufficiently
competent and qualified staff shall be assigned the office in
charge of modelling.
Subsection 3
Validation and documentation
Article 151
Supervised institutions shall put in place a reliable system
for validating the accuracy and consistency of their models
and modelling processes under the following conditions:
a) all material elements of the internal models, the
modelling process, and the validation system shall be
documented;
b) the validation system shall enable supervised institutions
to assess the performance of their internal models and
processes consistent and soundly;
c) the methods and data used in quantitative validation shall
be consistent over time. Supervised institutions shall
document any change in methods or data used in estimation
or validation, whether the change involves data sources or
periods covered;
d) supervised institutions shall regularly compare actual
returns on their equity investments, on the basis of realised
and unrealised gains and losses, with modelled estimates.
These comparisons shall use historical data that cover as
long a period as possible. Supervised institutions shall
document the methods and data used in such comparisons,
and shall update their analysis and documentation at least
once annually;
e) supervised institutions shall make comparisons with
external data sources. The analysis shall be based on data
that are appropriate to the portfolio, are updated regularly,
and cover a relevant observation period. Supervised
institutions’ internal assessments of the performance of
their models shall be based on as long a period as possible;
f) supervised institutions shall have robust internal
standards for addressing situations where differences
between actual equity returns and the estimates of their
models call into question the validity of the estimates or the
models. These internal standards shall take account of
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business cycles and any other similar variability in equity
returns. Any adjustments made to an internal model in
response to model reviews shall be documented and shall
comply with the supervised institution’s internal standards
relating to model review;
g) the internal models and the modelling process shall
covered by documentation that specifies the responsibilities
of the persons involved in modelling and the procedures for
approving and reviewing models.
Section 5
Requirements relating to internal controls
Subsection 1
General provisions
Article 152
All material aspects of the rating and estimation systems
shall be approved by the executive body referred to Article
4 of Regulation 97-02, which should have a general
command of the supervised institution’s rating systems and
a detailed understanding of the management reports
associated with them.
The executive body shall be informed of any changes or
exceptions from established policies that will have a
material impact on the operation of the rating system.
- regularly produces and analyses reports on the output of
the rating systems.
Article 156
The credit risk control unit is responsible for:
a) testing and monitoring grades and pools;
b) producing and analysing summary reports on the
operation of the rating systems;
c) implementing procedures to ensure that the definitions of
grades and pools are applied consistently across different
departments and geographic areas;
d) reviewing and documenting any changes to the rating
process, including the reasons for the change;
e) reviewing the rating criteria to determine if they remain
predictive of risk. Any changes to the rating process,
criteria, or individual rating parameters shall be
documented and retained;
f) actively participating in the design or selection,
implementation, and validation of models used in the rating
process;
g) ensuring the oversight and supervision of models used in
the rating process;
Article 153
The executive body shall have a good command of the
design and operation of the rating system and the measures
taken to ensure that it is operating properly. The credit risk
control units shall report on the performance of the rating
process, areas needing improvement, and the status of
efforts to improve identified deficiencies.
h) reviewing and altering the models used in the rating
process on an ongoing basis.
Article 154
Analyses of the supervised institution’s credit risk profile
based on internal rating systems shall be an essential part of
the reports provided to the executive body. Reporting shall
cover at least the following information: the risk profile by
grade; migration across grades; estimation of relevant
parameters per grade; comparisons of realised and
estimated default rates, LGDs, and CCFs; and stress-test
results. The frequency of reporting shall depend on the
significance, the type of information communicated, and
the level of the recipient in the hierarchy.
a) producing information relevant to testing and monitoring
grades and pools;
Subsection 2
Ongoing internal control
Article 155
Supervised institutions shall have a credit risk control unit
that:
- is independent from the persons and units responsible for
originating or renewing credit lines;
- reports to the executive body;
- is responsible for the design or selection, implementation,
oversight, and performance of the rating systems;
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Article 157
Subject to Article 37-1 of Regulation 97-02, supervised
institutions that resort to pooled data using the methods
described in Article 123-2 may outsource the following
tasks;
b) producing summary reports on the operation of the
rating systems;
c) producing information relevant to the review of the
rating criteria in order to evaluate if they remain predictive
of risk;
d) documenting changes to the rating process, criteria, or
individual rating parameters
e) producing relevant information supporting ongoing
review and alterations to models used in the rating process.
Subsection 3
Periodic internal control
Article 158
The internal audit unit or a comparable independent
auditing unit shall review, at least once annually, the rating
systems and their operation, and shall ensure compliance
with the minimum standards set out in this Title. This
review shall include the operation of the credit decision
process, and in particular the estimation of PD, LGD,
expected loss and CCFs.
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TITLE IV
CREDIT RISK MITIGATION
CHAPTER I
GENERAL PROVISIONS
Article 159
The provisions of this Title apply to supervised institutions
using the Standardised Approach or the Foundation IRB
Approach for credit risk to take into account the effects of
credit risk mitigation techniques in the calculation of riskweighted exposure amounts or, if relevant, expected loss
amounts as set out in Section 2, Chapter III of Title III.
subdivide that exposure into several parts, each covered by
one type of credit risk mitigation tool. The risk-weighted
exposure amount for each part shall be calculated
separately as provided in Title II and in this Title.
The same method shall be applied when credit protection
provided by a single protection provider has differing
maturities.
The provisions of Articles 185 and 195-1 to 195-4 specify
the applicable treatment when subject establishments using
the Foundation IRB Approach apply several techniques of
risk mitigation to the same exposure.
CHAPTER II
COLLATERAL
Article 160
For the purposes of this Title:
a) ’lending institution’ means the supervised institution that
has the exposure, whether or not the exposure derives from
a loan;
b) ’secured lending transaction’ means any transaction that
gives rise to an exposure secured by collateral and that does
not confer on the supervised institution the right to receive
margin frequently;
c) ’capital market-driven transaction’ means any
transaction that gives rise to an exposure secured by
collateral and that does confer upon the supervised
institution the right to receive margin frequently.
d) ’main index’ means a broadly diversified index
composed of sufficiently liquid securities.
Article 161
Supervised institutions shall have adequate risk analysis
and measurement systems that permit them to control the
risks associated with the use of credit risk mitigation
techniques.
Supervised institutions recognising the effects of credit
mitigation techniques shall continue to assess the credit
risks associated with the underlying exposures. In the case
of repurchase transactions and securities or commodities
lending or borrowing transactions, the underlying exposure,
for the purposes of this paragraph, means the net amount of
the exposure.
Article 162
The application of this Title may not result in exposure
amounts or, if applicable, expected loss amounts higher
than those calculated for an identical exposure for which
there is no credit risk mitigation.
Where risk-weighted exposure amounts calculated in
accordance with Titles II and III already take account of the
effects of credit protection, these effects shall not be
recognised again under this Title.
Article 163
Where a supervised institution that uses the Standardised
Approach for credit risk has more than one form of credit
risk mitigation covering a single exposure, it shall
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Section 1
Eligibility
Article 164-1
The following instruments are recognised as collateral,
subject to the minimum requirements of Section 2, under
all approaches for credit risk and all of the methods for
recognising risk mitigation set out in Section 3 of this
Chapter:
a) cash on deposit with and pledged or assigned to the
lending institution;
b) debt securities issued by central governments or central
banks which have an external credit assessment
corresponding to a credit quality step of 4 or higher as
defined in Article 11. For the purposes of this paragraph,
the following instruments are considered equivalent to debt
securities issued by central governments or central banks:
d)
debt securities issued by regional governments or local
authorities treated like central governments, as set out
in Article 12;
ii) debt securities issued by the multilateral development
banks listed in paragraph (b) of Article 14;
iii) debt securities issued by the European Community, the
International Monetary Fund, and the Bank for
International Settlements;
iv) debt securities issued by public sector entities, when
their exposures receive the same risk weight as those on
central governments, in accordance with Article 13;
(c) debt securities issued by institutions, when those
securities have an external credit assessment corresponding
to a credit quality step of 3 or higher as defined in
Article 16.
Debt securities issued by institutions may also be
recognised as collateral when they do not have an external
credit assessment, if they fulfil the following criteria:
- the debt securities are of senior rank and are listed on a
recognised exchange;
- all other issues by the issuing institution that have the
same seniority and that have an external credit assessment,
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have a credit assessment corresponding to a credit quality
step of 3 or higher as defined in Article 16;
- the lending institution does not possess any information to
suggest that the issue would justify a credit assessment
below that indicated in the preceding paragraph;
- the debt securities are sufficiently liquid.
For the purposes of this paragraph, the following
instruments are considered equivalent to debt securities
issued by institutions:
i) debt securities issued by regional governments or local
authorities other than those treated like central
governments;
ii) debt securities issued by public sector entities, when the
exposures on these entities receive the same risk weight as
institutions, in accordance with Article 13;
iii) debt securities issued by multilateral development
banks other than those listed in paragraph (b) of Article 14;
d) debt securities issued by other entities that have an
external credit assessment corresponding to a credit quality
step of 3 or higher as defined in Article 17;
e) debt securities with a short-term credit assessment
corresponding to a credit quality step of 3 or higher as
defined in Article 17;
f) equities or convertible bonds that are included in a main
index;
g) gold.
Units in collective investment undertakings (CIUs) are also
eligible as collateral, subject to the minimum requirements
of Section 2, if they are covered by a daily public price
quote and are composed of instruments listed in this
Article. If the CIU uses, or intends to use, derivative
products to hedge the instruments constituting the units, the
hedged instruments remain eligible as collateral.
If the investments of the CIU are not restricted to the
instruments deemed eligible as collateral in accordance
with the minimum requirements in section 2, the shares
issued may be recognised with the value of eligible assets
as collateral assuming that the CIU has invested in noneligible assets to the maximum extent allowed under its
mandate. In the case where non-eligible assets have a
negative value on account of liabilities or potential
liabilities resulting from their ownership, the supervised
institution calculates the total value of non-eligible assets
and deducts it from the value of eligible assets.
Article 164-2
For the purposes of paragraph (b) to (e) of the preceding
paragraph, if a given security has two credit assessments,
the less favourable assessment shall apply.
If a security has more than two credit assessments, the two
most favourable assessments shall be taken and the less
favourable of the two shall apply.
Article 164-3
The following instruments are also eligible as collateral,
subject to the minimum requirements of Section 2, under
all approaches for credit risk and all of the methods for
recognising risk mitigation set out in Section 3 of this Title:
a) cash on deposit with a third-party institution that is not a
depository institution, and pledged or assigned to the
lending institution;
b) life insurance policies pledged or assigned to the lending
institution;
c) instruments of all kinds that are issued by third-party
institutions and that will be repurchased by that institution
upon request.
Article 165
For supervised institutions that use the Financial Collateral
Comprehensive Method set out in Section 3 of this Chapter
to reflect the effects of financial collateral, the following
financial instruments are also recognised as collateral,
subject to the minimum requirements in Section 2:
a) equities or convertible bonds not included in a main
index, but traded on a recognised exchange;
b) units in CIUs, if they are covered by a daily public price
quote and are composed of instruments listed in Article
164-1 and in paragraph (a) of this Article. If the CIU uses,
or intends to use, derivative products to hedge the
instruments constituting the units, the hedged instruments
remain eligible as collateral.
If the investments of the CIU are not only composed of
instruments considered as eligible under the terms of
section 2, and of the assets referred to at point a of this
article, the units of such CIU may be estimated at the value
of the assets eligible as guarantees where the CIU has
invested in non eligible assets the highest amount
authorised under the terms of its mandate. Where the non
eligible assets have a negative value because of the
liabilities or potential liabilities detained the credit
institution shall calculate the global value of the non
eligible assets and reduce the value of the eligible assets for
the amount the non eligible assets.
Article 166-1
In addition to the instruments referred to in the preceding
paragraphs, supervised institutions using the Foundation
IRB Approach for credit risk may recognise the
instruments listed below as eligible collateral, subject to the
minimum requirements of Section 2.
Article 166-2
Residential real estate that is or will be occupied or let by
the owner, as well as commercial real estate, may be
recognised as collateral subject to the following conditions:
a) the value of the property does not depend materially
upon the credit quality of the obligor;
b) the risk of the borrower does not depend materially on
the performance of the underlying property, but rather on
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Selected French Banking and Financial Regulations – 2013
the capacity of the borrower to repay the debt from other
revenue sources.
For the purposes of this paragraph, when the owner of the
residential property is a société civile immobilière that
consists exclusively of natural persons who are not acting
in a professional capacity, the shareholders of the société
civile immobilière are considered to be the owners.
For exposures secured by residential property, the Autorité
de contrôle prudentiel may waive the condition stated in
paragraph (b) if the real estate market is sufficiently
developed and its loss rates are sufficiently low to justify
such treatment.
For finance lease agreements and lease agreements of a
financial nature concerning commercial real estate, the
Autorité de contrôle prudentiel may waive the condition
stated in paragraph (b) if the finance lease market for this
type of property is sufficiently developed and loss rates
satisfy the following conditions:
- the losses generated each year by lease financing
agreements and lease agreements of a financial nature for
which the financial outstanding is less than or equal to 50%
of the market value or 60% of the mortgage lending value
of the underlying real estate asset does not exceed 0.3% of
the total outstanding amount of all lease financing
agreements and lease agreements;
- the total losses generated each year by all financing
agreements and lease agreements of a financial nature does
not exceed 0.5% of the total outstanding amount of all lease
financing agreements and lease agreements.
If either of these two conditions ceases to be met for a
given year, the waiver shall end until such time as the
conditions are again satisfied.
Article 166-3
- Receivables shall be recognised as collateral if they are
linked to a commercial transaction or to a transaction
whose original maturity is less than or equal to one year.
Receivables associated with securitisations, subparticipations, or credit derivatives, or corresponding to the
amounts owed by an entity belonging to the same group are
not eligible.
Article 166-4
Physical collateral, other than the types of collateral
referred to above, is eligible subject to the following
conditions:
- the existence of liquid markets for disposal of the
collateral in an expeditious and economically efficient
manner;
- the existence of a well-established, publicly available
market prices for the collateral. The supervised institution
must be able to demonstrate that there is no evidence that
the net price it receives when collateral is realised deviate
significantly from the market price.
treated as loans secured by the financed property, subject to
the provisions of Article 184-1.
Section 2
Minimum requirements
Article 167-1
In order to be eligible as collateral, the instruments listed in
Article 164-1 must satisfy the following minimum
requirements:
a) the credit quality of the obligor and the value of the
instrument must not have a material positive correlation.
Debt securities issued by the obligor or by any entity
belonging to the same group are not eligible.
Instruments and other assets benefiting from the preference
mentioned in subparagraph 2 of paragraph I of Article
L. 515-13 of the Monetary and Financial Code issued by
the obligor shall be eligible when they are posted as
collateral for repurchase transactions and the credit quality
of the obligor and the value of the bonds or other assets are
materially positively correlated;
b) supervised institutions shall take all steps necessary to
ensure the enforceability of collateral arrangements,
including satisfying all contractual requirements and
applicable regulatory requirements. They shall carry out a
legal review to ensure the enforceability of the collateral in
all relevant jurisdictions. This review shall be renewed as
often as necessary;
c) the collateral arrangements shall be well documented,
with a clear and robust procedure for the timely liquidation
of collateral;
d) supervised institutions shall implement procedures and
systems to control risks arising from the use of collateral,
including residual risk and concentration risk;
e) the supervised institution shall have appropriate, welldocumented procedures for the different types and amounts
of collateral accepted;
f) supervised institutions shall determine the market value
of the collateral, and revalue it accordingly, with a
minimum frequency of once every six months, and more
frequently if the supervised institution foresees a significant
decrease in its market value.
g) where the collateral is held by a third party, the
supervised institution shall take reasonable steps to ensure
that the third party segregates the collateral from its own
assets.
Article 167-2
In addition to the requirements set out in the preceding
paragraph, when supervised institutions use the Financial
Collateral Simple Method described in Section 3 to reflect
the effects of financial collateral, the remaining maturity of
the protection must be at least as long as the remaining
maturity of the exposure.
Article 166-5
Where the minimum requirements set out in Article 171 are
met, lease financing agreements and lease agreements of a
financial nature for which there is no residual value are
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157
Article 168
For the recognition of real estate collateral, the following
conditions must be met:
a) the mortgage or charge is legally enforceable in all
jurisdictions that are relevant at the time of the conclusion
of the credit agreement, and, as applicable, properly filed
on a timely basis such that the lien is perfected. The legal
characteristics of the collateral shall enable the supervised
institution to realise the value of the protection within a
reasonable timeframe.
b) the value of the property shall be monitored frequently,
at a minimum once every year for real estate and once
every three years for residential real estate, or more
frequently if the market is subject to significant changes in
conditions. Statistical methods may be used to monitor the
value of the property and to identify property that needs
revaluation. The property valuation shall be reviewed by an
independent expert if it appears that the value of the
property has declined materially relative to general market
prices. For secured loans exceeding EUR 3 million or
representing more that 5% of the own funds of the
supervised institution’s own funds, the property valuation
shall be reviewed by an independent expert at least once
every three years. For the purposes of this paragraph,
‘independent expert’ means a person who possesses the
necessary qualifications, ability, and experience to conduct
a valuation and who is independent from the credit decision
process.
c) the types of residential and commercial real estate
accepted by the supervised institution as collateral, and its
lending policies in this regard shall be well documented.
d) supervised institutions shall have procedures permitting
them to verify that real estate property accepted as
collateral is adequately insured against damage.
Article 169
In order to be eligible as collateral, the receivables listed in
Article 166-3 must satisfy the following minimum
requirements:
a) the legal mechanism by which the collateral is provided
shall be robust and effective and shall define the lender’s
rights over the proceeds clearly;
b) supervised institutions shall take all steps necessary to
fulfil local requirements regarding the enforceability of
their security interest. The applicable legal framework
should allow the lender to have a first priority claim over
all unsecured creditors;
c) supervised institutions shall conduct a legal review to
ensure the enforceability of the collateral arrangements in
all relevant jurisdictions;
d) the collateral arrangements shall be well documented,
with a robust procedures for the timely collection of
collateral. These procedures shall ensure that any legal
conditions required for declaring the default of the
borrower and timely collection of collateral are observed.
In the event of the borrower’s financial distress or default,
158
the supervised institution should have legal authority to sell
or assign the receivables to other parties without consent of
the receivables obligors;
e) supervised institutions shall have adequate procedures
for determining the credit risk associated with receivables
eligible as collateral. These procedures shall include,
among other things, analyses of the borrower’s business
and industry and the types of customers with whom the
borrower does business. Where the supervised institution
relies on the borrower to ascertain the credit risk of the
customers, the supervised institution shall review the
borrower’s credit practices to ascertain their soundness and
credibility.
f) the margin between the amount of the exposure and the
value of the receivables shall reflect all relevant factors,
including the cost of collection and concentration within a
pool of receivables pledged or transferred as collateral by
the same borrower. Supervised institutions shall take into
account the potential concentration risk for all of their
exposures, including the receivables referred to in this
paragraph. They shall maintain an appropriate system for
monitoring the receivables on a continuous basis.
Compliance with loan covenants and all other legal
requirements shall be reviewed on a regular basis;
g) the receivables pledged or transferred as collateral by a
borrower shall be sufficiently diversified and shall not be
unduly correlated with the borrower. Where there is
material positive correlation, the attendant risks shall be
taken into account in the setting of margins for the
collateral pool as a whole;
h) receivables from entities belonging to the same group as
the borrower, or from the employees of such entities, shall
not be eligible as risk mitigants;
i) the supervised institution shall have a documented
process for collecting amounts due in the event of default
or financial difficulties on the part of the borrower, even
when the supervised institution normally looks to the
borrower for collections.
Article 170
In order to be eligible as collateral, physical collateral other
than the types referred to above must satisfy the following
minimum requirements:
a) the collateral arrangement are legally effective and
enforceable in all relevant jurisdictions, and permit the
supervised institution to realise the value of the property
within a reasonable timeframe;
b) with the exception of permissible prior claims such as
those referred to in paragraph (b) of the preceding Article,
only first liens on, or charges over, collateral are
recognised;
c) the value of the property shall be monitored on a
frequent basis, at least once annually, and more frequently
if the market is subject to significant changes in conditions;
d) the loan agreement shall include a detailed description of
the collateral and of the methods and frequency of
revaluation;
Selected French Banking and Financial Regulations – 2013
e) the types of physical collateral accepted by the
supervised institution shall be specified in its procedures.
These procedures shall indicate the appropriate amount of
each type of collateral relative to the amount of the
exposure to which it applies;
f) the supervised institution’s credit policies shall address
appropriate collateral requirements in relation to:
- the exposure amount;
- the ability to liquidate the collateral;
- the ability to establish objectively a price or market value
for the collateral;
- the frequency with which the value can be readily
obtained, including by means of a professional appraisal or
valuation;
- the volatility of the value of the collateral or a proxy of
the volatility;
g) both the initial valuation and revaluation of the collateral
shall take into account any deterioration or obsolescence;
h) supervised institutions shall have the right to monitor the
collateral on-site and shall have procedures on the subject;
i) supervised institutions shall have procedures that allow
them to verify that eligible collateral is adequately ensured
against damage
Article 171
Lease financing agreements and lease agreements of a
financial nature for which there is no residual value may be
treated as loans collateralised by the financed property
when the following conditions are satisfied:
a) the provisions of Articles 168 or 170 apply, according to
the nature of the property financed;
b) the lessor institution has a rigorous risk management
system covering the use to which the leased asset is put, its
age and planned duration of use, and the procedures for
monitoring the value of the financed property;
c) there is a robust legal framework establishing the
lessor’s legal ownership of the asset and permitting it to
exercise its rights as owner in a timely fashion;
d) where this has not already been taken into account, as
appropriate, in calculating the LGD level, the difference
between the value of the unamortised amount and the
market value of the property must not be so large as to
overstate the credit risk mitigation attributed to the leased
assets.
Selected French Banking and Financial Regulations – 2013
Article 172-1
Pledges or assignments of cash deposits referred to in
paragraph (a) of Article 164-3 must satisfy the following
requirements:
- the pledges or assignments are legally effective and
enforceable in all relevant jurisdictions;
- the third-party institution has been notified of the pledge
or assignment, enabling it to proceed on its own with
payment to the lending institution, or to any other party
with the lending credit institution’s consent;
- the pledges or assignments are irrevocable and
unconditional.
Article 172-2
Pledges or assignments of life insurance policies referred to
in paragraph (b) of Article 164-3 must satisfy the following
requirements:
a) the life insurance policy is openly pledged or assigned to
the lending credit institution;
b) the company providing the life insurance is notified of
the pledge or assignment and as a result may not pay
amounts payable under the contract without the consent of
the lending credit institution;
c) the lending institution has the right to cancel the policy
and receive the surrender value in a timely manner in the
event of the default of the borrower;
d) the lending institution is kept informed of any nonpayments of premiums by the policy-holder;
e) the pledged or assigned life insurance policy is valid for
the entire maturity of the loan. When this condition cannot
be satisfied because the insurance contract expires before
the loan relationship expires, the lending institution shall
take such measures as are necessary to ensure that the
amount due to the policyholder at the expiration of the
insurance contract serves as security until the expiration of
the credit agreement;
f)
the pledge or assignment may be effectively
implemented in all jurisdictions which are relevant at the
time of the conclusion of the credit agreement t.
g) the surrender value is declared by the company
providing the life insurance and is non-reducible;
h) the surrender value is to be paid in a timely manner
upon request
i)
the surrender value cannot be requested without the
consent of the credit institution;
j)
the company providing the life insurance is subject
to the insurance code, the mutual benefit insurance
code, the social security code, or is subject to
supervision by a competent authority of a third
country which applies supervisory and regulatory
arrangements at least equivalent to those applied in
the Community.
159
Section 3
Methods for taking account of financial collateral
Article 173
Cash, securities, or commodities purchased, borrowed, or
received under a repurchase transaction or securities or
commodities lending or borrowing transaction shall be
treated as eligible collateral.
Subsection 1
Financial Collateral Simple Method
Article 174
The Financial Collateral Simple Method set out in the
following Articles shall be available only for exposures
treated in accordance with the Standardised Approach for
credit risk. Without prejudice to the provisions of Article
39-2, a supervised institution may not use the Financial
Collateral Simple Method and the Financial Collateral
Comprehensive Method set out in subsection 2 at the same
time, except for the purposes of article 39-1 and article 441.
The supervised institutions must demonstrate to the
Autorité de contrôle prudentiel that the exceptional
application of both methods simultaneously is not used
selectively for the purpose of reducing minimum capital
requirements and does not lead to any regulatory arbitrage.
risk weight of 10% shall apply to the exposure values of
such transactions, for the portion collateralised by debt
securities issued by central governments or central banks
and having an external credit assessment corresponding to
the highest credit quality step defined in Article 11.
For the purposes of this Article, the following instruments
considered as equivalent to debt securities issued by central
governments or central banks:
i) debt securities issued by regional governments or local
authorities treated like central governments, as set out in
Article 12;
ii) debt securities issued by the multilateral development
banks listed in paragraph (b) of Article 14;
iii) debt securities issued by the European Community, the
International Monetary Fund, and the Bank for
International Settlements.
Article 176-4
A 0% risk weight may be applied in the following cases,
provided the exposure and the collateral are denominated in
the same currency:
- the collateral is cash or cash-assimilated instruments; or
- the collateral is in the form of debt securities issued by
central governments or central banks that have received an
external credit assessment corresponding to the highest
credit quality step defined in Article 11. In this case, a
discount of 20% is applied to the market value of the
securities.
Article 175
Supervised institutions shall assign eligible financial
collateral instruments a value equal their market value as
determined as provided in Article 167-1.
The debt securities referred to in the second paragraph of
the preceding Article shall also be considered equivalent to
debt securities issued by central governments or central
banks for the purposes of this Article.
Article 176-1
The risk weight that would apply under the Standardised
Approach for credit risk to a direct exposure to the
collateral instrument shall apply, by substitution, to that
portion of the exposure value of the exposure that is
covered by the collateral.
Subsection 2
Financial Collateral Comprehensive Method
The risk weight of the collateralised portion shall be a
minimum of 20% except as provided in the following
paragraphs. The risk weight of the portion that is not
covered by the collateral remains unchanged.
Article 176-2
A risk weight of 0% shall be applied to the collateralised
portion of the exposure when that exposure arises from
repurchase transactions or securities or commodities
lending or borrowing transactions which satisfy the
conditions set out in Article 178-6. If the counterparty to
the transaction is not a core market participant as defined in
that Article, a risk weight of 10% shall be applied.
Article 176-3
A risk weight of 0% shall be applied to the exposure values
determined in accordance with Title VII, for the derivative
instruments listed in Appendix II, provided those
instruments are subject to daily marking-to-market for the
portion collateralised by cash or cash assimilatedinstruments, and where there is no currency mismatch. A
160
Article 177
In valuing financial collateral, volatility adjustments shall
be applied to the market value of collateral as provided in
this subsection in order to take account of price volatility.
Subject to the provisions of the following paragraph, when
there is a mismatch between the exposure and the collateral
instrument, an adjustment reflecting currency volatility
shall also be applied.
For OTC derivatives transactions covered by novation
agreements or netting agreements recognised in accordance
with Title VI, an adjustment shall be applied when there is
a mismatch between the collateral currency and the
settlement currency. When the transactions covered by the
novation agreement netting agreement are denominated in
several different currencies, supervised institutions shall
apply a single volatility adjustment.
Article 178-1
Supervised institutions shall calculate the adjusted value of
the financial collateral for all of their transactions using the
following formula, with the exception of those subject to
recognised master netting agreements, for which the
provisions of Chapter IV of this Title apply:
Selected French Banking and Financial Regulations – 2013
CVA = C x (1-HC-HFX)
where:
- CVA is the volatility-adjusted value of the financial
collateral;
- HC is the volatility adjustment for the financial collateral,
calculated in accordance with Articles 178-2 to 178-6;
- HFX is the volatility adjustment for any currency
mismatch, calculated in accordance with Articles 178-2
to 178-6.
Supervised institutions shall calculate an adjusted value of
the exposure that takes into account the volatility of the
collateral instruments and the effects of credit risk
mitigation, using the following formula:
EVA = E x (1+ HE)
where:
- EVA is the volatility-adjusted exposure amount;
- E is the exposure value;
- HE is the volatility adjustment applied to the exposure
value calculated in accordance with Articles 178-2
to 178-6.
For transactions involving OTC derivative instruments,
EVA = E.
Article 178-2
The above volatility adjustments may be calculated using
an approach based on the supervisory volatility adjustments
set out in Article 178-3, or using the approach based on
own estimates of volatility adjustments set out in Article
178-4.
The choice between these two approaches is independent of
the approach for credit risk used by the supervised
institution. When a supervised institution chooses to use the
Own Estimates approach, that approach shall apply to all of
its exposures, with the exception of non-material portfolios,
for which the Supervisory Volatility Adjustment approach
may be used.
Where the financial collateral consists of more than one
recognised instrument, the volatility adjustment shall be
equal to the weighted average of the volatility adjustments
for each instrument, weighted by the proportion of total
collateral represented by each instrument.
Article 178-3
In the Supervisory Volatility Adjustment approach, the
adjustments set out in the following tables shall be applied
where there is daily valuation.
Supervised institutions shall calculate the fully-adjusted
exposure value using the following formula:
E* = max {0, [EVA - CVAM]}
where:
- E* is the fully-adjusted exposure value, taking into
account volatility and the risk mitigating effects of the
financial collateral;
- CVAM is CVA further adjusted for any maturity mismatch
as provided in Chapter V of this Title.
Selected French Banking and Financial Regulations – 2013
161
Credit quality
step with
which the
credit
assessment of
a debt security
is associated
1
2-3
4
Credit quality
step with which
the short-term
credit
assessment of a
short-term debt
security is
associated
1
2-3
162
Residual
maturity
≤ 1 year
>1 ≤ 5 years
> 5 years
≤ 1 year
>1 ≤ 5 years
> 5 years
≤ 1 year
>1 ≤ 5 years
> 5 years
Volatility adjustments for debt securities
issued by central governments and central
banks referred to in paragraph (b) of
Article 164-1
Volatility adjustments for debt securities
issued by institutions or other entities
referred to in paragraphs (c) and (d) of
Article 164-1
20-day
liquidation
period (%)
0.707
2.828
5.657
1.414
4.243
8.485
21.213
21.213
21.213
20-day
liquidation
period (%)
1.414
5.657
11.314
2.828
8.485
16.971
N/A
N/A
N/A
10-day
liquidation
period (%)
0.5
2
4
1
3
6
15
15
15
5-day
liquidation
period (%)
0.354
1.414
2.828
0.707
2.121
4.243
10.607
10.607
10.607
Volatility adjustments for debt securities
issued by central governments and central
banks referred to in paragraph (b) of Article
164-1 and having a short-term credit
assessment
20-day
liquidation
period (%)
0.707
1.414
10-day
liquidation
period (%)
0.5
1
5-day
liquidation
period (%)
0.354
0.707
10-day
liquidation
period (%)
1
4
8
2
6
12
N/A
N/A
N/A
5-day
liquidation
period (%)
0.707
2.828
5.657
1.414
4.243
8.485
N/A
N/A
N/A
Volatility adjustments for debt securities issued by
institutions or other entities referred to in
paragraphs (c) and (d) of Article 164-1 and having a
short-term credit assessment
20-day
liquidation
period (%)
1.414
2.828
10-day
liquidation
period (%)
1
2
5-day
liquidation
period (%)
0.707
1.414
Selected French Banking and Financial Regulations – 2013
Other collateral or exposure types
20-day liquidation period (%)
10-day liquidation period (%)
21.213
15
5-day liquidation period
(%)
10.607
35.355
25
17.678
0
21.213
0
15
0
10.607
Main index equities
and main index
convertible bonds
Other equities or
convertible bonds
listed on a recognised
exchange
Cash
Gold
Volatility adjustments for currency mismatches
20-day liquidation period
(%)
11.314
10-day liquidation period (%)
5-day liquidation period (%)
8
5.657
Selected French Banking and Financial Regulations – 2013
163
The liquidation period shall be:
- 20 business days for secured lending transactions;
- 5 business days for repurchase transactions, with the
exception of transactions involving the transfer of
commodities or guaranteed rights relating to title to
commodities;
- 5 business days for securities or commodities lending or
borrowing transactions;
- 10 business days for all other capital market-driven
transactions.
For the purposes of this Article, the credit quality steps
shall be those assigned in the Standardised Approach for
credit risk. The provisions of Article 164-2 shall apply to
this Article.
For repurchase transactions or securities lending or
borrowing transactions involving securities not listed in the
above tables, and for commodities lending or borrowing
transactions, the volatility adjustment shall be the same as
for equities not included in a main index but listed on a
recognised exchange.
For eligible units in CIUs, the volatility adjustment is the
weighted-average volatility adjustment that would apply to
the unit’s assets, using the liquidation periods defined
above. If the supervised institution is not aware of the
composition of the unit’s assets, the volatility adjustment
shall be the highest volatility adjustment that would apply
to any of the assets in which the fund has the right to invest.
For debt securities issued by an institution that does not
have an external credit assessment satisfying the conditions
set out in Article 164-1, the volatility adjustments shall be
the same as for securities issued by an institution or
corporate whose external credit assessment corresponds to
credit quality steps 2 or 3 as defined in Title II.
Article 178-4
Subject to the criteria set out in this Article, supervised
institutions may use own estimates of volatility for
calculating the volatility adjustments to be applied to
exposures and to financial collateral.
When eligible debt securities have a credit assessment
corresponding to investment grade or better, supervised
institutions may use own estimates for each category of
security.
Supervised institutions shall define each category of debt
securities taking into account their external credit
assessment, the type of issuer, their residual maturity, and
their modified duration. Volatility estimates shall be
representative of the debt securities included in each
category.
For debt securities having an external credit assessment
below investment grade, and for all other eligible collateral,
supervised institutions shall calculate volatility adjustments
for each of these instruments.
Volatility adjustments shall be calculated without taking
into account any correlations between the unsecured
exposure, collateral, or exchange rates.
164
In calculating the volatility adjustments, the following
quantitative criteria must be met:
a) a 99th percentile one-tailed confidence interval shall be
used;
b) the liquidation period shall be:
- 20 business days for secured lending transactions;
- 5 business days for repurchase transactions, with the
exception of transactions involving the transfer of
commodities or guaranteed rights relating to title to
commodities;
- 5 business days for securities or commodities lending or
borrowing transactions;
- 10 business days for all other capital market driven
transactions;
c) supervised institutions may use volatility adjustments
calculated using shorter or longer liquidation periods than
those set out in the preceding paragraph by applying the
following formula:
H M = H N TM / TN
where:
- HM is the volatility adjustment used by the supervised
institution;
- TM is the liquidation period as specified in the preceding
paragraph;
- TN is the liquidation period used by the supervised
institution to derive HN;
- HN is the volatility adjustment calculated based on the
liquidation period TN;
d) supervised institutions shall take into account the
illiquidity of lower-quality assets. The liquidation period
shall be adjusted upwards in cases where there is doubt
concerning the liquidity of the collateral. Supervised
institutions shall identify where historical data may
understate potential volatility. Such cases shall be dealt
with by means of a stress scenario;
e) the historical observation period used for calculating
volatility adjustments shall at least one year. For supervised
institutions that use a weighting scheme or other methods
to determine the historical observation period, the effective
historical observation period shall be at least one year with
a weighted average time lag of the individual observations
not less than 6 months. When volatility increases
significantly, the Autorité de contrôle prudentiel may
require that volatility adjustments be calculated using a
shorter observation period;
f) the data sets used by supervised institutions shall updated
at least quarterly, and more frequently when volatility
increases significantly. This implies that supervised
institutions shall calculate volatility adjustments at least
quarterly.
In calculating volatility adjustments,
quantitative criteria must be met:
the
following
a) the volatility estimates shall be used in the day-to-day
risk management of the supervised institution, including in
relation to its internal exposure limits;
Selected French Banking and Financial Regulations – 2013
b) if the liquidation period used by the supervised
institution in its day-to-day risk management is longer than
that determined as provided in this Section, the supervised
institution’s volatility adjustments shall be scaled up using
the formula in paragraph (c) of this Article;
Article 164-1 and risk-weighted at 0% in accordance with
Title II;
c) the supervised institution shall have procedures for
verifying and ensuring the effective operation of its system
for estimating volatility adjustments and for integrating
them into its risk management process. These procedures
should be well documented;
c) the maturity of the transaction does not exceed one day,
or both the exposure and the collateral are subject to daily
marking-to-market or daily margin calls;
d) the supervised institution’s system for estimating
volatility adjustments shall be subject to independent
periodic review carried out as part of the supervised
institution’s internal control process. This review shall
cover the entire system for estimating volatility adjustments
and integrating them into the supervised institution’s risk
management process. It shall be conducted at least once
annually and shall address, at a minimum:
- the integration of estimated volatility adjustments in daily
risk management;
- the validation of any significant change in the process for
estimating volatility adjustments;
- the consistency, timeliness, reliability, and independence
of the data sources used;
- the accuracy and relevance of the volatility assumptions.
Article 178-5
The volatility adjustments set out in Articles 178-3 and
178-4 are calculated on the basis of daily revaluation. If the
frequency of revaluation is less than daily, supervised
institutions shall scale up the daily revaluation volatility
adjustments using the following formula:
H = HM
N R + (TM − 1)
TM
where:
- H is the scaled-up volatility adjustments;
- HM is the volatility adjustment when there is daily
revaluation;
- NR is the actual number of business days between
revaluations;
- TM is the liquidation period as specified in Article 178-4.
Article 178-6
Subject to the conditions set out in this Article, supervised
institutions using the Supervisory Volatility Adjustment
approach or the Own Estimates approach to calculate
volatility adjustments may apply a volatility adjustment of
0% to repurchase transactions and securities lending or
borrowing transactions, in place of the volatility
adjustments calculated as provided in the preceding
Articles. The provisions of this Article do not apply to
supervised institutions using internal models as provided in
Chapter IV.
b) the exposure and the collateral are denominated in the
same currency;
d) the time between the last marking-to-market before the
failure by the counterparty to honour a margin call and the
liquidation of the collateral shall not exceed four business
days;
e) the transaction is settled across a settlement system
proven for that type of transaction;
f) the transaction is covered by standard market
documentation for repurchase transactions or securities
lending or borrowing transactions in the securities
concerned;
g) that documentation provides for the immediate
termination of the transaction if the counterparty fails to
satisfy an obligation to deliver cash or securities, or fails to
deliver margin, or otherwise defaults;
h) the counterparty is a core market participant. For the
purposes of this paragraph, ‘core market participants’ is
understood to include the following entities
i) the entities listed in paragraph (b) of Article 164-1 and
risk-weighted at 0% in accordance with Title II;
ii) institutions;
iii) other financial companies as defined in Article 1 of
Regulation 2000-03, as well as entities belonging to the
insurance sector within the meaning of Article L.517-2-I of
the Monetary and Financial Code, when the exposures on
these firms or entities are risk-weighted at 20% in the
Standardised Approach for credit risk, or which, in the case
of supervised institutions using the Foundation IRB
Approach for credit risk, have an internal rating associated
with a PD that corresponds to credit quality step 2 or higher
as defined in Article 17 for corporate exposures;
iv) regulated CIUs that are subject to capital or leverage
requirements;
v) regulated pension funds; and
vi) recognised clearing organisations.
Where the competent authorities of another Member State
apply a volatility adjustment of 0% to repurchase
transactions and securities lending or borrowing
transactions involving securities issued by their central
government or central bank, supervised institutions may
apply the same treatment to their repurchase transactions
and securities lending or borrowing transactions involving
the same debt securities.
In order to qualify for the above treatment, the following
conditions must be satisfied:
a) both the exposure and the collateral are cash or debt
securities issued by the entities listed in paragraph (b) of
Selected French Banking and Financial Regulations – 2013
165
Article 179
In calculating risk-weighted exposure amounts, supervised
institutions using the Standardised Approach for credit risk
shall use the fully-adjusted exposure value, E*, as defined
in Articles 178-1 à 178-5, as:
- the exposure value, for balance sheet assets;
- the value to which CCFs are applied to arrive at the
exposure value, for off-balance sheet items.
Supervised institutions using the Foundation IRB Approach
for credit risk shall use as LGD for the purposes of Title III
the effective loss given default, LGD*, calculated as
follows:
LGD* = LGD x (E*/E)
where:
- LGD is the loss given default that would apply to the
exposure value in the absence of credit risk mitigation;
- E* is the fully-adjusted exposure value as defined in
Articles 178-1 to 178-5;
- E is the exposure value.
Section 4
Methods for taking account of other collateral
a risk weight of 70%, where the senior unsecured exposure
to the company providing the life insurance is assigned a
risk weight of 100%;
a risk weight of 150%, where the senior unsecured
exposure to the company providing the life insurance is
assigned a risk weight of 150%.
Article 182
Instruments of all kinds that are issued by a third-party
institution and that will be repurchased by that institution
upon request, as referred to in Article 164-3, may be treated
as collateral provided by the issuing institution.
The value of the credit protection shall be:
- the nominal value of the instrument when it is
repurchased at that value;
- the value of the instruments determined in the same way
as for the debt securities listed in Article (c) of paragraph
164-1, when they are repurchased at their market value.
Section 5
Methods for taking account of collateral for institutions
using the Foundation IRB Approach for credit risk
Article 180
Where the conditions set out in Article 172-1 are satisfied,
cash on deposit with a third-party institution that is pledged
or assigned to the lending institution may be treated as
collateral furnished by the third-party institution.
Article 183-1
The value of the real estate collateral shall be the market
value or mortgage lending value reduced as appropriate to
reflect the results of the monitoring required Article 168
and to take account of the any prior claims on the property.
For the purposes of this Article:
Article 181
Where the conditions set out in Article 172-2 are satisfied,
the fraction of the exposure guaranteed by the surrender
value of the pledged or assigned life insurance policies
shall be calculated either:
a) ’market value’ means the estimated amount for which
the property should exchange hands on the date of
valuation in normal market conditions: that is, when each
party to the exchange acts knowledgeably, prudently, and
without compulsion. The market value shall be documented
in writing in a clear and transparent manner;
a)
on the basis on the risk weights specified below
where the exposure is subject to the standard credit
risk approach;
b)
or by assigning an LGD of 40% where the exposure
is subject to an IRB approach but not subject to the
supervised institution’s own estimates of LGD.
In case of a currency mismatch, the current surrender value
shall be reduced according to Article 194, the value of the
credit protection being the current surrender value of the
life insurance policy
For the purposes of Article 181, the following risk weights
shall be assigned on the basis of the risk weight assigned to
a senior unsecured exposure to the company providing the
life insurance:
a risk weight of 20%, where the senior unsecured exposure
to the company providing the life insurance is assigned a
risk weight of 20 %;
b) ’mortgage lending value’ means the value of the
property as determined by a prudent assessment of the
future marketability of the property, taking into account the
long-term sustainable characteristics of the property,
normal local market conditions, the current use of the asset,
and appropriate alternative uses of the property. The
mortgage lending value shall be documented in a
transparent and clear manner.
Article 183-2
In the case of receivables, the value of the collateral shall
be the amount receivable.
Article 183-3
For physical collateral other than those types mentioned
above, the property shall be valued at its market value
defined as the amount for which the property would
exchange on the date of valuation.
a risk weight of 35%, where the senior unsecured exposure
to the company providing the life insurance is assigned a
risk weight or 50%;
166
Selected French Banking and Financial Regulations – 2013
Article 184-1
Risk-weighted exposure amounts and expected losses
taking account of the effects of the collateral referred to in
this Section shall be calculated in accordance with the
following provisions:
For the purposes of Title III, supervised institutions using
the Foundation IRB Approach for credit risk shall
substitute the effective loss given default LGD* calculated
as indicated below for LGD:
- when the ratio of the value of the collateral (C) to the
exposure value (E) is below a minimum threshold C*
specified in the following table, supervised institutions
shall assign the collateralised exposure an effective loss
given default (LGD*), equal to the LGD defined in Title III
for a similar uncollateralised exposure;
LGD* for senior claims
or contingent claims
Receivables
Residential real estate and
commercial real estate
Other collateral
35 %
35 %
40 %
Selected French Banking and Financial Regulations – 2013
- when the ratio of the value of the collateral (C) to the
exposure value (E) exceeds a second threshold (C**)
specified in the following table, supervised institutions
shall assign the collateralised exposure, by substitution, the
effective loss given default (LGD*) calculated as indicated
below, in place of the LGD defined in Title III;
- when this second threshold (C**) is not reached for the
exposure as a whole, supervised institutions shall divide the
exposure into two parts: one part for which the second
threshold (C**) is reached, and the other part
corresponding to the residual exposure.
LGD* for senior claims
or contingent claims
LGD* for subordinated
claims or contingent
claims
65 %
65 %
70 %
Required minimum
collateralisation level of
the exposure (C*)
Required minimum
collateralisation level of
the exposure (C**)
0%
30 %
125 %
140 %
30 %
140 %
167
Until 31 December 2012, supervised institutions shall assign
the following LGDs, subject to the above thresholds:
- 30% for senior exposures in the form of Commercial Real
Estate leasing for finance lease agreements or lease
agreements or lease agreements of a financial nature
concerning commercial real estate use, when the exposure
represents a first-priority claim;
- 35% for senior exposures in the form of equipment leasing,
when the exposure represents a first-priority claim;
- 30% for senior exposures secured by residential or
commercial real estate and secured by a mortgage or
equivalent security, when the exposure represents a firstpriority claim.
Article 184-2
For exposures, or any part of an exposure, fully
collateralised by residential property, the Autorité de
contrôle prudentiel may authorise supervised institutions to
apply, in place of the treatment set out in the preceding
Articles, a 50% risk weight to the exposure value, or to the
guaranteed portion of the exposure value, if the real estate
market is sufficiently developed and its loss rates have the
following characteristics:
- the losses generated each year by exposures collateralised
by residential properties for which the outstanding loan
amount is less than or equal to 50% of the market value or
60% of the mortgage lending value of the real property do
not exceed 0.3% of total outstanding amount of those
exposures;
- the total losses generated each year by lending
collateralised by residential property do not exceed 0.5% of
the total outstanding amount of those exposures.
For finance lease agreements and lease agreements of a
financial nature concerning commercial real estate, the
Autorité de contrôle prudentiel may authorise supervised
institutions to apply, in place of the treatment set out in the
preceding Articles, a 50% risk weight to the fraction of the
exposure value corresponding to the discounted value of
minimum payments for the agreement if the market for
finance leases and leases of a financial nature for this type of
property is sufficiently developed and its loss rates have the
following characteristics:
- the losses generated each year by lease financing
agreements and leases of a financial nature for which the
outstanding financial amount is less than or equal to 50% of
the market value or 60% of the mortgage lending value of
the underlying real property do not exceed 0.3% of total
financial outstanding of exposures in this market;
- the total losses generated each year by lease financing
agreements and lease agreements of a financial nature do not
exceed 0.5% of the total financial outstanding of exposures
in this market.
If either of these two conditions ceases to be met for a given
year, the waiver shall end until such time as both conditions
are again satisfied.
When the competent authorities of another Member State
apply the treatments set out in this Article to exposures
collateralised by residential property or to finance lease
agreements or lease agreements of a financial nature
concerning commercial real estate, supervised institutions
may apply those treatments to exposures collateralised by
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residential property located in that State or to finance lease
agreements or lease agreements of a financial nature
concerning commercial real estate in that State.
Article 185
When an exposure is collateralised by both financial
collateral and other eligible collateral, supervised institutions
using the Foundation IRB Approach for credit risk shall, for
the purposes of Title III, substitute the effective loss given
default (LGD*) for LGD, in the following fashion:
- first, the adjusted exposure value referred to in Article 1781 shall be divided into several parts, each covered by only
one type of collateral. Supervised institutions shall, as
appropriate, divide the adjusted exposure value into the
portion covered by eligible financial collateral, the portion
covered by receivables, the portion covered by real estate
collateral, the portion covered by other eligible collateral,
and the unsecured portion, if relevant.
- then, the effective loss given default (LGD*) shall be
calculated for each of these parts as provided in this Chapter.
Chapter III
UNFUNDED CREDIT PROTECTION
Section 1
Eligibility
Article 186
Independent of the approach for credit risk used, and subject
to the minimum requirements set out in Section 2,
supervised institutions may recognise the following entities
as providers of protection:
a) central governments and central banks;
b) regional governments and local authorities;
c) multilateral development banks;
d) the European Community, the International Monetary
Fund, and the Bank for International Settlements;
e) public sector entities that are treated like central
governments or as institutions as provided in Title II;
f) institutions;
g) other corporate entities, including those belonging to the
same group as the supervised institution, when the following
conditions are met:
- the corporate entities have an external credit assessment
corresponding to a credit quality step of 2 or higher as
defined in Article 17;
- for supervised institutions using the Foundation IRB
Approach for credit risk, if the corporate entity does not
have an external credit assessment, it has an internal rating
associated with a PD corresponding to credit assessment
corresponding to a credit quality step of 2 or higher as
defined in Article 17.
Financial institutions authorised and supervised by the
competent authorities of another Member State responsible
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for licensing and supervising credit institutions may be
recognised as protection providers if they are subject to a
prudential supervision regime equivalent to the regime that
applies to the supervised institutions.
Article 187 - For institutions using the Foundation IRB
Approach for credit risk, the protection provider must have
an internal rating that satisfies the minimum requirements
set out in Chapter V of Title III.
Article 188
For the purposes of the double default treatment set out in
Article 48, institutions, entities belonging to the insurance
sector within the meaning of Article L. 517-2-I of the
Monetary and Financial Code, and Credit Export Agencies
may be recognised as protection providers if the following
requirements are satisfied:
Section 2
Minimum requirements
Article 190-1
Unfunded credit protection referred to in Section 1 must
satisfy the following requirements:
a) the credit protection is direct;
b) the extent of the credit protection is clearly defined and
incontrovertible;
c) the credit protection contract does not contain any clause,
the fulfilment of which is outside the direct control of the
lender, and that:
b) the protection provider is supervised in a manner
equivalent to supervision conducted in accordance with this
Order, or had, at the time the protection was put in place, an
external credit assessment corresponding to credit quality
assessment step 3 or higher as defined in Title II;
i) would allow the protection provider to cancel the
protection unilaterally;
ii) would increase the effective cost of protection as a result
of deteriorating credit quality of the protected exposure;
iii) could prevent the protection provider from satisfying its
payment obligation in a timely manner in the event that the
original counterparty fails to make payments due;
iv) could authorise the protection provider to reduce the
maturity of the credit protection;
c) the protection provider has an internal rating associated
with a PD corresponding to credit quality step 3 or higher as
defined in Title II;
d) the protection is legally effective and enforceable in all
jurisdictions concerned at the time the credit agreement is
concluded.
However, at the time the credit protection was provided, the
protection provider must have had an internal rating
associated with a PD corresponding to a credit quality step
of 2 or higher as defined in Title II. If at the time that the
protection was put in place, the protection provider had an
internal rating associated with a PD corresponding to a
credit quality step of 3 as defined in Title II, the protection
shall not become eligible until the protection provider
obtains an internal rating associated with a probability of
default corresponding to credit quality step 2 as defined in
Title II.
Article 190-2
Supervised institutions shall implement systems to manage
concentration risk arising from the use of unfunded credit
protection. Supervised institutions must be able to
demonstrate how its strategy regarding use of unfunded
credit protection interacts with their overall risk profiles.
a) the protection provider has sufficient expertise in
providing unfunded credit protection;
For the purposes of this Article, protection provided by
export credit agencies must not benefit from any explicit
government counter-guarantee.
Article 189-1
Independent of the approach for credit risk used, supervised
institutions may recognise credit default swaps, total return
swaps, credit linked notes, and other equivalent instruments
as credit risk mitigation techniques.
For supervised institutions that purchase credit protection in
the form of a total return swap and record the net payments
received on the swap as net income, but do not record
deterioration in the value of the asset that is protected, the
credit protection shall not be recognised.
Article 189-2 - When supervised institutions use credit
derivatives held in the trading book to hedge the exposures
in the non-trading book, the credit protection shall be
recognised and taken into account in accordance with this
Title if the credit risk transferred to the trading book is
transferred to one or more third parties.
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Article 191
When an exposure is protected by a guarantee which is
counter-guaranteed by a central government or central bank,
a regional government or local authority, a public sector
entity treated like a central government as provided in Title
II, a multilateral development bank referred to in paragraph
(b) of Article 14 or an international organisation with a riskweight exposure of 0% in accordance with Article 15 of
Title II, the exposure may be treated as protected by a
guarantee provided by the above entities, provided the
following conditions are satisfied:
a) the counter-guarantee covers the entire credit risk of the
claim;
b) both the original guarantee and the counter-guarantee
meet the minimum requirements for guarantees set out in
Articles 190-1, 190-2, and 192-1, with the exception that the
counter-guarantee need not be direct;
c) the protection is robust and the historical data indicate
that the protection provided by the counter-guarantee is at
least equivalent to that of a direct guarantee provided by the
same entity.
The treatment referred to in the preceding paragraph also
applies to exposures counter-guaranteed by entities other
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than those listed above if the counter-guarantee is in turn
directly guaranteed by one of the entities listed.
Article 192-1
In addition to the requirements set out in Articles 190-1 and
190-2, guarantees must satisfy the following requirements:
a) in the event of default or non-payment on the part of the
counterparty, the lending institution shall have the right to
pursue the guarantor in a timely manner for any monies due
under the terms of the claim. Payment by the protection
provider shall not be subject to the lending institution first
having to pursue the obligor. In the case of guarantees
covering real estate loans granted for the acquisition or
improvement of residential property, the requirements in
subparagraph (iii) of paragraph (c) of Article 190-1 and the
requirements set out in this paragraph need only be satisfied
within an appropriate and reasonable timeframe;
b) the guarantee is the object of an explicitly documented
agreement accepted by the protection provider;
c) the protection covers all types of payments that the
obligor is expected under the terms of the claim. When
certain types of payment are not covered, the recognised
value of the guarantee shall be adjusted to reflect the limited
nature of the coverage.
Article 192-2
In the case of guarantees obtained in the context of mutual
guarantee schemes or provided or counter-guaranteed by the
entities listed in Article 191, the requirements set out in
paragraph (a) of the preceding Article shall be considered
satisfied when either of the following conditions is met:
a) the lending institution has the right to receive in a timely
manner a provisional payment from the protection provider
representing a rigorous estimate of the economic loss,
including losses resulting from the non-payment of interest
or any other amount due from the borrower, and likely to be
incurred by the lending institution in proportion to the
coverage of the guarantee;
b) the lending institution can demonstrate that the effects of
the guarantee, including the coverage of losses resulting
from any amount due from the borrower, justify this
treatment.
Article 192-3
In addition to the requirements set out in Articles 190-1 and
190-2, credit derivatives must satisfy the following
requirements:
a) subject to the provisions of paragraph (b), the credit
events shall at a minimum include:
i) the non-payment of the amounts due under the terms of
the underlying obligation that are in effect at the time. The
payments made under the terms of the protection shall
occur, at the latest, after the expiration of a grace period
close to or shorter than the grace period provided for in the
terms of the underlying obligation;
ii) the bankruptcy, insolvency or inability of the obligor to
pay its debts, or to make payments as they become due, or
any other similar event, or the admission in writing of such
inability;
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iii) the restructuring of the underlying obligation involving
forgiveness or postponement of principal, interest, or fees, as
well as a value adjustment or any other similar debit to the
profit and loss account;
b) when restructuring of the underlying obligation is not
considered a credit event, the value of the protection shall be
adjusted as provided in Article 194;
c) when the credit derivatives allow for cash settlement,
supervised institutions shall have a robust valuation process
for estimating losses reliably. There shall be a clearly
specified period for obtaining post-credit-event valuations of
the underlying obligation;
d) when the protection purchaser’s right and ability to
transfer the underlying obligation to the protection provider
is required for settlement, the terms of the underlying
obligation shall provide that any required consent to such
transfer may not be unreasonably withheld;
e) the parties responsible for determining whether a credit
event has occurred shall be clearly identified. This
determination may not be the sole responsibility of the
protection seller. The protection buyer shall have the right or
the ability to inform the protection provider of the
occurrence of a credit event.
When there is a mismatch between the underlying obligation
and the reference asset, or between the underlying obligation
and the asset used to determine whether a credit event has
occurred, the following conditions must be satisfied:
a) the reference asset, or the asset used to determine whether
a credit event has occurred ranks pari passu with or is junior
to the underlying obligation;
b) the reference asset or the asset used to determine whether
a credit event has occurred has the same obligor, i.e., the
same legal entity, as the underlying obligation. In this case,
cross-default or cross-acceleration clauses are legally
enforceable.
Article 192-4
Unfunded credit protection eligible for the double default
treatment set out in Article 48 shall satisfy the following
requirements:
a) the underlying obligation shall be:
– an exposure classified as a corporate exposure in Article
40-1, excluding exposures on entities belonging to the
insurance sector within the meaning of Article L. 517-2-I of
the Monetary and Financial Code; or
– an exposure to a regional government or local authority or
to a public sector entity that is not treated as an exposure to a
central government or a central bank as defined in Articles
40-1 to 40-6; or
– an exposure to a small or medium-sized entity classified as
a retail exposure in Articles 41;
b) the obligor for the underlying commitment shall not be a
member of the same group as the protection provider;
c) the exposure shall be covered by one of the following
guarantees or credit derivatives:
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– single-name unfunded credit derivatives or single-name
guarantees;
– first-to-default credit derivatives covering a basket of
assets. In this case, the treatment shall be applied to the asset
within the basket with the lowest risk-weighted exposure
amount;
– nth-to-default credit derivatives covering a basket of assets.
In this case, the protection obtained is eligible only if
eligible protection for the (n-1)th default has already been
obtained or if (n-1) of the assets in the basket have already
defaulted. When these conditions are satisfied, the treatment
shall be applied to the asset in the basket with the lowest
risk-weighted exposure amount;
d) the protection satisfies the requirements set out in
paragraphs 190-1, 190-2, 192-1 and 192-3;
e) the effect of the protection is not already taken into
account in the risk-weighting of the exposure prior to the
application of the double default treatment;
f) the supervised institution that benefits from the protection
does not have the obligation to take legal action against the
counterparty in order to receive payments under the terms of
the protection. To the extent possible, supervised institutions
shall take the necessary steps to ensure that the protection
provider pays promptly in the event of a credit event;
g) the purchased protection absorbs all losses arising from
one of the credit events provided for in the contract, for the
portion of the exposure covered by the protection;
h) for contracts providing for physical settlement, supervised
institutions shall ensure the legal certainty of settlement. If a
supervised institution intends to deliver an asset other than
the underlying asset, it shall ensure that the asset to be
delivered is sufficiently liquid to be purchased for delivery
in accordance with the terms of the contract;
i) the terms and conditions of the contract establishing the
protection arrangements shall be legally confirmed in
writing by both the protection provider and the supervised
institution that benefits from it;
j) supervised institutions shall put in place provisions
permitting them to detect any excessive correlation between
the credit quality of the protection provider and the obligor
of the exposure covered by the protection, due to their
financial condition being dependent on common factors
other than the general or sectoral economic outlook;
k) in the case of protection against dilution risk, the seller of
purchased receivables shall not be a member of the same
group as the protection provider.
Section 3
Methods for taking account of unfunded credit
protection
Article 193
Credit linked notes issued by a lending institution are treated
as cash collateral.
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Article 194
Unfunded credit protection is evaluated in accordance with
the following provisions:
a) the value of protection shall be the amount that the
protection provider has undertaken to pay in the event of
default, non-payment on the part of the borrower, or any
other credit event specified in the contract;
b) in the case of credit derivatives for which a restructuring
of the underlying obligation is not considered as a credit
event implying forgiveness or postponement of principal,
interest, or fees resulting in a loss event such as a value
adjustment or any other similar debit to the profit and loss
account, supervised institutions shall apply the following
provisions:
- when the amount that the protection provider has
undertaken to pay is less than or equal to the exposure value,
the value of the protection as defined in paragraph (a) shall
be reduced by 40%;
- when the amount that the protection provider has
undertaken to pay is greater than the exposure value, the
value of the credit protection shall not exceed 60% of the
exposure value;
c) when unfunded credit protection is denominated in a
currency different from that in which the exposures covered
by the protection are denominated, supervised institutions
shall apply a volatility adjustment to the value of the
protection, calculated as follows:
G* = G x (1-HFX)
where:
- G is the nominal amount of the protection;
- G* is G adjusted for the currency mismatch;
- HFX is the volatility adjustment for the currency mismatch,
and.
In the absence of a currency mismatch, G* = G.
The above volatility adjustments may be calculated using
the Supervisory Volatility Adjustments approach or the Own
Estimates approach set out in subsection 2 of Section 3 of
Chapter II.
Article 195-1
The calculation of risk-weighted exposure amounts and, if
relevant, expected losses, shall take account of the effects of
unfunded credit protection in accordance with the following
provisions.
Article 195-2
When a supervised institution transfers a portion of the risk
of a loan in one or more tranches, the provisions of Article V
shall apply. When there are materiality thresholds below
which a credit event will not trigger payment under the
terms of the protection, supervised institutions shall be
considered to have retained a first-loss position.
Article 195-3
Supervised institutions using the Standardised Approach for
credit risk shall take account of the effects of unfunded
credit protection in accordance with the following
provisions:
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a) when an exposure is entirely covered by unfunded credit
protection, supervised institutions shall assign the exposure,
by substitution, the risk weight that would apply to a direct
exposure on the protection provider in the Standardised
Approach for credit risk.
To determine the extent of protection, supervised institutions
shall use the nominal amount of protection adjusted for any
maturity mismatch as provided in Article 194 and for any
maturity mismatch in accordance with Chapter V of this
title;
b) when a portion of an exposure is covered by unfunded
credit protection and the protected and unprotected portions
rank equal in seniority, supervised institutions shall calculate
the risk-weighted exposure amount for the purposes of Title
II in the following manner:
(E-GA) x r + GA x g
where:
- E is the exposure value;
- GA, is the nominal amount of protection adjusted for any
maturity mismatch as provided in Article 194 and for any
maturity mismatch in accordance with chapter V of this
Title;
- r is the risk weight of the exposures to the obligor in the
Standardised Approach for credit risk;
- g is the risk weight of the protection provider in the
Standardised Approach for credit risk.
The treatment set out in paragraphs (d) and (e) of Article 11
shall apply to exposures or parts of exposures covered by
unprotected credit protection provided by central banks or
central governments and denominated in the domestic
currency of the borrower, when the exposure is funded in
that currency.
Article 195-4
For the purposes of the provisions of Sections 2 and 3 of
Chapter IV of Title III, supervised institutions using the
Foundation IRB Approach for credit risk shall take account
of the effects of unfunded credit protection according the
following provisions:
a) when an exposure is partially or fully covered by
unfunded credit protection, supervised institutions shall
apply, by substitution, the PD of the protection provider to
the covered portion of the exposure. When the supervised
institutions consider that full substitution is not warranted,
they shall assign a PD between that of the borrower and that
of the guarantor;
b) in the case of subordinated exposures covered by nonsubordinated unfunded credit protection, supervised
institutions using the Foundation IRB Approach for credit
risk shall apply the LGD that would apply to senior
exposures;
maturity mismatch in accordance with Chapter V of this
title;
e) by derogation to paragraph (a), supervised institutions
shall substitute the risk weight of the protection provider
when the protection provider is subject to the Standardised
Approach for credit risk.
Article 196
When supervised institutions obtain credit protection for a
basket of exposures in the form of first-to-default credit
derivatives, the following treatment applies: the riskweighted exposure and, if relevant, expected losses, for the
exposure in the basket that in the absence of the credit
protection would be associated with the lowest riskweighted exposure amount under Title II or III (depending
on the choice of approach), may be modified as provided in
this Chapter if the value of the exposure is less than or equal
to the value of the protection.
When supervised institutions have credit protection for a
basket of exposures in the form of nth-to-default credit
derivatives, the effects of the protection may be treated as
provided in the preceding paragraph for the calculation of
risk-weighted exposures and, if relevant, expected losses if
the institution has already obtained protection for defaults 1
to n-1 or if n-1 defaults have already occurred.
CHAPTER IV
NETTING
Section 1
Eligibility
Article 197
Subject to the minimum requirements of Section 2, the
netting of the on-balance sheet transactions of a supervised
institution with the same counterparty shall be recognised as
a credit risk mitigation technique.
Without prejudice to the provisions of the following article,
this recognition is limited to loans and deposits placed with
the lending institution by the same counterparty.
Article 198
Subject to the minimum requirements of Section 2, when
supervised institutions use the Financial Collateral
Comprehensive Method set out in Section 3 to reflect the
effects of financial collateral as defined in Section 3 of
Chapter II, the effects of bilateral netting contracts signed
with the same counterparty and covering repurchase
transactions, securities or commodities lending or borrowing
transactions, or other capital market-driven transactions may
be recognised as credit risk mitigation techniques. Without
prejudice to the provisions of Chapter V of Title VII, the
debt securities or commodities involved in these transactions
shall be limited to those listed in Articles 164-1 and 165.
c) when an exposure is partially covered by unfunded credit
protection, supervised institutions shall apply the PD of the
borrower and the LGD associated with the underlying
exposure to the uncovered portion of the exposure;
d) to determine the extent of protection, supervised institutions
shall use the nominal amount of protection adjusted for any
maturity mismatch as provided in Article 194, and for any
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Section 2
Minimum requirements
Article 199
In order to be recognised as a credit risk mitigation
technique, on-balance sheet netting must satisfy the
following requirements:
- the netting agreement is legally enforceable in all relevant
jurisdictions, including in the event of the insolvency or
bankruptcy of a counterparty;
- the supervised institution is able to determine at any time
which assets and liabilities are subject to the netting
agreement;
- the supervised institution monitors and controls the risks
associated with the termination of credit protection;
- the supervised institution monitors and controls the
exposures concerned on a net basis.
Article 200
In order to be recognised as credit risk mitigation
techniques, master netting agreements covering repurchase
transactions, securities or commodities lending or borrowing
transactions, or other capital market-driven transactions
must satisfy the following requirements:
- they are legally effective and enforceable in all relevant
jurisdictions, including in the event of the bankruptcy or
insolvency of the counterparty;
- they give the non-defaulting party the right to terminate
and close-out in a timely manner all transactions under the
agreement upon the event of default, including in the event
of the bankruptcy or insolvency of the counterparty
- they provide for the netting of gains and losses on
transactions closed out under a master agreement such that a
single net amount owed by one party to the other can be
determined.
Article 202-2
Supervised institutions should first calculate:
a) a net position in each type of debt security or commodity
subject to the same master netting agreement. This net
position shall be calculated by computing the total value of
the debt securities or commodities of that type lent, sold, or
provided and then subtracting the total value of securities or
commodities of that type borrowed, purchased, or received.
For the purposes of this paragraph, ‘type of debt security’
means debt securities issued by the same entity, with the
same issue date, the same maturity, the same liquidation
period referenced in Section 3 of Chapter II, and subject to
the same contractual terms and conditions;
b) a net position in each currency other than the settlement
currency of the master netting agreement. This net position
shall be calculated by taking the total value of the securities
denominated in that currency that are, sold, or provided;
subtracting the total value of securities or commodities
denominated in the same currency that are borrowed,
purchased, or received; and then subtracting the amount of
cash in that currency that is lent or transferred.
Article 202-3
Supervised institutions should then:
a) apply the appropriate volatility adjustment for each type
of security or cash position to the absolute value of the net
long or short position in securities of that type.
b) apply the appropriate volatility adjustment for currency
mismatch to the net long or short position in each currency
other than the settlement currency of the master netting
agreement.
In addition to the above requirements, the requirements for
the recognition of financial collateral set out in Article 167-1
must be satisfied
Article 202-4
Supervised institutions shall calculate the fully-adjusted
exposure value, taking into account the affects of the master
netting agreement, using the following formula:
Section 3
Methods for taking account of netting
E* = max {0, [(∑(E) - ∑(C)) + ∑(|net position in each type
of security | x Hsec) + (∑|Efx| x Hfx)]}
Article 201
Loans and deposits placed with the lending institution by the
same counterparty and that are subject to on-balance sheet
netting shall be treated as cash collateral.
Article 202-1
To take account of the effect of master netting agreements
covering repurchase transactions, securities or commodities
lending or borrowing transactions, or other capital marketdriven transactions, supervised institutions shall calculate
the fully-adjusted exposure value in accordance with the
following provisions, using for the calculation of volatility
adjustments either the Own Estimates approach or the
Supervisory Volatility Adjustments approach set out in
Section 2 of Chapter II. When supervised institutions use the
Supervisory Volatility Adjustments approach, the conditions
and requirements set out in Article 178-4 must be satisfied.
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where:
- E* is the fully-adjusted exposure value;
- E is the exposure value that would apply in the absence of
the credit protection, for each exposure under the agreement;
- C is the value of the debt securities or commodities
borrowed, purchased, or received or the cash borrowed or
received under the agreement;
- ∑(E) is the sum of the exposure values, E;
- Σ(C) is the sum of the values of debt securities,
commodities, and cash, C;
- Efx is the net long or short position in a given currency
other than the settlement currency of the agreement;
- Hsec is the volatility adjustment appropriate to a particular
type of debt security;
- Hfx is the volatility adjustment for currency mismatch.
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Article 203-1
Instead of applying Articles 202-1 to 202-4, and whatever
their approach to credit risk, supervised institutions may be
authorised by Autorité de contrôle prudentiel to use internal
models for:
a) taking account of the effects of netting that covers
repurchase transactions, securities or commodities lending
or borrowing transactions, or other capital market-driven
transactions, if the models takes into account correlations
between positions in debt securities covered by the netting
agreement as well as the liquidity of the instruments
concerned. These models shall provide estimates of the
potential change in value of unsecured exposure amount
(∑E - ∑C).
b) margin lending transactions, if these transactions are
covered under a bilateral master netting agreement that
meets the requirements set out in Title VI.
Supervised institutions granted approval to use an internal
model to calculate capital requirements for market risk in
conformance with Title VII may use an internal model for
the application of this Article. The Autorité de contrôle
prudentiel may prohibit the use of such a model.
Article 203-2
Internal models shall apply to all counterparties and
instruments, except in non-material portfolios, for which the
approach set out in Articles 201 and 202-1 to 202-4 may be
used.
Article 203-3
To use of internal models, supervised institutions shall have
a system for the managing the risks associated with
transactions covered by master netting agreements that is
conceptually sound and implemented with integrity. In
particular, the following qualitative criteria shall be met:
a) the internal model used to calculate the potential price
volatility of transactions is closely integrated into the daily
risk management process of the supervised institution and
serves as the basis for internal reports;
b) supervised institutions have a risk control unit responsible
for designing and operating the risk management system.
This unit must be independent from business trading units
and must report directly to senior management. It shall
produce daily reports on the output of the model and on the
use of trading limits;
c) the daily reports produced by the independent risk-control
unit shall be reviewed by a level of management with
sufficient authority to enforce reductions of positions taken
and reductions in overall risk exposure;
d) the risk-control unit has a sufficient number of staff
skilled in the use of models;
e) supervised institutions have a programme for verifying
compliance with the internal policies and procedures relating
to the overall operation of the risk-measurement system.
These policies and procedures shall be well documented;
174
f) the models have a proven track record of reasonable
accuracy in measuring risks, demonstrated through by backtesting its output using at least one year of data;
g) supervised institutions frequently conduct a rigorous
programme of stress testing. The results of these tests are
reviewed and reflected in the system of limits;
h) an independent review of the risk-measurement system is
conducted as part of the supervised institution’s regular
internal control process This review covers both the
activities of the trading units and those of the independent
risk-control unit;
i) the risk management system is reviewed at least once
annually;
j) the internal models satisfy the requirements set out in
paragraphs (b) and (c) of Article 290 and Article 291.
Article 203-4
For the calculation of potential changes in value, the
following quantitative criteria shall be met:
- potential changes in value are calculated at least daily;
- a one-tailed 99% confidence interval is used;
- a liquidation period of 5 business days is applied to
securities repurchase transactions or securities lending or
borrowing transactions; for the other operations a liquidation
period of 10 business days shall be used;
- the historical observation period used in calculating
potential variation is at least one year, except where a
shorter observation period is justified by a large upsurge in
price volatility;
- institutions update their data series at least quarterly.
The risk-measurement system shall capture a sufficient
number of risk factors to capture all material price risks.
Supervised institutions may take account of empirical
correlations within risk categories and across risk categories,
provided that the system for measuring these correlations is
sound and implemented with integrity.
Article 203-5
The fully-adjusted exposure value, taking account of the
effects of the master netting agreement, shall be calculated
as follows:
E* = max {0, [( ∑E - ∑C) + (VaR of the model)]}
where:
- E* is the fully-adjusted exposure value;
- E is the exposure value for each exposure under the
agreement;
- C is the value of the debt securities or commodities
borrowed, purchased, or received or the cash borrowed or
received under the agreement;
- ∑(E) is the sum of the exposure values, E;
- Σ(C) is the sum of the values of debt securities,
commodities, and cash, C;
In calculating risk-weighted exposure amounts, supervised
institutions shall use the previous business day’s model
output as estimated by the internal model.
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Article 204
For the purposes of Titles II and III, supervised institutions
shall take the fully-adjusted exposure value (E*) as defined
in the preceding paragraphs as the exposure value of
exposures to the counterparty arising from the transactions
subject to a master netting agreement.
CHAPTER V
MATURITY MISMATCHES
Article 205
For the purposes of calculating risk-weighted exposure
amounts, a maturity mismatch exists when the residual
maturity of the credit protection is less than that of the
exposure covered by the protection. When the residual
maturity of the protection is less than three months and there
is a maturity mismatch, the protection shall not be
recognised.
In the case of maturity mismatch, the credit protection shall
not be recognised if its original maturity is less than 1 year
or if the exposure covered by the protection is a short-term
exposure for which the maturity (M) must be at least one
day, as provided in Article 89-2.
Article 206
The effective maturity of the exposure covered by protection
shall be the longest possible remaining time before the
obligor is required to fulfil its obligations, but no less than 5
years. Subject to the following paragraph, the maturity of the
credit protection shall be the time to the earliest date at
which the protection may end or be terminated
Where the protection provider has the option to terminate
the protection unilaterally, the maturity of the protection
shall be the time to the earliest date at which that option can
be exercised. Where the supervised institution has the option
to terminate the protection and the contractual terms contain
a positive incentive for the supervised institution to exercise
that option before contractual maturity, the maturity of the
protection shall be the time to the earliest date at which that
option can be exercised; otherwise the option shall not affect
the maturity of the protection.
Where the protection provided by a credit derivative can
terminate prior to the expiration of a grace period required
for a default on the underlying obligation to occur as a result
of a failure to pay, the maturity of the protection shall be
reduced by the amount of the grace period.
Article 207
Supervised institutions using the Financial Collateral Simple
Method to reflect the effects of financial collateral may not
recognise financial collateral when there is a maturity
mismatch.
Article 208
When supervised institutions use the Financial Collateral
Comprehensive Method to reflect the effects of financial
collateral, the maturity mismatch is taken into account in the
adjusted value of the instruments constituting:
CVAM = CVA x (t-t*)/(T-t*)
Selected French Banking and Financial Regulations – 2013
where:
- CVA is the volatility-adjusted value of the instrument
constituting the financial collateral as defined in Section 3 of
Chapter II, or the amount of the exposure, whichever is
lower;
- t is the number of years remaining to the maturity date of
the credit protection as defined in Article 206 of this
Chapter, or the value of T as defined below, whichever is
lower;
- T is the number of years remaining to the maturity date of
the exposure as defined in Article 206, or 5 years when T is
greater than 5 years;
t* = 0.25.
Supervised institutions shall use CVAM to calculate the fullyadjusted exposure value (E*), as provided in Subsection 2 of
Section 2 of Title II.
Article 209
In the case of unfunded credit protection, the maturity
mismatch shall be reflected in the adjusted value of the
credit protection as follows:
GA = G* x (t-t*)/(T-t*)
where:
- G* is the amount of the protection adjusted for any
currency mismatch
- GA is G* adjusted for any maturity mismatch
- t is the number of years remaining to the maturity date of
the credit protection as defined in Article 206 of this
Chapter, or the value of T as defined below, whichever is
lower;
- T is the number of years remaining to the maturity date of
the exposure as defined in Article 206, or 5 years when T is
greater than 5 years;
- t* = 0.25.
Supervised institutions shall use GA as the value of the credit
protection for the purposes of Articles 194 and 195-1 to 195-4.
TITLE V
SECURITISATION
CHAPTER I
GENERAL PROVISIONS
Article 210
For the purposes of this Title:
a) ’traditional securitisation’ means a securitisation
involving the economic transfer of the securitised exposures
to a special purpose entity which issues securities. The
transaction or structure involves the transfer of ownership of
the securitised exposures from the originator supervised
institution, or a sub-participation. The securities issued must
not represent payment obligations of the originator
supervised institution;
b) ’synthetic securitisation’ means a securitisation in which
the transfer of credit risk is achieved by the use of credit
derivatives or guarantees, and the pool of exposures is not
removed from the balance sheet of the originator supervised
institution;
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c) ’tranche’ means a contractually established segment of
the credit risk associated with an exposure or a number of
exposures. Each segment entails a credit risk specific to it,
reflecting its rank or subordination, independent of any
credit protection obtained directly from third parties;
d) ’originator’ means either of the following:
- an entity that, either itself or through related entities, was
involved directly or indirectly in the original agreement
which created the obligations or potential exposures of the
debtor or potential debtor that give rise to the securitisation
transaction or structure;
- an entity that securitises exposures which it has purchased
from a third party and brought onto its balance sheet;
e) ’sponsor’ means a supervised institution other than an
originator supervised institution that establishes and
manages an asset-backed commercial paper programme or
any other securitisation transaction or structure in which it
purchases exposures from third parties;
f) ’credit enhancement’ means a contractual arrangement
whereby the credit quality of a position in a securitisation is
improved, including the enhancement provided by more
junior tranches in the securitisation and other types of credit
protection;
n) ’unfunded credit protection’ means guarantees and credit
derivatives other than credit linked notes and similar
instruments.
Article 211
The risk-weighted exposure amount of a securitisation
position shall be calculated by applying the risk weight
determined as provided in this Title to the exposure value of
the position.
Article 212
If a supervised institution uses the Standardised Approach
for credit risk set out in Title II for the exposure class to
which the securitised exposures belong, the risk-weighted
exposure amounts for the securitisation positions shall be
calculated as provided in Chapter III.
If a supervised institution uses the IRB approach for credit
risk set out in Title III, the risk-weighted exposure amounts
for the securitisation positions shall be calculated as
provided in Chapter IV.
Article 213
When an originator supervised institution transfers
significant credit risk exposures as provided in Chapter II, it
shall:
g) ’securitisation special purpose entity’ means an entity,
other than a supervised institution, whose purpose is to
house one or more securitisations, and whose activities are
limited to accomplishing that objective. The structure of the
entity is designed to isolate its obligations from those of the
originator supervised institution. The holders of the
beneficial interests in the entity have the right to pledge or
exchange their shares without restriction;
a) in the case of a traditional securitisation, exclude from its
calculation of risk-weighted exposure amounts, and, as
relevant, expected loss amounts, the exposures that it has
securitised;
h) ’excess spread’ means interest income and any other fee
income received in connection with the securitised
exposures, net of costs and expenses;
c) calculate the risk-weighted exposure amounts for the
positions that it holds in the securitisation.
i) ’clean-up call option’ means a contractual option for the
originator institution to repurchase or extinguish the
securitisation positions before all of the underlying
exposures have been repaid, when the amount of outstanding
exposures falls below a specified level;
j) ’liquidity facility’ means the securitisation position arising
from a contractual agreement to provide funding to ensure
the timeliness of cash flows to investors;
k) ’KIRB’ means 8% of the sum of:
- the risk-weighted exposure amounts for the securitised
exposures, as they would be calculated under Article III if
the exposures had not been securitised, plus;
- the amount of expected losses associated with those
exposures;
l) ’asset-backed commercial paper programme’ means a
programme of securitisation issuing securities that
predominantly take the form of commercial paper with an
original maturity of one year or less;
m) ’funded credit protection’ means collateral and creditlinked notes or similar instruments;
176
b) in the case of a synthetic securitisation, calculate riskweighted exposure amounts, and, as relevant, expected loss
amounts, for the securitised exposures;
When the originator supervised institution does not transfer
significant credit risk, it shall not calculate risk-weighted
exposure amounts for the positions it holds in the
securitisation, but instead shall apply the provisions of Titles
II and III to those positions.
Article 214
An originator or sponsor supervised institution, that
calculates its risk-weighted exposures, in accordance with
the provisions of the previous Article or which has sold
instruments from its trading book to a special purpose
vehicle with the result that it is no longer obliged to hold
capital to cover the risk related to these instruments shall not
provide financial support, beyond its contractual obligations,
aimed at reducing investors’ real or potential losses.
If a supervised institution referred to in the preceding
paragraph does provide support beyond its contractual
obligations for a given securitisation, it shall be subject to
the capital requirements that would apply to the securitised
exposures as if they had not been securitised. Supervised
institutions shall disclose publicly any support provided
beyond their contractual obligations and the impact of that
support on their capital requirements.
Selected French Banking and Financial Regulations – 2013
Article 215
In the case of an exposure that is to different tranches in a
securitisation, the exposure to each tranche shall be
considered a separate securitisation position. Supervised
institutions that provide credit protection to securitisation
positions shall be considered as holding those positions.
Article 216
If a supervised institution has two or more overlapping
positions in a securitisation, the overlapping position or
portion of a position shall be included in the calculation of
risk-weighted exposure amounts, using the highest risk
weight that applies to those positions. The supervised
institution may also recognise such overlaps between the
capital required to cover specific trading book risk positions
and the capital required to cover banking book risk provided
that it is capable of calculating and comparing the capital
required to cover the positions concerned. The overlapping
positions must, wholly or partially, represent an exposure to
the same risk, such that the portion of the positions that
overlaps constitutes a single exposure.
Where Article 255 c applies to positions in a programme of
asset-backed commercial paper, the supervised institution
may, subject to Autorité de contrôle prudentiel approval, use
the weighting applied to a liquidity line to calculate the riskweighted exposure amount for the asset-backed commercial
paper if the latter and the liquidity line have the same
seniority thereby creating overlapping positions, and if the
liquidity line covers 100% of the asset-backed commercial
paper programme.
Article 217
The exposure value of a position in a securitisation shall be
determined as follows:
a) if the supervised institution uses the Standardised
Approach set out in Chapter III, the exposure value of an onbalance sheet securitisation position shall be its balance
sheet value;
b) if the supervised institution calculates risk-weighted
exposure amounts using the internal ratings approach set out
in Chapter IV, the exposure value of an on-balance sheet
securitisation position shall be its balance sheet value
measured gross of value adjustments and gross of latent
gains or losses that are not included in the income statement
or in regulatory capital. Latent gains or losses shall not be
taken into account in calculating the exposure value of the
securitised exposures;
c) notwithstanding Article 216, the exposure value of an offbalance sheet securitisation position shall be its nominal
value multiplied by a conversion figure of 100% except
where otherwise provided in this Title;
d) the exposure value of a securitisation position arising
from a derivative instrument listed in Appendix II, shall be
determined in accordance with Title VI;
e) if a securitisation position is covered by funded credit
protection, its exposure value may be adjusted as provided
in Title IV.
A credit institution, other than when acting as an originator,
a sponsor or original lender, shall be exposed to the credit
risk of a securitisation position, irrespective of the portfolio
in which it is, only if the originator, sponsor or original
lender has explicitly disclosed to the credit institution that it
will retain, on an ongoing basis, a material net economic
interest which, in any event, shall not be less than 5 %.
For the purpose of this Article, a “material net economic
interest” means:
i) retention of no less than 5 % of the nominal value of each
of the tranches sold or transferred to the investors;
ii) in the case of securitisations of revolving exposures,
retention of the originator’s interest of no less than 5 % of
the nominal value of the securitised exposures;
iii) retention of randomly selected exposures, equivalent to
no less than 5 % of the nominal amount of the securitised
exposures, where such exposures would otherwise have
been securitised in the securitisation, provided that the
number of potentially securitised exposures is no less than
100 at origination; or
iv) retention of the first loss tranche and, if necessary, other
tranches having the same or a more severe risk profile than
those transferred or sold to investors and not maturing any
earlier than those transferred or sold to investors, so that the
retention equals in total no less than 5 % of the nominal
value of the securitised exposures.
The net economic interest is measured at the origination and
shall be maintained on an ongoing basis. It shall not be
subject to any credit risk mitigation or any short positions or
any other hedge.
For the purpose of determining the net economic interest,
the notional value for off-balance sheet items is used.
For the purpose of this Article, “ongoing basis” means that
retained positions, interest or exposures are not hedged or
sold.
There shall be no multiple applications of the retention
requirements for any given securitisation.
b) Where a supervised institution, EU parent credit
institution or EU financial holding company, or one of its
subsidiaries, as an originator or a sponsor, securitises
exposures from several credit institutions, investment firms
or other financial institutions which are included in the
scope of supervision on a consolidated basis, the
requirement referred to in paragraph a may be satisfied on
the basis of the consolidated situation of the related EU
parent credit institution or EU financial holding company.
This paragraph shall apply only where credit institutions,
investment firms or financial institutions which created the
securitised exposures have committed themselves to
satisfying the requirements set out in paragraph f and
deliver, in a timely manner, to the originator or sponsor and
to the supervised institution, EU parent credit institution or
EU financial holding company, the information needed to
satisfy the requirements referred to in paragraph g).
Article 217-1
Exposure to transferred credit risk
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177
c) Paragraph a) shall not apply where the securitised
exposures are claims or contingent claims on or fully,
unconditionally and irrevocably guaranteed by:
- central governments or central banks;
- regional or local authorities and public sector entities of
Member States;
- institutions to which a 50% risk weight or less is assigned
under Article 16; or
- multilateral development banks.
Paragraph a) shall not apply to:
- transactions based on a clear, transparent and accessible
index, where the underlying reference entities are identical
to those that make up an index of entities that is widely
traded, or are other tradable securities other than
securitisation positions;
- syndicated loans, purchased receivables or credit default
swaps where these instruments are not used to package or
hedge a securitisation that is covered by paragraph a).
d) Before investing, and as appropriate thereafter, supervised
institutions shall be able to demonstrate to the Autorité de
contrôle prudentiel for each of their individual securitisation
positions, that they have a comprehensive and thorough
understanding of these positions. To this end, they have
implemented formal policies and procedures suited to their
trading book and non-trading book. These policies and
procedures, which are commensurate with the risk profile of
their investments in securitised positions, aim at analysing
and recording:
i) information disclosed under paragraph a, by originators or
sponsors to specify the net economic interest that they
maintain, on an ongoing basis, in the securitisation;
ii) the risk characteristics of each securitization position;
iii) the risk characteristics of the underlying exposures;
iv) the reputation of originators or sponsors and the losses
that they may have experienced in earlier securitisations in
the relevant exposure classes underlying the securitisation
position;
v) the statements and disclosures made by the originators or
sponsors, or their agents or advisors, about their due
diligence on the securitised exposures and, where applicable,
on the quality of the collateral supporting the securitised
exposures;
vi) where applicable, the methodologies and concepts on
which the valuation of collateral supporting the securitised
exposures is based and the policies adopted by the originator
or sponsor to ensure the independence of the valuer; this
mission may have been entrusted to agents or consultants
under the responsibility of the originator or the sponsor;
vii) all the structural features of the securitisation that can
materially impact the performance of the supervised
institution’s securitisation position.
178
Supervised institutions shall regularly perform their own
stress tests appropriate to their securitisation positions. To
this end, they may rely on financial models developed by an
ECAI provided that they can demonstrate to the Autorité de
contrôle prudentiel, when requested, that they took due care
prior to investing to validate the relevant assumptions and
structures of the models and to understand the methodology,
assumptions and results.
e) Supervised institutions, other than when acting as
originators, sponsors or original lenders, shall establish
formal procedures appropriate to their trading book and nontrading book and commensurate with the risk profile of their
investments in securitised positions to monitor, on an
ongoing basis, performance information on the underlying
exposures.
Where relevant, this information shall include:
the exposure type,
the percentage of loans more than 30, 60 and 90
days past due,
default rates,
prepayment rates,
loans in foreclosure,
collateral type and the percentage of the exposure
guaranteed by this collateral,
the frequency distribution of credit scores,
sectoral and geographical diversification,
the frequency distribution of loan to value ratios
with bandwidths that facilitate adequate sensitivity
analysis, or any other measures of credit
worthiness across underlying exposures.
Where the underlying exposures are themselves
securitisation positions, supervised institutions shall have
the information set out above not only on the underlying
securitization tranches, but also on the characteristics and
performance of the pools underlying those securitisation
tranches.
Credit institutions shall have a thorough understanding of all
structural features of a securitisation transaction that would
materially impact the performance of their exposures, such
as:
the contractual waterfall and waterfall related
triggers,
credit enhancements,
liquidity facilities,
market value triggers,
the deal-specific definition of default.
Where the requirements in paragraphs d), e) and g) in this
paragraph are not met in any material respect by reason of
the negligence or omission of the supervised institution, the
Autorité de contrôle prudentiel imposes a proportionate
additional risk weight of no less than 250 % of the risk
weight (capped at 1 250 %) which would apply to the
relevant securitisation positions under Chapters III and IV of
this Title. The risk weight shall progressively increase with
each subsequent infringement of the due diligence
provisions. The Autorité de contrôle prudentiel shall take
into account the exemptions for certain securitisations
provided in paragraph c and, if necessary, reduces the
additional risk weight it imposes under this Article.
f) Sponsor and originator supervised institutions shall apply
to exposures to be securitised the criteria for credit-granting
in accordance with the requirements of Chapter 1 of Title IV
of regulation 97-02 of 21 February 1997 relating to internal
Selected French Banking and Financial Regulations – 2013
control in credit institutions and investment firms. To this
end, the originator and sponsor supervised institutions shall
apply the same processes for approving and, where relevant,
amending, renewing and re-financing credits as for
exposures to be held on their books.
Credit institutions shall also apply the same standards of
analysis to participations or underwritings in securitisation
issues purchased from third parties whether such
participations or underwritings are to be held on their trading
or non-trading book.
Where the requirements referred to in the first subparagraph
of this paragraph are not met, the originator supervised
institution shall not apply Article 213, paragraphs a) and c),
and shall not be authorised to exclude the securitised
exposures from the calculation of its capital requirements.
g) Subject originators and sponsors communicate the level
of net economic investment they take in the securitisation, in
application of paragraph a). They ensure that potential
investors have easy access to all the relevant information
and data concerning:
― credit quality;
― performance of the different underlying;
― cash flows;
― collateral guaranteeing a securitisation exposure;
― the elaboration and implementation of complete and well
documented stress tests
To this end, the relevant data is determined on the
securitisation date and thereafter whenever needed,
depending on the type of securitisation.
h) Paragraphs a) to g) apply to new securitisations issued
after 1 January 2011. After 31 December 2014 paragraphs a)
to g) apply to existing securitisations if the underlying
exposures are replaced or added to by new exposures after
that date. In the event of a generalised liquidity crisis on the
market, the Autorité de contrôle prudentiel may decided to
temporarily suspend the requirements stipulated in
paragraphs a) and b).
CHAPTER II
RECOGNITION OF SIGNIFICANT CREDIT RISK
TRANSFER
Section 1
Minimum requirements for recognition of significant
credit risk transfer
Article 218
a) A subject originator of a traditional securitisation may
exclude the securitised exposures from the calculation of the
weighted exposure amounts, and, where applicable, from the
expected losses when one of the following conditions is
satisfied:
i) a significant fraction of the credit risk associated
with the securitised exposures has been transferred to
third parties;
ii) The originator supervised institution applies a risk
weighting of 1,250% to all the securitised positions it
holds in the securitisation or deducts these securitised
positions from shareholder capital in accordance with
Article 6 bis of Regulation n°90-02 of 23 February
1990 regarding own funds.
b) For the purposes of the application of point i) of
paragraph a), a large exposure is considered to have been
transferred in the following cases:
i) When the risk-weighted exposures in mezzanine
securitised positions held by an originator in the same
securitisation do not exceed 50% of the amounts of
risk-weighted exposures to all the mezzanine
securitised positions existing in this securitisation;
ii) Where there are no mezzanine securitisation
positions, the originator being able to demonstrate that
the exposure value of the securitisation positions that
would be subject to a 1250% risk weight exceeds a
reasoned estimate of the expected loss on the
securitised exposures by a substantial margin, and the
originator not holding more than 20% of the exposure
values of the securitisation positions that would be
subject to a 1,250% risk weight. The ACP reserves the
right to assess whether any potential reduction of the
risk-weighted exposure amounts that the originator
supervised institution would obtain from this
securitisation is justified by a proportionate transfer of
the credit risk to third parties.
c) For the purposes of paragraph b), mezzanine
securitisation positions mean securitisation positions to
which a risk-weight lower than 1250% applies and that are
more junior than the most senior position in this
securitisation and more junior than any securitisation
positions in this securitisation to which:
i) in the case of a securitisation position to which the
standardised approach applies, a credit quality step 1 is
assigned; or
i) in the case of a securitisation position described in
Chapter IV (to which the IRB approach applies), a
credit quality step 1 or 2 is assigned; or
d) As an alternative to paragraphs b) and c), significant
credit risk may be considered to have been transferred if the
Authority is satisfied that the subject originator has policies
and methodologies in place ensuring that the possible
reduction of capital requirements which the originator
achieves by the securitisation is justified by a commensurate
transfer of credit risk to third parties. The Authority shall
only be satisfied if the originator Licence Holder can
demonstrate that such transfer of credit risk to third parties is
also recognised for purposes of the Licence Holder’s
internal risk management and its internal capital allocation.
e) Apart from the elements mentioned in paragraphs b) and
c) all of the following conditions must be satisfied before a
large exposure may be considered to have been transferred:
i) the securitisation documentation reflects the
economic substance of the structure or transaction;
ii) the institution has obtained a written and reasoned
legal opinion to the effect that:
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179
- the securitised exposures have been effectively
transferred to the securitisation special purpose entity;
- the underlying assets cannot be used by the originator
institution or its creditors;
- in the event of a bankruptcy proceeding against the
institution, the assets of the special purpose entity are
excluded from the debtor’s assets;
iii) the securities issued do not represent payment
obligations of the originator supervised institution;
iv) the transferee is a securitisation special purpose
entity;
v) the originator supervised institution does not
maintain effective or indirect control over the
transferred exposures. An originator institution shall be
considered to have maintained effective control over
the transferred exposures if it has the right to
repurchase them from the transferee in order to realise
their benefits or if it is obligated to re-assume
transferred risk. The originator supervised institution’s
retention of servicing rights or obligations for
transferred assets shall not in itself constitute indirect
control of the exposures;
vi) if there is a clean-up call option, the following
conditions must be satisfied:
i) The risk-weighted exposure amounts of the
mezzanine securitised positions held by the subject
originator do not exceed 50% of the existing riskweighted exposure amounts of the mezzanine
securitised positions in this securitisation;
ii) where there are no mezzanine securitisation
positions and the originator can demonstrate that the
exposure value of the securitisation positions that
would be subject to a 1,250% risk weight exceeds a
reasoned estimate of the expected loss on the
securitised exposures by a substantial margin, and the
originator does not hold more than 20% of the
exposure values of the securitisation positions that
would be subject to deduction from own-funds or a
1,250% risk-weight.
The ACP reserves the right to assess whether any
potential reduction of the amounts of risk-weighted
exposures that the subject originator institution would
obtain from this securitisation is adequately matched
by a proportionate transfer of the credit risk to third
parties.
- the clean-up call option is exercisable at the
discretion of the originator supervised institution;
- the clean-up call option may be exercised only when
10% or less of the original value of the securitised
exposures remains unamortised;
- the clean-up call option is not structured in such a
way as to avoid allocating losses to credit enhancement
positions or other positions held by investors and is not
otherwise structured to provide credit enhancement.
c) For the purposes of the provisions of paragraph b),
mezzanine securitisation positions mean securitisation
positions to which a risk-weight lower than 1,250% applies
and that are more junior than the most senior position in this
securitisation and more junior than any securitisation
positions in this securitisation to which:
vii) the documentation of the securitisation transaction
or structure does not contain any clause that:
ii) in the case of a securitisation position described in
Chapter IV a credit quality step 1 or 2 is assigned; or
- except in the case of early amortisation provisions,
requires that positions in the securitisation be improved
by the originator supervised institution, in particular by
substituting underlying credit exposures or by
increasing the yield payable to investors in response to
a deterioration in the credit quality of the securitised
exposures, or
- increases the yield payable to holders of positions in
the securitisation in response to a deterioration in the
credit quality of the underlying pool.
d) As an alternative to paragraphs b) and c), significant
credit risk may be considered to have been transferred if the
supervised institution has policies and methodologies in
place to ensure that a possible reduction of capital
requirements that the originator achieves by the
securitisation is justified by a commensurate transfer of
credit risk to third parties. The subject originator institution
must prove that such a transfer of risk to third parties is also
recognised for the purposes of the internal risk management
and its internal capital allocation.
Article 219
a) if either of the following conditions is met:
i) significant part of the credit risk is considered to
have been transferred to third parties either through
funded or unfunded credit protection; or;
ii) The subject originator institution applies a risk
weighting of 1,250% to all the securitised positions it
holds in this securitisation or deducts these securitised
positions from shareholder capital in accordance with
Article 6 bis of Regulation n°90-02 of 23 February
1990 regarding own funds.
180
b) For the purposes of the application of point i) of
paragraph a), a significant exposure is considered to have
been transferred when at least one of the following
conditions have been satisfied:
i) in the case of a securitisation positions described in
Chapter III, a credit quality step 1 is assigned; or
e) In addition, the transfer must comply with the following
conditions:
i) the securitisation documentation reflects the
economic substance of the transaction;
ii) the credit protection by which the credit risk is
transferred complies with the eligibility and
requirements of Title IV. For these purposes, special
purpose entities shall not be eligible as providers of
unfunded protection;
iii) the instruments used to transfer credit risk do not
contain contractual terms or conditions that:
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- impose significant materiality thresholds below
which credit protection is deemed not to be triggered if
a credit event occurs;
- allow for the termination of the protection in the
event of deterioration in the credit quality of the
underlying exposures;
- except in the case of early amortisation provisions,
require positions in the securitisation to be improved
by the originator supervised institution;
- increase the supervised institution’s cost of credit
protection or the yield payable to holders of positions
in the securitisation in the event of deterioration in the
credit quality of the underlying pool;
iv) a written and reasoned legal opinion is obtained
confirming the enforceability of the credit protection in
all relevant jurisdictions.
RW* = [RW(SP) x (t-t*)/(T-t*)] + [RW(Ass) x (T-t)/(T-t*)]
where:
- RW* is the risk-weighted exposure amount for the
purposes of calculating capital requirements for credit risk
and dilution risk;
- RW(Ass) is the risk-weighted exposure amount that would
be calculated if the exposures had not been securitised,
calculated on a pro-rata basis;
- RW(SP) is the risk-weighted exposure amounts that would
be calculated under Article 220 if there were no maturity
mismatch;
- T is the remaining maturity of the underlying exposures,
expressed in years;
- t is the remaining maturity of the credit protection,
expressed in years;
- t* = 0.25.
CHAPTER III
CALCULATION OF RISK-WEIGHTED EXPOSURE
AMOUNTS UNDER THE STANDARDISED
APPROACH
v) where there is a clean-up call option, the
requirements set out in paragraph (vi) of the preceding
Article shall apply.
Section 2
Calculation of risk-weighted exposure amounts for
exposures securitised in a synthetic securitisation
Article 220
Where the requirements set out in Section 1 are met, the
originator supervised institution of a synthetic securitisation
shall use the calculation methods set out in Chapter 4 in
place of the provisions of Titles II and III for the entire pool
of securitised exposures.
Section 1
General provisions
Article 222
Subject to the provisions of Section 2, the risk-weighted
exposure amount of a rated securitisation or re-securitisation
position shall be calculated by applying the following risk
weights to the exposure value:
Weighting category
Credit quality
step
1
2
3
4
(Only for
credit
assessments
other than
short-term)
All
other
credit
quality
steps
Securitisation
20%
50%
100%
350%
1250%
Resecuritisation
40%
100%
225%
650%
1 250%
For supervised institutions using the IRB approaches for
credit risk, the expected loss for securitised exposures shall
be equal to zero.
Subject to the provisions of Article 221, the originator
supervised institution shall calculate the risk-weighted
exposure amounts for all tranches in the securitisation as
provided in Chapter IV, including those provisions relating
to the recognition of credit risk mitigation.
Article 221
Maturity mismatches between the credit protection by means
of which the tranching is achieved and the securitised
exposures shall be taken into account in accordance with the
following provisions:
a) the maturity of the securitised exposures shall be taken as
that of the exposure having the longest maturity, subject to a
maximum of five years. The maturity of the credit protection
shall be determined as provided in Title IV.
b) originator supervised institutions shall ignore any
maturity mismatch in calculating risk-weighted exposure
amounts for tranches risk-weighted at 1250%;
c) for all other tranches, maturity mismatches shall be
treated according to the following formula:
Selected French Banking and Financial Regulations – 2013
Subject to the provisions of Section 3, the risk-weighted
exposure amount of an unrated securitisation position shall
be calculated by applying a risk weight of 1250% to the
exposure value.
Article 223
If credit protection is obtained on a securitisation position,
the effects of credit risk mitigation shall be taken into
account as provided in Title IV.
Article 224
As provided in Article 6a of Regulation 90-02, supervised
institutions may deduct the exposure value of a position
risk-weighted at 1250% from own funds instead of including
the position in the calculation of risk-weighted exposure
amounts. For this purpose, the calculation of the exposure
value shall reflect eligible funded credit protection as
provided in Title IV.
181
For the purposes of Section 2, an amount equal to 12.5 times
the amount deducted shall be subtracted from the maximum
risk-weighted exposure amount.
Section 2
Originator and sponsor supervised institutions
Article 225
The risk-weighted exposure amounts of securitisation
positions held by originator supervised institutions or
sponsor supervised institutions may be limited to the riskweighted exposure amounts that would be calculated if the
exposures had not been securitised, subject to the application
of a 150% risk weight to all securitised exposures that are
past due or that are associated with high risk within the
meaning of Article 23.
Section 3
Treatment of unrated positions
Article 226
Provided that they know the composition of the pool of
securitised assets at all times, supervised institutions may
apply the weighted-average risk weight that would be
applied to the securitised exposures under Title II, multiplied
by a concentration ratio. This concentration ratio shall be
equal to the sum of the nominal amounts of all the
securitisation tranches divided by the sum of the nominal
amounts of the tranches junior to or pari passu with the
tranche in which the position is held, including the tranche
itself. The resulting risk weight may not be higher than
1250% or lower than any risk weight applicable to a more
senior rated tranche.
If a supervised institution cannot determine the risk weights
that would be applied to the securitised exposures, it shall
apply a risk weight of 1250% to the securitisation position.
Section 4
Treatment of securitisation positions constituting a
second-loss position or a higher tranche in an assetbacked commercial paper programme
Article 227
Subject to the provisions of Section 5, supervised
institutions shall apply to securitisation positions a risk
weight that is the greater of 100% or the highest risk weight
that would be applied under Title II to any of the securitised
exposures by a supervised institution holding the exposures.
For this treatment to be available, the securitisation positions
must satisfy the following conditions:
a) they are in a tranche that is economically in a second-loss
position or better in the securitisation, and the first-loss
tranche provides meaningful credit enhancement to the
second-loss tranche;
b) their credit quality is equivalent to investment grade or
better;
c) they are held by a supervised institution that does not hold
a position in the first-loss tranche.
182
Section 5
Treatment of unrated liquidity facilities
Article 228
Subject to the following conditions, the exposure value of a
liquidity facility shall be determined by applying a 50%
CCF to its nominal amount :
- the liquidity facility documentation clearly identifies and
limits the circumstances under which the facility may be
drawn;
- the facility cannot be drawn to cover losses already
incurred at the time of draw: for example, to provide
liquidity for exposures in default at the time of draw or to
acquire assets at a price higher than fair value;
- the facility must not be used to provide permanent or
regular funding for the securitisation transaction or structure;
- repayment of draws on the facility must not be
subordinated to the claims of investors other than those
claims arising from interest rate or currency derivative
contracts, fees, or other such payments, nor be subject to
waiver or deferral;
- the liquidity facility cannot be drawn after all applicable
credit enhancements from which the liquidity facility would
benefit are exhausted;
- the facility shall include a provision that provides for an
automatic reduction in the amount that can be drawn equal
to the amount of exposures that are in default as defined in
Article 118-1, or that permits the termination of the facility
when the pool of securitised exposures consists of rated
instruments and the average quality of the pool falls below
investment grade.
The risk weight applied to liquidity facilities shall be the
highest risk weight that would be applied under Title II to
any of the securitised exposures by a supervised institution
holding the exposures.
Article 229
The exposure value of a cash advance liquidity facility that
is unconditionally cancellable shall be determined by
applying a 0% CCF to its nominal amount, providing that
the conditions set out in Article 228 are satisfied and that
repayment of draws on the facility is senior to any other
claims on the cash flows arising from the securitised
exposures.
Section 6
Additional capital requirements for securitisations of
revolving exposures with early amortisation provisions
Article 230
When supervised institutions sell revolving exposures into a
securitisation that contains an early amortisation provision,
they shall calculate an additional risk-weighted exposure
amount for the sum of the originator institution’s interest
and the investors’ interest.
If the securitised exposures include both revolving and nonrevolving exposures, originator supervised institutions shall
apply the treatment set out below only to that portion of the
underlying pool that consists of revolving exposures.
Selected French Banking and Financial Regulations – 2013
‘Originator’s interest’ means the exposure value of that
notional part of a pool of drawn amounts sold into a
securitisation, the proportion of which in relation to the
amount of the total pool sold into the structure determines
the proportion of the cash flows generated by principal and
interest collections and other associated amounts that are not
available to make payments to those holding positions in the
securitisation. The originator’s interest may not be
subordinate to the investors’ interest.
‘Investors’ interest’ means the exposure value of the
remaining notional part of the pool of drawn amounts
‘Revolving exposure’ means the exposures for which
customers’ outstanding balances are permitted to fluctuate
based on their decisions to borrow and repay, up to a
contractual limit agreed with the supervised institution.
‘Early amortisation provision’ means a contractual clause
that requires the redemption of investors’ positions before
the originally stated maturity of the securities issued in the
case of defined events.
The exposure of the originator supervised institution
associated with its rights with respect to the originator’s
interest shall not be considered as a securitisation position
but as a pro rata exposure to the securitised exposures as if
they had not been securitised.
Article 231
Supervised institutions are not subject to additional capital
requirements when they originate the following
securitisations:
a) securitisations of revolving exposures in which the
investors remain fully exposed to all future draws by
borrowers, such that the risk on the underlying facilities
never returns to the originator supervised institution, even
after an early amortisation clause has been triggered;
b) securitisations in which an early amortisation provision is
triggered solely by events unrelated to the performance of
the securitised assets or the originator supervised institution,
such as material changes in tax laws or regulations.
Article 232
The additional risk-weighted exposure amount shall be equal
to the amount of the investors’ interest multiplied by the
product of the appropriate conversion figure indicated below
and the weighted-average risk weight that would apply to
the securitised exposures if they had not been securitised,
weighted by the exposure value of the underlying assets.
Article 233
If a securitisation includes a provision for early amortisation
of retail exposures that are uncommitted and unconditionally
cancellable without prior notice, and early amortisation is
triggered by the excess spread falling below a specified level,
supervised institutions shall compare the three-month average
excess spread level with the excess spread levels at which
excess spread is required to be trapped.
If the securitisation does not require excess spread to be
trapped, the trapping point shall be 4.5 percentage points
greater than the excess spread level at which an early
amortisation is triggered.
Selected French Banking and Financial Regulations – 2013
The CCFs to be applied shall be determined by the level of
the actual three-month average excess spread, as shown in the
following table.
Securitisations
subject to a
controlled
early amortisation
provision
Securitisations
subject to a noncontrolled
early amortisation
provision
CCF
CCF
0%
1%
2%
10%
20%
40%
0%
5%
15%
50%
100%
100%
3-month average
excess spread
Above level A
Level A
Level B
Level C
Level D
Level E
An early amortisation provision shall be considered to be
‘controlled’ if the following conditions are met:
a) the originator supervised institution has an appropriate
plan to ensure that it has sufficient capital and liquidity
available in the event of an early amortisation;
b) throughout the duration of the transaction, there is prorata sharing between the originator’s interest and the
investors’ interest of payments of interest and principal,
expenses, losses, and recoveries based on the balance of
receivables outstanding at one or more reference points each
month;
c) the amortisation period is sufficient for 90% of the total
debt (originator’s and investors’ interest) outstanding at the
beginning of the early amortisation period to be repaid or
recognised as in default;
d) the speed of repayment is no more rapid than would be
achieved by straight-line amortisation over the period referred
to in the preceding paragraph.
In the preceding table:
- ’Level A’ means a level of excess spread less than
133.33% of the trapping level of excess spread but not less
than 100% of that trapping level;
- ’Level B’ means a level of excess spread less than 100% of
the trapping level of excess spread but not less than 75% of
that trapping level;
- ’Level C’ means a level of excess spread less than 75% of
the trapping level of excess spread but not less than 50% of
that trapping level;
- ’Level D’ means a level of excess spread less than 50% of
the trapping level of excess spread but not less than 25% of
that trapping level;
- ’Level E’ means a level of excess spread less than 25% of
the trapping level of excess spread.
If a securitisation includes a provision for early amortisation
of retail exposures that are uncommitted and unconditionally
cancellable without prior notice, and the early amortisation
is triggered by a quantitative threshold other than the threemonth average excess spread, the Autorité de contrôle
183
prudentiel may apply a different treatment to determine the
CCF. That treatment shall closely approximate the treatment
set out in the preceding Article.
The Autorité de contrôle prudentiel shall consult with the
competent authorities of all other European Union Member
States and give consideration to their opinions. The opinions
expressed during this consultation and the treatment adopted
shall be made public by the Autorité de contrôle prudentiel.
Article 234
The CCF for all other securitisation transactions and
structures that include a provision for controlled early
amortisation of revolving exposures shall be 90%.
The CCF for all other securitisation transactions and
structures that include a provision for non-controlled early
amortisation of revolving exposures shall be 100%.
Article 235
The sum of the risk-weighted exposure amounts for
positions in the investors’ interest and the additional riskweighted exposure amounts referred to in Article 230 shall
not exceed the greater of the following two amounts:
- the risk-weighted exposure amounts for the positions in the
investors’ interest, and
- the risk-weighted exposure amounts that would be
calculated by a supervised institution holding the exposures
if they had not been securitised, in an amount equal to the
investors’ interest.
Article 236
The deduction of any net gains that may arise from the
capitalisation of the future income of securitised assets and
that constitute a credit enhancement to the securitisation
position shall be treated independently of the maximum
amount referred to in the preceding Article.
CHAPTER IV
CALCULATION OF RISK-WEIGHTED EXPOSURE
Section 1
Hierarchy of methods
Subsection 1
General provisions
Article 237-1
Supervised institutions shall use:
a) the Ratings Based Method set out in Section 3 for
positions with external credit assessments or for which an
inferred rating can be used;
b) the Supervisory Formula Method set out in Section 4 for
unrated positions, except where the Internal Assessment
Approach is permitted subject to the conditions set out in
subsection 3.
Article 237-2
A supervised institution other than an originator supervised
institution or a sponsor supervised institution may use the
184
Supervisory Formula Method only with the prior approval of
the Autorité de contrôle prudentiel.
Article 237-3
Originator supervised institutions or sponsor supervised
institutions that are unable to calculate KIRB and that have
not obtained approval to use the Internal Assessment
Approach for their positions in asset-backed commercial
paper programmes, along with other supervised institutions
that have not obtained approval to use the Supervisory
Formula Method or, for their positions in asset-backed
commercial paper programmes, the Internal Assessment
Approach, shall apply a risk weight of 1250% to unrated
securitisation positions for which an inferred rating cannot
be used.
Subsection 2
Use of inferred ratings
Article 238
When the following minimum requirements are satisfied,
supervised institutions shall assign unrated securitisation
positions an inferred credit assessment equivalent to the
credit assessment of reference positions. ‘Reference
positions’ means the most senior rated positions that are in
all respects subordinate to the unrated securitisation
position:
a) the reference positions must be subordinated in all
respects to the unrated securitisation tranche.
b) the maturity of the reference positions must be equal to or
longer than that of the unrated position.
c) any inferred rating must be updated on an ongoing basis
to reflect any changes in the credit assessment of the
reference securitisation positions.
Subsection 3
The Internal Assessment Approach for positions in assetback commercial paper programmes
Article 239
Subject to the approval of the Autorité de contrôle
prudentiel, a supervised institution may assign a derived
rating to an unrated position in an asset-backed commercial
paper programme if the following conditions are satisfied:
a) the positions in the commercial paper issued from the
programme are rated positions;
b) the supervised institution demonstrates to the Autorité de
contrôle prudentiel that its internal method for assessing the
credit quality of the position is as reliable, from the
perspective of prudential supervision, as the assessment
methodology used by one or more ECAIs recognised by the
Autorité de contrôle prudentiel for rating securities backed
by exposures of the same type as the securitised exposures.
This methodology must be publicly available;
c) the ECAIs whose rating methodology is referenced in the
preceding paragraph shall include ECAIs that have provided
an external rating for the commercial paper issued from the
programme. The quantitative elements, such as stress
Selected French Banking and Financial Regulations – 2013
factors, used in assigning a given credit quality to a
securitisation position shall be at least as conservative as
those used in the ECAIs’ assessment methodology;
d) in developing their internal assessment methodology,
supervised institutions shall take into consideration
appropriate published ratings methodologies of ECAIs
recognised by the Autorité de contrôle prudentiel that rate
the commercial paper of the asset-backed commercial paper
programme. This consideration shall be documented and
updated regularly;
e) the supervised institution’s internal assessment
methodology shall include rating grades. There shall be a
well-documented correspondence between such rating
grades and the credit assessments of eligible ECAIs;
f) supervised institutions shall use the internal assessment
methodology in their internal risk management processes,
including the decision-making, management information,
and internal capital allocation processes;
g) supervised institutions shall periodically audit their
internal assessment process and the quality of the internal
assessments of their positions in an asset-backed commercial
paper programme. This audit may be conducted by external
auditors;
h) supervised institutions shall track the performance of their
internal ratings over time to evaluate the performance of
their internal assessment methodology. They shall make
adjustments, as necessary, when the performance of the
exposures routinely diverges from that indicated by the
internal ratings;
i) the asset-backed commercial paper programme shall
incorporate underwriting standards in the form of credit and
investment guidelines. In deciding on an asset purchase, the
programme administrator shall consider the type of asset
being purchased, the type and monetary value of the
exposures arising from the provision of liquidity facilities
and credit enhancements, the loss distribution, and the legal
and economic isolation of the transferred assets from the
entity selling the assets. A credit analysis of the asset seller’s
risk profile shall be performed. It shall include an analysis of
the seller’s past and expected future financial performance,
current competitive position in the market, expected future
competitiveness, leverage ratio, cash flows, interest
coverage ratio, and debt rating. In addition, a review of the
seller’s underwriting standards, servicing capabilities, and
collection processes shall be performed;
j) the underwriting standards of the asset-backed commercial
paper programme shall set minimum criteria for asset
eligibility that, in particular:
- exclude the purchase of assets that are significantly past
due or defaulted;
- limit excess concentrations of risk in an individual obligor
or geographic area;
- delimit the character and tenor of the assets to be
purchased;
k) the asset-backed commercial paper programme shall
establish collection procedures that take into account the
operational capability and credit quality of the body
responsible for administering and servicing assets. The
Selected French Banking and Financial Regulations – 2013
programme shall mitigate the risks associated with this body
and with the seller using various methods, such as setting
triggers based on credit quality that would preclude any
commingling of funds;
l) the aggregate estimate of loss on an asset pool that the
asset-backed commercial paper programme is considering
purchasing shall take into account all sources of potential
risk, including credit and dilution risk. If credit enhancement
provided by the seller is sized based only on credit-related
losses, a separate reserve shall be established for dilution
risk, if dilution risk is material for the particular exposure
pool;
m) in addition, in sizing the required enhancement level,
several years of historical data, covering losses,
delinquencies, dilutions, and the turnover rate of the
receivables, shall be reviewed;
n) the asset-backed commercial paper programme shall
incorporate structural features, such as wind-down triggers,
into the purchase of exposures in order to reduce the risk of
deterioration in the credit quality of the underlying portfolio.
The Autorité de contrôle prudentiel may waive the
requirement for public availability stated in paragraph (d) if
there is not yet a publicly available assessment methodology
due to specific features of the securitisation, such as the
unique character of its structure.
Article 240
Supervised institutions shall assign unrated positions one of
the ratings described in the preceding Article. The position
shall be assigned a derived rating equivalent to the credit
assessments corresponding to that rating grade. If this
derived rating corresponds, at the inception of the
securitisation, to the level of investment grade or better, it
shall be treated as an external credit assessment for the
purposes of calculating risk-weighted exposure amounts.
Section 2
Maximum risk-weighted exposure amounts
Article 241
The risk-weighted exposure amounts for the securitisation
positions of an originator supervised institution, a sponsor
supervised institution, or any other supervised institutions
that can calculate KIRB, shall be limited to the sum of the
amounts that would be calculated for the underlying
exposures if they had not been securitised, plus the expected
losses for those exposures.
Section 3
Ratings Based Method
Article 242-1
The risk-weighted exposure amount of an externally rated
securitisation or re-securitisation position is calculated by
applying to the exposure value the weighting indicated
below in accordance with mapping established by the
Autorité de contrôle prudentiel and then multiplying the
result by 1.06. This multiplicative factor shall not be applied
to positions risk-weighted at 1,250%.
185
CREDIT
STEPS
Credit
assessments
other than
short-term
E1
QUALITY
Short-term
credit
assessments
A
1
7
12 20
% % %
8
15 25
% % %
10 18 35
% % %
12 20
% %
20 35
% %
35 50 %
%
60 75 %
%
100 %
E2
E3
E4
2
E5
E6
E7
APPLICABLE WEIGHTING
Securitisation Repositions
securitisation
positions
3
E8
B
C
D
20 %
E
100
%
150
%
200
%
30
%
40
%
50
%
65
%
100
%
150
%
225
%
350
%
25 %
35 %
40 %
60 %
E9
250 %
300
%
500
%
E10
425 %
500
%
650
%
E11
650 %
750
%
850
%
All other steps and not
unrated
1 250 %
Article 242-4
To calculate the actual number of securitisation exposures, all
the exposures to the same issuer are treated as one and the
same exposure. The actual number of exposures is calculated
as follows :
N=
( EAD i ) 2
i
EAD
2
i
i
Where EADi is the sum of values at risk of all exposures to
the Nth issuer.
When the supervised institution is aware of the share of the
portfolio associated with the highest exposure, C1, the
supervised institution may calculate the actual number of
exposures, N, as being equal to 1/C1.
Article 243
The effects of credit risk mitigation on securitisation positions
shall be recognised in accordance with Articles 247 and 248.
Section 4
Supervisory Formula Method
Article 244
Unless covered by the provisions of paragraph b of Article
246, the weighting applicable to a securitisation position is
determined in accordance with the following formula when
the latter is above 7% for a securitisation position and above
20% for a re-securitisation position:
12.5 x (S[L+T]-S[L])/T
where:
Article 242-2
Supervised institutions shall apply the weighting in column C
of the above table when the securitisation position is not a resecuritisation position and when the actual number of
securitisation exposures is below six. For the other
securitisation positions that are not re-securitisation positions,
the weightings indicated in column B, should be used except
where the position is located in the most senior tranche of the
securitisation, in which case the weightings in Column A
should be applied. For the re-securitisation positions, the
weightings of column E should be used, except where the resecuritisation position is located in the most senior tranche of
the re-securitisation and none of the underlying positions are
themselves re-securitisation positions, in which case the
weighting in column D should be used.
In determining whether a tranche is the most senior, the
supervised institutions may ignore amounts due on interest
rate or currency, derivative contracts fees, or other similar
payments.
x
S[ x] =
ω ( Kirbr− x ) / Kirbr
)
Kirbr+ K[ x] − K[Kirbr] + (d ⋅ Kirbr/ ω)(1 − e
when x ≤ Kirbr
when Kirbr< x
where:
h
c
v
f
g
a
b
d
= (1 − Kirbr / ELGD ) N
= Kirbr /(1 − h )
( ELGD − Kirbr ) Kirbr + 0,25 (1 − ELGD ) Kirbr
N
v + Kirbr 2
(
1
− Kirbr ) Kirbr − v
=
− c 2 +
−
1
h
(1 − h ) τ
=
(1 − c )c
−1
f
= g ⋅c
= g ⋅ (1 − c )
= 1 − (1 − h) ⋅ (1 − Beta[ Kirbr ; a , b ])
=
K [ x ] = (1 − h ) ⋅ ((1 − Beta[ x; a , b ]) x + Beta[ x; a + 1, b] c ).
and:
τ = 1000
ω = 20
186
Selected French Banking and Financial Regulations – 2013
- Beta [x; a, b] is the cumulative beta distribution with
parameters a and b evaluated at point x;
- T is the thickness of the tranche in which the position is
held, and is equal to the ratio of the nominal amount of the
tranche to the sum of the exposure values of the securitised
exposures. The exposure value of a derivative instrument
listed in Appendix II shall, if the current replacement cost is
not a positive value, be equal to the potential future credit
exposure calculated in accordance with Title VI;
- KIRBR is the ratio of KIRB to the sum of the exposure values
of the securitised exposures. KIRBR is expressed in decimal
form.
- L is the credit enhancement level. It is measured as the
ratio of the nominal amount of all tranches subordinate to
the tranche in which the position is held, to the sum of the
exposure values of the securitised exposures. Capitalised
future income shall not be included in calculating L.
Amounts due by counterparties to derivative instruments
listed in Appendix II that represent tranches more junior
than the tranche in question may be measured at their
current replacement cost, excluding potential future
exposure.
- N is the effective number of securitised exposures,
calculated as provided in Article 242-4. Regarding resecuritisations, the supervised institution includes the
number of underlying portfolio exposures to resecuritisation positions and not of underlying portfolio
exposures to securitisation positions;
- ELGD is the exposure-weighted average LGD, calculated
as follows:
LGD .EAD
ELGD =
EAD
i
i
i
i
i
where:
- LGDi is the average LGD associated with all exposures to
the ith obligor;
new text
- EADi, is the sum of the exposure values of all exposures to
the ith obligor.
LGD is determined as provided in Title III. In the case of a
securitisation of securitisation positions, an LGD of 100%
shall be applied to the new securitised positions. When
default risk and dilution risk for purchased receivables are
treated in an aggregate manner within a securitisation such
that a single reserve or over-collateralisation is available to
cover both credit losses and dilution losses, the LGD shall
be constructed as a weighted average of the LGD for credit
risk and the 75% LGD for dilution risk. This average shall
be weighted by the stand-alone capital charges for credit risk
and dilution risk.
If the exposure value of the largest securitised exposure, C1,
is no greater than 3% of the sum of the exposure values of
all the securitised exposures, supervised institutions shall set
LGD at 50% and assign N one of the following two values:
where:
N = 1/C1
- Cm is the ratio of the sum of the exposure values of the
largest ‘m’ exposures to the sum of the exposure values of
the securitised exposures. The level of ‘m’ shall be set by
the supervised institution;
- for securitisations involving retail exposures exclusively, h
= 0 and v = 0, unless the Autorité de contrôle prudentiel
disagrees.
Article 245
The effects of credit risk mitigation on securitisation
positions shall be recognised as provided in Articles 247,
249-1, and 249-2.
Article 246
The VaR of the liquidity facilities concerned by this section
is determined in the following manner when they do not
already have an external credit valuation:
a) A conversion factor of 0% is applied to the nominal
amount of a credit line in the form of a cash advance when
the conditions described in Article 229 are respected;
b) When a subject credit institution is unable to calculate its
KIRB, the Autorité de contrôle prudentiel may authorise, on
an exceptional basis and for a limited period, the institution
in question to apply the method described below to its credit
lines not subject to external credit valuations and satisfying
the conditions stipulated in Article 228:
― the highest weighting that would have been applied to the
securitised exposures – in compliance with Title II – had
those exposures not been securitised, is applied to the
liquidity facility;
― to determine the position’s VaR, a conversion of 50% is
applied to the nominal value of credit lines with initial
maturities of one year or less;
― otherwise a conversion factor of 100% is applied
Section 5
Liquidity facilities
Article 247
Supervised institutions may use:
- funded credit protection recognised for the Standardised
Approach for credit risk, once the minimum requirements
set out in Title IV are satisfied;
- unfunded credit protection and unfunded protection
providers, as provided in and subject to the minimum
requirements of Title IV.
−1
Cm −C1
max{1− mC1, 0}
m −1
N = C1Cm +
Selected French Banking and Financial Regulations – 2013
187
Article 248
Where risk-weighted exposure amounts are calculated using
the Ratings Based Method, the exposure value or the riskweighted exposure amount for a securitisation position for
which credit protection has been obtained shall be modified
as provided in Title IV for supervised institutions using the
Standardised Approach for credit risk.
Article 249-1
In the case of full protection, supervised institutions that
calculate risk-weighted exposure amounts using the
Supervisory Formula Method shall determine the ‘effective
risk weight’ of the position, which is obtained by dividing
the risk-weighted exposure amount of the position by its
exposure value and then multiplying the result by 100.
The risk-weighted exposure amount of the securitisation
position is determined as follows:
a) if the securitisation position is covered by funded credit
protection, the risk-weighted exposure amount of the
securitisation position shall be calculated by multiplying the
fully-adjusted exposure amount of the position (E*),
reflecting the effects of the funded protection, by the
effective risk weight. E* shall be calculated as provided in
Title IV, where E is the amount of the securitisation
position;
b) if the securitisation position is covered by unfunded credit
protection, the risk-weighted exposure amount of the
securitisation position shall be calculated by multiplying the
nominal amount of the protection adjusted for any currency
mismatch and maturity mismatch (GA) by the risk weight of
the protection provider, and adding this to the amount
arrived at by multiplying the amount of the securitisation
position minus GA by the effective risk weight. GA shall be
calculated as provided in Title IV.
Article 249-2
In the case of partial protection, supervised institutions that
calculate risk-weighted exposure amounts using the
Supervisory Formula Method shall determine the riskweighted exposure amount of the securitisation position as
follows:
a) if the credit risk mitigation covers the ‘first loss’ on the
securitisation position, or covers all losses on a proportional
basis, the supervised institution may apply the provisions set
out in the preceding Article;
b) in all other cases, the securitisation position shall be
treated as two or more distinct positions, with the uncovered
portion being considered the position with the lower credit
quality. Supervised institutions shall apply the treatment set
out in Section 4, with the following modifications:
- ’T’ shall be set equal to e* in the case of funded protection;
and to T-g in the case of unfunded protection;
- e* shall be the ratio of E* to the total notional amount of
the underlying pool;
- E* shall be the fully-adjusted exposure amount of the
securitisation position calculated according to the provisions
of Title IV as they apply to supervised institutions using the
Standardised Approach for credit risk. E shall be the amount
of the securitisation position and g shall be the ratio of the
nominal amount of credit protection adjusted for any
188
currency or maturity mismatch as provided in Title IV to the
sum of the amounts of the securitised exposures.
In the case of unfunded credit protection, the risk weight of
the protection provider shall be applied to that portion of the
position not falling within the adjusted value of T.
Section 7
Additional capital requirements for securitisations of
revolving exposures with early amortisation provisions
Article 250
When supervised institutions sell revolving exposures into a
securitisation that contains an early amortisation provision,
they shall calculate an additional risk-weighted exposure
amount as provided in Section 6 of Chapter III.
Article 251
For the purposes of this treatment:
a) ’originator’s interest’ shall be the sum of:
i) the exposure value of that notional part of the pool of
drawn amounts sold into a securitisation, whose proportion
in relation to the amount of the total pool sold into the
structure determines the proportion of the cash flows
generated by principal and interest collections and other
associated amounts that are not available to make payments
to those holding positions in the securitisation; and
ii) the exposure value of the undrawn amounts of the credit
lines, the drawn amounts of which have been sold into the
securitisation, whose proportion in relation to the total
amount of undrawn amounts is equal to the proportion of the
exposure value described in point (i) in relation to the
exposure value of the pool of drawn amounts sold into the
securitisation;
b) the originator’s interest may not be subordinate to the
investors’ interest.
‘Investors’ interest’ shall be the sum of the exposure value
of the notional part of the pool of drawn amounts not falling
within point (i) plus the exposure value of that part of the
pool of undrawn amounts of credit lines, the drawn amounts
of which have been sold into the securitisation, not falling
within point (ii);
c) the exposure of the originator supervised institution
associated with its rights with respect to the originator’s
interest referred to in line (i) of paragraph (a) shall not be
considered as a securitisation position but as a pro rata
exposure to the securitised drawn amounts as if they had not
been securitised, in an amount equal to that described in line
(i) of paragraph (a).
The originator supervised institution shall be considered to
hold a pro rata exposure to the undrawn amounts of the
credit lines, the drawn amounts of which have been sold into
the securitisation, in an amount equal to that described in
line (ii) of paragraph (a).
Selected French Banking and Financial Regulations – 2013
Section 8
Reduction in risk-weighted exposure amounts
Article 252-1
The risk-weighted exposure amount of a securitisation
position risk-weighted at 1250% shall be reduced by 12.5
times the amount of any value adjustments made to the
securitised exposures. Such value adjustments shall not be
taken into account in the calculation set out in Article 68.
Article 252-2
The risk-weighted exposure amount of a securitisation
position may be reduced by 12.5 times the amount of any
value adjustments made to the position.
Article 253
In accordance with Article 6a of Regulation 90-02,
supervised institutions may deduct the exposure value of a
securitisation position risk-weighted at 1250% from their
own funds instead of including the position in the
calculation of risk-weighted exposure amounts, subject to
the following conditions:
a) the exposure value of the position shall be derived from
the risk-weighted exposure amounts, taking into account any
reductions made in accordance with the preceding Articles;
b) the calculation of the exposure value shall reflect any
eligible funded protection in a manner consistent with the
methodology set out in Section 6;
c) if the Supervisory Formula Method is used to calculate
risk-weighted exposure amounts, and L < KIRBR and [L+T] >
KIRBR, the position may be treated as two distinct positions
with L = KIRBR for the more senior position.
For the purposes of Section 2, supervised institutions shall
subtract 12.5 times the amount deducted from their own
funds from the maximum risk-weighted exposure amount.
CHAPTER V
EXTERNAL CREDIT ASSESSMENTS
Section 1
Recognition of external credit assessment institutions
Article 254-1
The competent authorities shall recognise the ECAIs whose
assessments may be used by supervised institutions for the
purposes of this Title, on the basis of the criteria set out in
Chapter III of Title II, subject to the condition that the ECAI
has a demonstrated ability in the area of securitisation.
The Autorité de contrôle prudentiel also takes the necessary
measures to oblige these entities, in the framework of the
assessments of exposures involving structured financial
instruments, to provide explanations to the public detailing
to what extent the performances of the underlying basket of
assets influences their credit assessments.
Article 254-2
The Autorité de contrôle prudentiel shall decide which
credit quality steps shall be associated with the external
Selected French Banking and Financial Regulations – 2013
credit assessments made by an ECAI. This mapping shall
take into account the following factors:
- the degree of risk associated with each assessment;
- quantitative factors, such as default or loss rates; and
- qualitative factors such as the range of transactions
assessed by the ECAI and the meaning of the credit
assessment.
Securitisation positions to which the same risk weight is
applied on the basis of the credit assessments of eligible
ECAIs should present an equivalent degree of credit risk. If
this is not the case, the Autorité de contrôle prudentiel may
decide to modify the mapping.
Article 255
In order to be used in calculating risk-weighted exposure
amounts as provided in this Title, external credit
assessments must comply with the following conditions:
a) there is no mismatch between the types of payments
reflected in the external credit assessment and the types of
payment to which the supervised institution is entitled under
the contract giving rise to the securitisation position;
b) the external credit assessment is publicly available. Credit
assessments shall be considered publicly available only if
they have been published in a publicly accessible forum and
are included in the ECAI’s transition matrix. External credit
assessments that are made available only to a limited
number of entities shall not be considered to be publicly
available.
c) the credit assessment cannot be based, either fully or
partially, on the un-financed support provided by the
supervised institution itself. In such cases, the supervised
institution treats the position concerned as though it were
unrated and applies the valuation process stipulated in Title
V of this Decree.
Article 256
Supervised institutions may nominate one or more eligible
ECAIs recognised by the Autorité de contrôle prudentiel to
be used in the calculation of risk-weighted exposure
amounts.
External credit assessments must be used consistently for all
securitisation positions. The assessments may not be used
selectively.
A supervised institution may not use the credit assessments
of one ECAI for its positions in some tranches and the credit
assessments of another ECAI for its positions in other
tranches within the same structure.
If a position has two credit assessments by nominated
ECAIs, the supervised institution shall use the less
favourable credit assessment.
If a position has more than two credit assessments by
nominated ECAIs, the supervised institution shall take the
two most favourable assessments and use the less favourable
of the two.
If eligible credit protection as defined in Title IV is provided
directly to a securitisation special purpose entity, and that
189
protection is reflected in the external credit assessment of a
securitisation position, the risk weight associated with that
external credit assessment shall be used.
shall supply collateral to a second counterparty when an
exposure of that second counterparty to the first
counterparty exceeds a level determined in advance, referred
to as the margin call threshold;
The external credit assessment may not be used if:
a) the credit protection is not eligible;
b) the credit protection is not provided to the special purpose
entity but applies directly to the securitisation position.
TITLE VI
THE TREATMENT OF COUNTERPARTY
CREDIT RISK
CHAPTER I
GENERAL PROVISIONS
Section 1
Definitions
Article 257
For the purposes of this Title, the following definitions shall
apply:
a) ’counterparty credit risk’ mean the risk that the
counterparty to a transaction could default before the final
settlement of all of the transaction’s cash flows;
b) ’long settlement transactions’ mean transactions in which
a counterparty undertakes to deliver securities, commodities,
or a foreign exchange amount against cash, other financial
instruments, or commodities, or vice versa, at a settlement or
delivery date that is contractually specified as the market
standard for this type of transaction, or no later than five
business days after the date on which the supervised
institution enters into the transaction;
c) ’margin lending transactions’ mean transactions in which
the supervised institution is involved in the purchase, sale,
carrying, or trading of securities. Margin lending
transactions do not include other loans that are secured by
securities collateral;
d) ’netting set’ means a group of transactions with a single
counterparty that are subject to a legally enforceable
bilateral novation agreement or bilateral netting agreement
whose effects are recognised under the provisions of this
Title and Title IV. Each transaction that is not subject to a
legally enforceable bilateral netting agreement that is
recognised under the provisions of this Title should be
considered as its own netting set;
e) ’risk position’ means an amount that is assigned to a
transaction under the Standardised Method set out in
Chapter IV and resulting from a predetermined algorithm;
f) ’hedging set’ means a group of risk positions arising from
the transactions within a single netting set, for which only
the net balance is relevant for determining the exposure
value under the Standardised Method set out in Chapter IV;
g) ’margin agreement’ means a contractual agreement or the
provisions of an agreement under which one counterparty
190
h) ’margin period of risk’ means the time period from the
last exchange of collateral covering a netting set of
transactions with a defaulting counterparty until that
counterparty is definitively dissolved and liquidated and the
resulting market risk is re-hedged;
i) ’cross-product netting’ means the inclusion of transactions
in different product categories within the same netting set
under the conditions set out in Section 3;
j) ’current market value’ means the net market value of all
the transactions within a netting set. Both positive and
negative market values are used in computing the current
market value;
k) ’distribution of market values’ means the forecast of the
probability distribution of net market values of transactions
within a netting set at some future date (the forecasting
horizon), given the realised market value of those
transactions;
l) ’distribution of exposures’ means the forecast of the
probability distribution of market values that is calculated by
setting forecast instances of negative net market values
equal to zero;
m) ’risk-neutral distribution’ means a distribution of market
values or exposures at a future date, calculated using market
implied values such as implied volatilities;
n) ’actual distribution’ means a distribution of market values
or exposures at a future date, calculated using historic or
realised values such as volatilities calculated using past price
or rate changes;
o) ’current exposure’ means the larger of zero or the market
value of a transaction or portfolio of transactions within a
netting set that would be lost upon the default of the
counterparty, assuming no recovery on the value of those
transactions is possible;
p) ’peak exposure’ means a high percentile of the
distribution of exposures at any particular future date before
the maturity date of the longest maturity transaction in the
netting set;
q) ’expected exposure’ means the average of the distribution
of exposures at any future date before the maturity date of
the longest maturity transaction in the netting set;
r) ’effective expected exposure’ means the value defined at a
given date as the maximum expected exposure that occurs at
that date or any prior date;
s) ’expected positive exposure’ means the weighted average
over time of expected exposures, weighted by the fraction of
the entire time interval represented by individual expected
exposures. When calculating the minimum capital
requirement for counterparty credit risk, the average is
calculated over the first year or, if all of the contracts within
the netting set mature within less than one year, over the
Selected French Banking and Financial Regulations – 2013
time period corresponding to the longest maturity contract in
the netting set;
- the Standardised method;
- the Internal Model method.
t) ’effective expected positive exposure’ means the weighted
average over time of effective expected exposure over the
first year, or, if all the contracts within the netting set mature
within less than one year, over the time period of the longest
maturity contract in the netting set, weighted by the fraction
of the entire time interval represented by individual expected
exposures;
Supervised institutions that use the treatment set out in
Article 293-1 may not use the original exposure method.
u) ’credit valuation adjustment’ means an adjustment to the
mid-market valuation of the portfolio of transactions with a
counterparty. This adjustment reflects the market value of
the credit risk due to any failure to perform on contractual
obligations. This adjustment may reflect the market value of
the credit risk of the counterparty or the market value of the
credit risk of both the supervised institution and the
counterparty;
v) ’one-sided credit valuation adjustment’ means a credit
valuation adjustment that reflects the market value of the
credit risk of the counterparty to the supervised institution,
but does not reflect the market value of the credit risk of the
supervised institution to the counterparty;
w) ’rollover risk’ means the amount by which the expected
positive exposure is understated when future transactions
with a counterparty are expected to be conducted on an
ongoing basis. The additional exposure generated by those
future transactions is not included in the calculation of
expected positive exposure;
x) ’general wrong-way risk’ means the risk arising when the
PD of counterparties is positively correlated with general
market risk factors;
y) ’specific wrong-way risk’ means the risk arising when the
exposure to a particular counterparty is positively correlated
with the PD of the counterparty due to the intrinsic nature of
the transaction. A supervised institution shall be considered
to be exposed to specific wrong-way risk if the future
exposure to a specific counterparty is likely to be high when
the counterparty’s PD is also high.
Article 258
Supervised institutions shall treat counterparty credit risk for
all of their exposures, whether they are in the non-trading
book or the trading book. The counterparty credit risk of
elements in the trading book shall be treated in accordance
with the provisions of Chapter V of Title VII relating to
capital requirements for settlement and counterparty risk,
and with the provisions of this Title.
Section 2
Choice of method
Article 259-1
Subject to the provisions of this Section, supervised
institutions shall use one of the following methods to
calculate the exposure value for the derivative instruments
listed in Appendix II:
- the Mark-to-Market method;
- the Original Exposure method;
Selected French Banking and Financial Regulations – 2013
Article 259-2
The combined use of different methods listed above shall be
permitted on a permanent basis within a group, but not
within a single legal entity, except where one of the methods
is used for the cases set out in Article 277.
Article 259-3
Subject to the approval of the Autorité de contrôle
prudentiel, supervised institutions may use the Internal
Model method set out in Chapter V to calculate the exposure
value for:
- the derivative instruments listed in Appendix II;
- repurchase transactions;
- securities or commodities lending or borrowing
transactions;
- margin lending transactions;
- long settlement transactions.
Article 260
When a supervised institution purchases protection in the
form of a credit derivative for a non-trading book exposure,
or for an exposure to counterparty credit risk, it may
compute its capital requirement for the hedged asset in
accordance with Articles 194 to 195-4 relating to the
methods for recognising the effects of credit derivatives, or,
subject to the approval of the Autorité de contrôle
prudentiel, in accordance with Article 48 relating to the
treatment of double default or Articles 136-1 to 140 relating
to the effects of credit derivatives for institutions using own
estimates of LGD.
In all of these cases, the exposure value for counterparty
credit risk for the credit derivatives is set equal to zero.
The exposure value for counterparty credit risk for a credit
default swap sold in the non-trading book is set equal to zero
if the credit default swap is treated as credit protection
provided by the supervised institution and if it is subject to a
capital requirement for credit risk for the full notional
amount.
Article 261
Whatever the method used to calculate counterparty credit
risk, the exposure value for a given counterparty is equal to
the sum of the exposure values calculated for each netting
set with that counterparty.
Article 262
An exposure value of zero for counterparty credit risk and
credit risk may be assigned to derivative contracts,
repurchase transactions, securities or commodities lending
or borrowing transactions, long settlement transactions, and
margin lending transactions outstanding with a central
clearing house.
The exposures of the clearing house with all participants in
its arrangements shall be fully collateralised on a daily basis.
191
Article 263
The exposure value of long settlement transactions may be
determined using any of the methods set out in this Title,
independent of the choice of method for treating the
counterparty credit risk of OTC derivatives, repurchase
transactions, securities or commodities lending or borrowing
transactions, and margin lending transactions. In calculating
capital requirements for long settlement transactions,
supervised institutions that use IRB approaches for credit
risk may assign the risk weights of the Standardised
approach for credit risk on a permanent basis, whatever the
magnitude of those transactions.
Section 3
Contractual netting
Article 264
For the purpose of this Section:
- ’counterparty’ means any entity that has the power to
conclude a contractual netting agreement;
- ’contractual cross-product netting agreement’ means a
bilateral agreement between a supervised institution and a
counterparty that creates a single legal obligation covering
all included bilateral master agreements and transactions
belonging to different product categories.
For the purposes of cross-product netting, the following
transactions and instruments are considered as belonging to
different product categories:
- repurchase transactions and securities and commodities
lending and borrowing transactions;
- margin lending transactions;
- the derivative instruments listed in Appendix II.
Article 265
For the purposes of this Title, the following netting
mechanisms may be recognised as risk-reducing:
- bilateral novation agreements;
- other bilateral netting agreements between the supervised
institution and a counterparty;
- bilateral cross-product netting agreements, for supervised
institutions that have received the approval of the Autorité
de contrôle prudentiel to use the Internal Model method.
Article 266-1
Contractual netting shall be recognised for the calculation of
capital requirements when the following conditions are met:
a) in the event of default, bankruptcy, of liquidation of the
counterparty, or any other similar circumstance, the netting
agreement creates a single legal obligation, covering all
included transactions, giving the supervised institution the
right to receive or the obligation to pay the net balance of
the positive and negative mark-to-market values of the
transactions concerned;
b) in the cases referred to in the preceding paragraph, the
supervised institution must have a written and reasoned legal
opinion to the effect that, in the event of legal challenge, its
claims and obligations would be limited to the net sum
referred to in the preceding paragraph under the law that
applies:
192
- in the jurisdiction in which the counterparty is incorporated
and, if a foreign branch of an undertaking is involved, under
the law of the jurisdiction in which the branch is located;
- to the transactions concerned;
- to any other contract or agreement necessary to effect the
contractual netting;
c) the supervised institution has procedures in place to
ensure the continued legal validity of the netting agreement
in the event of changes in the applicable laws;
d) the agreement does not contain a lump-sum settlement
clause in the event of failure;
e) the supervised institution
documentation in its files;
maintains
all
required
f) the supervised institution takes into account the effects of
netting when it calculates its aggregate credit risk exposure
to each counterparty and when it manages counterparty
credit risk on that basis;
g) the credit risk to each counterparty is aggregated to arrive
at a single legal exposure for all transactions. That
aggregated value shall be factored into credit limits and used
in the assessment of internal capital adequacy.
The contracts of netting agreement along with legal opinions
relating to them, shall be made available to the General
Secretariat of the Autorité de contrôle prudentiel.
The Autorité de contrôle prudentiel may prohibit the
recognition of these agreements if, after appropriate
consultation with the competent authorities of the other
Member States concerned, it judges that their legal validity
is not assured.
Article 266-2
Contractual cross-product netting agreements shall be
recognised when they meet the following conditions, in
addition to the conditions mentioned above:
a) the net sum referred to in paragraph (a) of the preceding
Article is the net sum of the positive and negative close out
values of all bilateral master agreements and the positive and
negative mark-to-market value of the individual
transactions;
b) the written and reasoned legal opinions referred to in
paragraph (b) of the preceding Article address the validity
and enforceability of the entire cross-product netting
agreement and the impact of that agreement on the material
provisions of the individual bilateral master agreement
included in the cross-product agreement.
c) the procedures referred to in paragraph (c) of the
preceding Article permit to verify that any transaction
included in a netting set is covered by a legal opinion;
d) the supervised institution complies with the requirements
for the recognition of netting mechanisms and, if relevant,
for the recognition of each individual master netting
agreement included in a cross-product agreement, in
accordance with the provisions of Title IV.
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coefficients in the preceding table are applicable to a
contract, based on its characteristics, the largest coefficient
should be used.
CHAPTER II
MARK-TO-MARKET METHOD
Article 267-1
In the Mark-to-Market method, supervised institutions
calculate replacement cost and potential future risk in
accordance with the provisions of this Chapter.
Contracts that do not fall within any of the categories set
forth in the preceding table shall be assigned the largest
coefficient, after their residual maturity has been taken into
account.
Article 267-2
Where a contract is not included in a novation agreement or
netting agreement that satisfies the conditions set out in
Article 266-1, its replacement cost is equal to its market
value, if positive. Otherwise, the replacement cost is set
equal to zero.
With the prior approval of the Autorité de contrôle
prudentiel, supervised institutions that conduct a large
amount of commodities business and have a diversified
commodities portfolio may use the following coefficients in
place of the coefficients assigned to contracts on precious
metals other than gold and to commodities.
Where contracts are governed by a single novation
agreement or a single netting agreement that satisfies the
conditions set out in Article 266-1, the replacement cost is
the net balance of the market values of those contracts, if
positive. Otherwise, the replacement cost is set equal to
zero.
Remaining
maturity
Article 267-3
For the calculation of potential future risk, the notional
amount of all contracts is risk-weighted as a function of their
remaining maturity, as follows:
Remaini
ng
maturity
One
year or
less
More
than one
and not
exceedin
g five
years
More
than five
years
Exchang
e-rate
and gold
contract
s
Equity
contrac
ts
0%
1%%
0.5%
5%
6%
Contra
cts on
preciou
s
metals
other
than
gold
7%
10%
8%
7%
12%
Equity
contrac
ts
Commodit
ies
contracts
One year
or less
More than
one
and
less than
or equal to
five years
More than
five years
Contracts
on
precious
metals
other
than gold
Contracts
on other
metals
Contracts
on
agricultural
products
Contracts on
energy
products and
other
commodities
2%
2.5%
3%
4%
5%
4%
5%
6%
8%
9%
10 %
7.5%
Article 267-4
For contracts concluded with the same counterparty, the
future potential risk on that counterparty is the sum of the
nominal amounts, weighted according to the provisions of
Article 267-3. However, the future potential risk arising
from contracts subject to a single novation agreement or
netting agreement that meets the conditions set out in Article
266-1 may be calculated as follows.
First, institutions calculate the ratio of net replacement cost
to gross replacement cost, RNG:
1.5%
7.5%
10%
8%
15%
The future potential risk of options sold is considered to be
equal to zero.
If forward foreign exchange transactions and similar
transactions are subject to a single netting agreement that
meets the conditions set out in Article 266-1, the net amount
may be used when the flows being netted are denominated
in a single currency and are payable at a single value date.
For contracts structured in such a way that the replacement
cost is periodically cancelled, the residual maturity is
reduced to the time between such cancellations. However,
the coefficient applicable to interest-rate contracts may not
be less than 0.5% when the residual maturity of such
contracts is longer than one year.
For contracts structured in such a way as to leverage the
nominal amount, institutions shall calculate the future
potential risk after applying an appropriate leverage
coefficient to the nominal amount. If more than one of the
Selected French Banking and Financial Regulations – 2013
- the numerator of the ratio is the replacement cost of the
contracts, calculated in accordance with Article 267-2,
taking into account the effects of netting or novation;
- the denominator of the ratio is the replacement cost of the
contracts, calculated in accordance with Article 267-2,
without taking into account the effects of netting or novation
(gross replacement cost).
When the denominator is zero, the ratio is considered to be
equal to zero.
Second, the following formula is used to determine the
future potential risk, FPR, for contracts subject to the same
novation agreement or netting agreement:
RPF = (0,4 + 0,6 × RNB) × (sum of nominal amounts,
weighted as set out in the provisions of Article 267-3)
Institutions may also calculate a single RNG ratio applicable
to all contracts covered by a legally valid novation
agreement or netting agreement. In that case:
193
- the numerator of the ratio is the sum of net replacement
costs resulting from the application of Article 267-2 to each
novation agreement or netting agreement referred to above;
- the denominator of the ratio is the sum of gross
replacement costs for all contracts mentioned above.
Institutions shall inform the General Secretariat of the
Autorité de contrôle prudentiel of their choice of option for
calculating the RNG ratio. The option must be applied
consistently.
Article 267-5
The exposure value is the sum of the current replacement
cost as determined in Article 267-2 and the potential future
credit exposure.
CHAPTER III
ORIGINAL EXPOSURE METHOD
Article 268-1
Institutions may avail themselves of this method only for
exchange-rate and interest-rate contracts. The Autorité de
contrôle prudentiel may prohibit the use of this method.
Article 268-2
Where contracts are not included in a novation agreement or
netting agreement that satisfies the conditions set out in
Article 266-1, their notional amount shall be weighted
according to their initial maturity as follows:
Initial maturity
Less than one year
More than one year
and not exceeding
two years
Additional
allowance for each
additional year
Interest rate
contracts
0.5%
1%
Exchange rate
Contracts
2%
5%
1%
3%
For interest-rate contracts, institutions may, however, refer
to the residual maturity to the extent that their business
justifies it. The Autorité de contrôle prudentiel may prohibit
this practice if it judges that this condition is not met.
value date, the net amount may be used; the weightings to be
applied shall then be those referred to in the preceding
Article.
For interest-rate contracts, institutions may, however, refer
to the residual maturity to the extent their business justifies
it. The Autorité de contrôle prudentiel may prohibit this
practice if it judges that this condition is not met.
Article 268-4
The exposure value is the result obtained from the preceding
calculations.
CHAPTER IV
STANDARDISED METHOD
Article 269
The use of the Standardised Method shall be limited to OTC
derivatives and long settlement transactions.
The exposure value shall be calculated separately for each
netting set. It shall be determined net of any collateral using
the following formula:
exposure value =
β * max CMV − CMC ;
j
i
RPT ij − RPC lj * CCRM j
l
where:
CMV = the current market value of the portfolio of
transactions in the netting set with a counterparty, gross of
collateral; that is, where:
CMV = CMVi
i
where:
- CMVi is the current market value of transaction i;
- CMC is the current market value of the collateral assigned
to the netting set, that is, where:
CMC = CMCl
l
Article 268-3
Where contracts are included in a single novation agreement
or a single netting agreement that complies with the
conditions of Article 266-1, their notional amount shall be
weighted according to their initial maturity as follows:
Initial maturity
Less than one
year
More than one
and not exceeding
two years
Additional
allowance for
each additional
year
Interest rate
contracts
0,35 %
Exchange rate
contracts
1,50 %
0,75 %
3,75 %
0,75 %
2,25 %
If forward foreign-exchange transactions and similar
transactions are subject to a single netting agreement that
meets the conditions of Article 266-1, and the flows are
denominated in the same currency and payable at the same
194
where:
- CMCl is the current market value of the collateral;
- i is the index designating a transaction;
- l is the index designating the collateral;
- j is the index designating the hedging set category. These
hedging sets correspond to risk factors for which risk
positions of opposite sign can be offset to yield a net risk
position on which the exposure measure is then based;
- RPTij is the risk position from transaction i with respect to
hedging set j;
- RPClj is the risk position from collateral l with respect to
hedging set j;
- CCRMj is the multiplier given in the table in Article 276
for hedging set j;
- β = 1,4
Collateral received from a counterparty has a positive sign,
and collateral posted to a counterparty has a negative sign.
Selected French Banking and Financial Regulations – 2013
Collateral that is recognised for this method shall be
confined to the collateral that is eligible under Articles 165
and 338-3.
Article 270
When an OTC derivative transaction with a linear risk
profile stipulates the exchange of a financial instrument for a
payment, the part of the transaction associated with the
payment is referred to as the payment leg. Transactions that
stipulate the exchange of payment against payment consist
of two payment legs. The payment legs correspond to the
contractually agreed gross payments, including the notional
amount of the transaction.
In applying the Standardised method, supervised institutions
may disregard the interest rate risk from payment legs with a
remaining maturity of less than one year.
Supervised institutions may treat transactions that consist of
two payment legs that are denominated in the same currency
as a single aggregate transaction. The aggregate transaction
is then treated like a payment leg.
Transactions with a linear risk profile for which the
underlying financial instrument is an equity instrument
(including equity indices) or a commodity (including gold or
other precious metals) shall be mapped to a risk position in
the respective equity (or equity index) or commodity
(including gold and other precious metals).
The payment legs of these transactions shall be mapped to
an interest rate risk position.
payments (including the notional amount), and converted to
euros, and then multiplied by the modified duration of the
debt instrument or the payment leg.
- for credit default swaps, the size of a risk position is equal
to the notional value of the reference instrument multiplied
by the remaining maturity of the credit default swap;
- for OTC derivatives with a non-linear risk profile,
including options and swaptions, the size of the risk position
is equal to the delta equivalent of the effective notional
value of the financial instrument that underlies the
transaction, unless that instrument is a debt instrument.
- for OTC derivatives with a non-linear risk profile,
including options and swaptions, where the underlying
financial instrument is a debt instrument or a payment leg,
the size of a risk position is equal to the delta equivalent of
the effective notional value of the financial instrument or
payment leg multiplied by its modified duration of the debt
instrument.
Article 272
In determining risk positions, supervised institutions shall
treat collateral received from a counterparty as a long
position that comes due the same day. Collateral posted with
the counterparty shall be treated as a short position that
comes due the same day.
Article 273
Supervised institutions shall use the following formulae to
determine the value and sign of risk positions:
a) for all instruments other than debt securities, the effective
notional value or the delta equivalent notional value shall be
equal to:
If the payment legs are denominated in a foreign currency,
they shall also be mapped to a risk position in that currency.
Transactions with a linear risk profile for which the
underlying instrument is a debt instrument shall be mapped
to an interest rate risk position for the debt instrument and
another interest rate risk position for the payment leg.
Transactions with a linear risk profile that stipulate the
exchange of payment against payment, including foreign
exchange forward contracts, are mapped to an interest rate
risk position for each of the payment legs.
If the underlying debt instrument is denominated in a foreign
currency, the debt instrument is mapped to a risk position in
that currency. If a payment leg is denominated in a foreign
currency, the payment leg is also mapped to a risk position
in that currency.
p ref
where:
- pref is the price of the underlying instrument, in euros;
- V is the value of the financial instrument (in the case of an
option, the option price; and in the case of a transaction with
a linear risk profile, the value of the underlying instrument);
- P is the price of the underlying instrument, expressed in the
same currency as V.
b) for debt instruments and the payment legs of all
transactions, the effective notional value multiplied by the
modified duration, or the delta equivalent notional value
multiplied by the modified duration, shall be equal to:
∂V
∂r
The exposure value assigned to a foreign exchange basis
swap transaction is zero.
Article 271
The size of risk positions is determined as follows:
- for transactions whose underlying financial instruments are
not debt securities, the size of the risk position is equal to
the effective notional value of the underlying financial
instruments, defined as the market price multiplied by the
quantity, and converted to euros.
- for transactions whose underlying financial instruments are
debt securities and for payment legs, the size of the risk
position is equal to the effective notional value of the gross
Selected French Banking and Financial Regulations – 2013
∂V
∂ p
where:
- V is the value of the financial instrument (in the case of an
option, the option price; and in the case of a transaction with
a linear risk profile, the value of the underlying instrument
or the value of the payment leg);
- r is the interest rate.
If V is denominated in a currency other than the euro, the
derivative instruments shall be converted into euros using
the appropriate exchange rate.
195
Article 274
Supervised institutions shall group risk positions into
hedging sets. For each hedging set, they shall calculate the
absolute value of the sum of the resulting risk positions.
This sum is termed the ‘net risk position’ and is represented
the following expression in the formulas in Article 269:
i
RPTij − RPClj
l
Article 275
For interest rate risk positions associated with money
deposits received as collateral, with payment legs, and with
underlying debt instruments for which a capital charge of
more than 1.60% is prescribed in the table in Article 321, six
hedging sets shall be distinguished for each currency, as set
out in the following table.
Maturity
Maturity
Maturity
Government
referenced interest
rates
Less than 1 year
From 1 to 5 years
More than 5 years
Other
referenced
interest rates
Less than 1 year
From 1 to 5 years
More than 5 years
For interest rate risk positions associated with underlying
debt instruments or payment legs for which the interest rate
is linked to a reference interest rate that represents a general
market interest level, the remaining maturity is the length of
the time interval up to the next re-adjustment of the interest
rate. In all other cases, it corresponds to the remaining
maturity of the underlying debt instrument, or in the case of
a payment leg, the remaining life of the transaction.
A single hedging set is defined for each issuer of a reference
debt instrument that underlies a credit default swap.
The nth-to-default credit default swaps are treated as
follows:
A single hedging set is defined for interest rate risk positions
associated with:
- money deposits that are posted with a counterparty as
collateral when that counterparty does not have debt
obligations with low specific risk;
- underlying debt instruments for which a capital charge of
more than 1.60% is prescribed in the table in Article 321;
- payment legs that emulate debt instruments referred to in
the preceding line;
Supervised institutions shall assign to the same hedging set
risk positions corresponding to:
- debt instruments of a given issuer, or;
- reference debt instruments of the same issuer that are
emulated by payment legs, or;
- debt instruments that underlie a credit default swap.
Supervised institutions shall assign underlying financial
instruments other than debt instruments to the same hedging
sets only if they are identical or similar instruments. In all
other cases, they shall be assigned to separate hedging sets.
The similarity of instruments is established as in accordance
with the following provisions:
a) equities are treated as similar if they have the same issuer.
An equity index is treated as a separate issuer;
b) for precious metals, instruments are treated as similar if
they involve the same metal. A precious metal index is
treated as a separate precious metal;
c) for commodities, instruments are treated as similar if they
involve the same commodity. A commodity index is treated
as a separate commodity.
Institutions shall apply the multipliers defined in the
following table to the different categories of hedging sets:
a) The measurement of the net risk position of a reference
security underlying a nth-to-default credit default swap
corresponds to the effective notional value of the reference
security, multiplied by the modified duration of the
derivative at the umpteenth default divided by a variation of
the credit margin of the reference security;
Hedging set categories
1. Interest rates
2. Interest rates for risk positions
associated with a reference debt
instrument that underlies a
credit default swap and to which the
table in Article 321 assigns a capital
charge of 1.60% or less
Multiplier
0.2 %
0.3 %
b) A single hedging set is constituted for each reference
security underlying a credit default swap at the nth default;
the net risk positions associated with the different swap
contracts at the nth default are not included in the same
hedging set;
3. Interest rates for risk positions
associated with a debt instrument or
reference debt instrument to which
the table in Article 321 assigns a
capital charge of more than 1.60%
0.6 %
c) The multiplication factor applied to all the hedges
constituted for each reference security underlying a
derivative at the nth default is:
4. Exchange rates
5. Electricity
6. Gold
7. Equity
8. Precious metals (excluding gold)
9. Other commodities (excluding
precious metals)
10. Underlying instruments of OTC
derivatives that are not in any of the
above
categories
2.5 %
4%
5%
7%
8.5 %
10 %
0,3% when the reference security is subject to a credit
assessment conducted by a recognised credit assessment
agency, equivalent to step 1 to step 3 of the credit quality
scale;
0.6% in other cases.
196
10 %
Selected French Banking and Financial Regulations – 2013
Underlying instruments of OTC derivatives that do not fall
within other categories shall be assigned to separate
individual hedging sets for each category of underlying
instrument.
Article 277
When supervised institutions cannot determine the delta or
the modified duration of transactions with a non-linear risk
profile, or of payment legs and transactions for which the
underlying are debt instruments, using a model approved for
the purpose of calculating minimum capital requirements for
market risk, the Autorité de contrôle prudentiel may require
that the size of the risk positions and multipliers be
determined using more conservative measures or that the
Mark-to-Market method be used. Netting of such
transactions shall not be recognised; each transaction shall
be considered as a separate netting set.
Supervised institutions shall have internal procedures to
verify that transactions included in a hedging set are covered
by a legally enforceable netting contract that meets the
requirements set out in Section 3 of Chapter I.
Supervised institutions that use collateral to mitigate their
counterpart credit risk shall have internal procedures to
verify that the legal certainty standards set out in Title IV are
satisfied before recognising the effect of the collateral.
CHAPTER V
INTERNAL MODEL METHOD
Section 1
Scope of application
Article 278-1
When the requirements of this Chapter are satisfied,
supervised institutions may use the Internal Model method
to calculate the exposure value of:
received approval to use the Internal Model method, it shall
use the Mark-to-Market method or the Standardised method.
The combined use of these two methods within a group is
permitted on a permanent basis. The combined use of these
two methods within a single legal entity is permitted only
where one of the methods is required by the Autorité de
contrôle prudentiel in accordance with the provisions of
Article 277.
Article 278-4
Supervised institutions which have been granted approval to
use the Internal Model method shall not revert to the Markto-Market method or the Standardised method except for
demonstrated good cause and with the prior approval of the
Autorité de contrôle prudentiel. If the requirements of this
Title cease to be satisfied, the supervised institution shall
present to the Autorité de contrôle prudentiel a plan for a
timely return to compliance, unless it can demonstrate that
the effects of its non-compliance are not material.
Section 2
Calculation of exposure value
Article 279
The exposure value shall be measured at the level of the
netting set, under the following conditions:
a) the model shall specify the distribution of changes in the
market value of the netting set attributable to changes in
market variables such as interest rates and foreign exchange
rates;
b) the model shall compute the exposure value for the
netting set at different future dates, given the changes in the
market variables;
c) for counterparties subject to margin agreements, the
model may also capture future movements in collateral;
- the derivative instruments listed in Appendix II; or
- repurchase transactions, securities or commodities lending
or borrowing transactions, and margin lending transactions;
or
- all of the operations referred to in the preceding two lines.
d) supervised institutions may reflect eligible financial
collateral as defined in Articles 165 and 338-3 in calculating
the distribution of changes in the market value of the netting
set, if the quantitative, qualitative, and data requirements for
the Internal Model method are satisfied;
Long settlement transactions shall be included in each of
these categories.
Article 280
The exposure value shall be calculated as follows:
Notwithstanding the provisions of Article 259-2, supervised
institutions may choose not to apply this method to
exposures that are immaterial in size and risk.
Article 278-2
The Autorité de contrôle prudentiel may grant approval to
supervised institutions to apply the Internal Model method
sequentially across different transaction types. During this
period, counterparty credit risk of transactions to which the
Internal Model method does not apply shall be calculated
using the Mark-to-Market method or the Standardised
method.
Article 278-3
For all OTC derivative transactions and for long settlement
transactions for which a supervised institution has not
Selected French Banking and Financial Regulations – 2013
E = α × effective EPE
where:
- E is the exposure value;
- effective EPE is the effective expected positive exposure;
- α = 1,4
The Autorité de contrôle prudentiel may require a value of
alpha greater than 1.4.
The EPE shall be calculated as follows:
effective EPE = (EEt)
where EEt is the average exposure at future date t.
197
This average shall be calculated across future values of
relevant market risk factors.
d) Internal estimates of α shall take account of the
granularity of portfolios.
The model estimates EE at a series of future dates.
e) the numerator and denominator of the ratio defined in
paragraph (b) shall be calculated consistently in terms of
modelling methodology, parameter specifications, and
portfolio composition;
Effective EE shall be computed recursively as follows:
effective EE = max(EE
tk
; effective; EE )
tk-1
tk
f) the approach used shall be based on the supervised
institution’s internal capital approach. That approach shall
be well documented and subject to independent validation;
where:
- EE is the effective expected exposure;
- t is the current date;
g) supervised institutions shall review their estimates of α at
least quarterly, and more frequently if justified by changes
in the composition of the portfolio;
0
- EE is the current exposure.
to
The effective expected positive exposure is the average
value of the effective expected exposures calculated on a
horizon of one year. If all contracts in the netting set mature
within this horizon, the expected positive exposure is the
average value of expected exposures until all contracts in the
netting set mature. Effective expected positive exposure is
computed as a weighted average of effective expected
exposures using the following formula:
effective
EPE =
min(1year;
; maturity)
effective
EE
tk
*
Δ tk
k =1
where the weights ∆t = t – t
k
k
k-1
allow for the case in which
future exposure is calculated at dates that are not equally
spaced over time.
The values of expected exposure or maximum exposure
shall be calculated based on a distribution of exposures that
accounts for the possible non-normality of the distribution of
exposures.
Supervised institutions may use a more conservative
measure for each counterparty than that calculated using the
above equation.
Article 281-1
Notwithstanding the provisions of the preceding Article, the
Autorité de contrôle prudentiel may permit supervised
institutions to use their own estimates of α under the
following conditions:
a) α is not be less than 1.2;
b) α is equal to the ratio in which:
- the numerator is the amount of internal capital resulting
from a full simulation of counterparty credit risk exposure
reflecting all market risk and counterparty credit risk factors;
- the denominator is the amount of internal capital calculated
using, as a measure of counterparty credit risk, a fixed
amount corresponding to the expected positive exposure.
c) Supervised institutions shall demonstrate that their
internal estimates of α capture, in the numerator, material
sources of stochastic dependency in the distribution of
market values of transactions or of portfolios of transactions
across counterparties;
198
h) supervised institutions shall assess model risk.
Article 281-2
Where appropriate, volatilities and correlations of market
risk factors used in the joint simulation of market and credit
risk should be conditioned on the credit risk factor in order
to reflect potential increases in volatility or correlation in an
economic downturn.
Article 282
If a netting set is subject to a margin agreement, supervised
institutions shall use one of the following measures of
expected positive exposure:
a) effective expected positive exposure without taking into
account the margin agreement;
b) the threshold set in the margin agreement, if positive, plus
an add-on that reflects the potential increase in the exposure
over the margin period of risk. The add-on is equal to the
expected increase in the netting set’s exposure beginning
from a current exposure of zero over the margin period of
risk. The minimum length of the margin period of risk is
five business days for netting sets consisting only of repostyle transactions subject to daily re-margining and daily
mark-to-market, and ten business days for all other netting
sets;
c) if the internal model captures the effects of the margin
agreement in the estimation of expected exposure, the
model’s measure of expected exposure may be used directly
in the formula for effected expected exposure in Article 280,
with the prior approval of the Autorité de contrôle
prudentiel.
Section 3
Minimum requirements for the use of internal models
Subsection 1
Counterparty credit risk control
Article 283-1
Supervised institutions shall have a control unit that is
responsible for the design and implementation of its
counterparty credit risk management system, including
initial and on-going validation of the model. This unit shall:
Selected French Banking and Financial Regulations – 2013
a) control the integrity of input data and produce and analyse
reports on the output of the risk measurement model,
including an evaluation of the relationship between
measures of risk exposure and credit and trading limits;
b) be independent from the operating units responsible for
originating, renewing, or trading exposures;
confidence interval chosen, at both the portfolio and the
counterparty level.
Supervised institutions take account of large or concentrated
positions, including by groups of related counterparties, by
industry, and by market;
k) supervised institutions have a programme for verifying
compliance with internal rules and procedures relating to the
operation of the counterparty credit risk management
system. This system is covered by documentation describing
the empirical techniques used.
c) be adequately staffed;
d) report directly to the executive body;
e) be closely integrated with the process of daily
management of credit risk, and be an integral part of the
process of monitoring and controlling credit risk and the
overall risk profile of the institution.
Article 283-2
Supervised institutions shall have procedures and systems
for managing counterparty credit risk that are conceptually
sound, are implemented with integrity, and satisfy the
following criteria:
l) Supervised institutions have a routine and rigorous
programme of stress testing, as a complement to the
day-to-day counterparty credit risk analysis based on the
output of the risk measurement model. The results of this
stress testing are reviewed periodically by the executive
body and are reflected in the counterparty credit risk policies
and limits set by the executive body. Where stress tests
reveal a particular vulnerability to a given set of
circumstances, prompt steps are taken to reduce that risk.
b) they take into account market, liquidity, legal, and
operational risks that may be associated with counterparty
credit risk;
Article 284
An independent review of the counterparty credit risk
measurement system shall be conducted at regular intervals
as part of the institution’s internal control process. This
review shall cover the activities of both operating units and
the independent counterparty credit risk control unit. It shall
cover, at a minimum:
c) before any new transaction, the credit risk of any new
counterparty is assessed;
a) the adequacy of the documentation of the counterparty
credit risk management system and process;
d) credit risk over the period running from the trade date to
the settlement date is properly taken into account;
b) the organisation of the counterparty credit risk control
unit;
e) market, liquidity, and operational risks are managed as
comprehensively as possible both at the counterparty level
(aggregating counterparty credit risk exposures with other
credit exposures) and at the group level;
c) the integration of counterparty credit risk measures into
daily risk management;
a) they
include
the
management, approval,
counterparty credit risk;
identification,
and internal
measurement,
reporting of
d) the approval process for risk pricing models and valuation
systems used by front- and back-office personnel;
f) the executive body exercises control over the limitations
and assumptions of the model used, and understands their
impact on the model’s output;
e) the validation of any significant change in the
counterparty credit risk measurement process;
g) the uncertainties of the market environment and any
operational issues that may exist are reflected in the model;
f) the scope of counterparty credit risk captured by the
internal model;
h) daily reports on the supervised institution’s exposures to
counterparty credit risk are reviewed by persons with
sufficient expertise and authority to enforce any needed
reductions in positions taken by individual traders or credit
managers, or in the supervised institution’s overall exposure
to counterparty credit risk;
g) the integrity of the management information system;
i) the system for measuring counterparty credit risk is used
in conjunction with credit and trading limits. Credit and
trading limits are consistent with risk modelling over time,
and well understood by traders and credit managers;
j) the system for measuring counterparty credit risk captures
daily and intra-day commitments. Supervised institutions
measure current exposures gross and net of collateral.
Supervised institutions calculate and monitor their peak
exposures or their potential future exposures, at the
Selected French Banking and Financial Regulations – 2013
h) the accuracy and completeness of counterparty credit risk
data;
i) the procedures for verifying the consistency, timeliness,
and reliability of data sources used to run models, including
the independence of data sources;
j) the accuracy and appropriateness of volatility and
correlation assumptions;
k) the accuracy of valuation and risk transformation
calculations;
l) the verification of the model’s accuracy through frequent
back-testing.
199
Subsection 2
Use test
Subsection 3
Stress testing
Article 285
Supervised institutions shall demonstrate that they use their
model for internal purposes, as set forth in the following
provisions:
Article 286
Supervised institutions shall have appropriate stress testing
procedures which they use to assess the adequacy of internal
capital for counterparty credit risk. The output of these stress
tests shall be compared with the measure of expected
positive exposure as part of the process of capital adequacy
assessment set out in Article 17b of Regulation 97-02. Stress
testing shall permit supervised institutions to identify events
or changes in economic conditions that could have
unfavourable effects on their credit exposures, and to assess
their ability to withstand such changes.
a) the distribution of exposures generated by the model and
used to calculate effective expected positive exposure shall
be closely integrated into the day-to-day counterparty credit
risk management process. The model’s output shall be an
integral part of the credit approval and counterparty credit
risk management, and is taken fully into account in internal
capital allocation and internal controls;
b) supervised institutions shall have a sufficient track record
in the use of internal models. They shall demonstrate that,
for at least one year prior to approval by the Autorité de
contrôle prudentiel, they have used an internal model, which
meets, in broad terms, the minimum requirements set out in
this Section, for calculating the distributions of exposures;
c) the model used to generate the distributions of exposures
shall be an integral part of a counterparty credit risk
management framework that includes the identification,
measurement, management, approval, and internal reporting
of counterparty credit risk. This framework shall cover the
usage of credit lines (aggregating counterparty credit risk
exposures with other credit exposures) and internal capital
allocation. In addition to expected positive exposure,
supervised institutions shall measure and manage current
exposures. Where appropriate, supervised institutions shall
measure current exposure gross and net of collateral.
The use test shall be satisfied when the supervised
institutions use other measures of counterparty credit risk,
such as peak exposure or potential future exposure, based on
the distribution of exposures generated by the model used to
compute expected positive exposure;
d) supervised institutions shall have systems for estimating
expected exposure daily, if necessary, unless they
demonstrate to the Autorité de contrôle prudentiel that their
exposures to counterparty credit risk warrant less frequent
calculation. Expected exposure amounts at future dates shall
be calculated in a manner that adequately reflects the time
structure of future cash flows and the maturity of contracts,
and that is consistent with the materiality and the nature of
the transactions;
e) exposures shall be measured, monitored, and controlled
over the life of all contracts in the netting set, and not just to
the one-year horizon. Supervised institutions shall put in
place procedures permitting them to identify and control the
counterparty credit risk when the exposure increases beyond
the one-year horizon. The forecast increase in exposure
beyond one year shall be taken into account in the internal
capital model.
Supervised institutions shall stress test their counterparty
credit risk exposures, including joint stressing of market and
credit risk factors. Stress tests shall consider concentration
risk to a single counterparty or groups of counterparties,
correlation between market risk and credit risk, and the risk
that liquidating the counterparty’s positions could move the
market. Stress tests shall also consider the impact of such
market movements on the supervised institution’s own
positions, and integrate the results of that analysis in its
assessment of counterparty credit risk
Subsection 4
Wrong-way risk
Article 287
Supervised institutions shall give due consideration to
exposures that give rise to a significant degree of general
wrong-way risk.
Supervised institutions shall put in place procedures to
identify, monitor, and control cases of specific wrong-way
risk over the entire life of the transaction.
Subsection 5
Integrity of the modelling process
Article 288
The modelling
requirements:
process
shall
satisfy
the
following
a) internal models shall reflect transaction terms and
specifications in a timely, complete, and conservative
fashion. These terms and specifications shall include at least
minimum contractual notional amounts, maturity, reference
assets, margining agreements, and netting agreements. The
terms and specifications shall be maintained in a database
that is subject to periodic audit;
b) supervised institutions shall obtain a legal opinion
verifying the legal enforceability of novation agreements
and netting agreements. The agreements should be entered
into the database by an independent unit;
c) the entry of terms and specifications into the model shall
be subject to periodic internal audit;
d) supervised institutions shall put in place formal
procedures for reconciliation between the model and source
200
Selected French Banking and Financial Regulations – 2013
data systems to verify that the terms and specifications are
reflected correctly, or at least conservatively, and on an
ongoing basis, in the calculation of expected positive
exposure;
e) the model shall use current market data to compute
current exposures. When historical data are used to estimate
volatility and correlations, at least three years of historical
data shall be used. Historical data shall be updated quarterly,
or more frequently if market conditions warrant. The data
shall cover a full range of economic conditions over a
complete business cycle;
f) a unit independent from operating units shall validate the
price set by the operating units. Data shall be acquired
independently of the operating units, fed into the model in a
timely and comprehensive fashion, and maintained in a
database that is subject to periodic internal audit;
g) supervised institutions shall have a well-established
process for verifying the integrity of data, which permits
them to correct identified errors and anomalies;
h) if the model relies on proxy market data, particularly where
three years of historical data are not be available for new
products, internal policies shall identify suitable proxies.
Supervised institutions shall demonstrate empirically that the
proxies provide a conservative representation of the underlying
risk under adverse market conditions;
i) if the model considers the effect of collateral on the market
value of the netting set, supervised institutions shall have
appropriate historical data to model the volatility of the
collateral.
Article 289
The model shall be subject to internal validation. This
process shall be clearly articulated in the supervised
institutions’ policies and procedures, and shall include:
a) a description of the testing needed to ensure the integrity
of the model and to identify the conditions under which
assumptions are violated and which could result in an
understatement of expected positive exposure;
b) a review of the comprehensiveness of the model.
Article 290
Supervised institutions shall have internal controls and
procedures that permit them:
a) to adjust their estimates of expected positive exposure
when risks become significant. These controls and
procedures shall include:
h)
identifying and managing exposures to specific wrongway risk;
i)
ii) for exposures with a rising risk profile after one year,
making regular comparisons between estimates of expected
positive exposure over one year and expected positive
exposure over the entire life of the exposure;
iii) for exposures with a remaining maturity of less than one
year, making regular comparisons between the replacement
cost and the realised exposure profile, or with stored data
that allow such a comparison;
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b) to verify, prior to including a transaction in a netting set,
that the transaction is covered by a legally enforceable
netting contract that is legally enforceable and that meets the
requirements set out in Section 3 of Chapter I;
c) to verify, prior to recognising the effect of collateral to
reduce their exposures to counterparty credit risk, that the
collateral meets the legal certainty standards set out in
Title IV.
Subsection 6
Use of internal models
Article 291
In order to be approved by the Autorité de contrôle
prudentiel, models used by supervised institutions to
calculate expected positive exposure shall also satisfy the
following requirements:
a) they comply with the qualitative criteria set out in Chapter
VII of Title VII;
b) interest rates, foreign exchange rates, equity prices,
commodities, and other market risk factors are forecast over
long time horizons for measuring counterparty credit risk
exposure;
c) the forecasting model for market risk factors performs
well over a long time horizon;
d) the pricing models used to calculate counterparty credit
risk exposure for a given scenario of future shocks to market
risk factors is validated by appropriate tests. Pricing models
for options take account of the nonlinearity of option value
with respect to market risk factors;
e) the model captures transaction-specific information in
order to aggregate exposures at the level of the netting set.
Supervised institutions shall ensure that transactions are
assigned to the appropriate netting set within the model;
f) the model for calculating expected positive exposure
includes transaction-specific information to capture the
effects of margining. The model takes into account the
current amount of margin as well as the margin that may be
passed between counterparties in the future, the nature of
margin agreements (unilateral or bilateral), the frequency of
margin calls, the margin period of risk, the minimum
threshold of unmargined exposure that the supervised
institution is willing to accept, and the minimum transfer
amount;
g) the model may either reflect changes directly in the value
of collateral posted, or apply the provisions set out in Title
IV;
h) supervised institutions shall put in place back-testing
based on static, historical data for representative
counterparty portfolios. At regular intervals, supervised
institutions shall conduct such back-tests on a number of
representative
counterparty
portfolios
(actual
or
hypothetical). These representative portfolios shall be
chosen based on their sensitivity to the correlations and
material risk factors to which the supervised institutions is
exposed.
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TITLE VII
PRUDENTIAL SUPERVISION OF MARKET
RISK
CHAPTER I
GENERAL PROVISIONS
Article 292-1
Own funds, as defined in Article 5b of Regulation 90-02,
must cover all of the requirements for:
a) market risks in the trading book as defined in Section 1 of
Chapter II. These risks, which correspond to the position
risk on debt or equity securities defined in Article 294,
include interest-rate risk as defined in Section 2 of
Chapter III, equity-position risk as defined in Section 3 of
Chapter III, and option risk attached to them as set out in
Chapter VIII;
b) foreign-exchange risk as defined in Section 1 of Chapter
IV, commodity risk as defined in Section 2 of Chapter IV,
and the option risks attached to them as set out in
Chapter VIII;
c) any additional requirement resulting from exceeding
large-exposure limits, as set out in Chapter VI.
Article 292-2
Both the settlement risk, whether related to the trading
portfolio or to the banking book, and the counterparty risk
described in Chapter V are covered by core capital and
supplementary capital.
Article 292-3
The Autorité de contrôle prudentiel may authorise
supervised institutions to use their own internal models to
calculate capital requirements for market risk in the trading
book, foreign-exchange risk, and options risk attached to
them, if those models comply adequately with the conditions
set out in Chapter VII of Title VII of this Decree.
Article 293-1
Supervised institutions, with the exception of investment
firms and financial holding companies whose principal
holdings consist of one or more investment firms, may
calculate the capital requirements for their trading books as
specified in Titles II and III, provided they meet the
following conditions:
- in the past two half-years, the average book value of the
trading book has not exceeded 5% of total assets plus offbalance-sheet items. It must at no time have exceeded 6% of
that sum;
- the average total trading book positions has not exceeded
15 million euros in the past two half-years. It must at no
time have exceeded 20 million euros.
If either of these limits is exceeded, the supervised
institution shall be subject to the provisions of this Title.
The above treatment shall apply to consolidated
calculations. If the group to which a supervised institution
belongs does not meet the conditions for this treatment, each
supervised institution in the group that meets the conditions
individually, and that has an investment department whose
management is not integrated into that of the parent
company, shall be eligible for the treatment.
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Article 293-2
Foreign-exchange risk and the gold risk must be covered by
own funds if the net overall position in foreign currencies
plus the gold position exceeds 2% of total own funds.
Article 294
For purposes of this Title, the position risk on a debt or
equity security, or a derivative thereof, shall be divided into
two components:
– the general risk, which is the risk of a price change
caused by an interest-rate fluctuation in the case of a debt
security or a debt derivative, or by a movement in the equity
market as a whole in the case of an equity or an equity
derivative;
– the specific risk, which is the risk of a price change
due to factors related to the issuer of the security or the
underlying instrument. Securities issued by the supervised
institution itself or by regional or central institutions
affiliated with the same central organisation as defined in
Article L. 511-31 of the Monetary and Financial Code shall
be disregarded.
Article 295
he trading-book positions of consolidated institutions
authorised in a Member State may be offset insofar as own
funds are suitably distributed within the group and the group
has a legal structure that guarantees reciprocal financial
assistance. Foreign-exchange positions may be offset under
the same conditions.
The trading-book positions of institutions authorised in a
Member State may also be offset against those of
consolidated institutions having their registered office in a
third country, provided the following three conditions are all
met:
- the institutions in the third country meet the definition of
supervised institutions;
- those institutions are subject to rules at least as strict as the
provisions in force in France;
- there are no obstacles in law or in fact that are liable
significantly to affect the transfer of funds within the group
to which the supervised institution belongs.
Foreign exchange and commodity positions may be offset
under the same conditions.
Article 297
Supervised institutions must immediately inform the
General Secretariat of the Autorité de contrôle prudentiel of
all defaults by their counterparties in repurchase and reverse
repurchase agreements or security lending or borrowing
transactions.
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CHAPTER II
DEFINITION AND VALUATION OF THE TRADING
BOOK
Subsection 2
Internal hedges
Section 1
Definition of the trading book
Article 300
Internal hedges may be included in the trading book under
the following conditions.
An internal hedge is defined as a position that materially or
completely offsets the risk associated with a banking book
position or set of positions.
Positions arising from internal hedges are eligible for trading
book treatment, provided that they are held with trading
intent and that the general criteria on trading intent and
prudent valuation set out in the preceding Article and in
Section 3 are met. In particular:
a) internal hedges shall not be intended primarily to reduce
capital requirements;
b) internal hedges shall be properly documented and subject
to internal approval and audit procedures;
c) the internal transaction shall be dealt with at market
conditions;
d) the bulk of the market risk that is generated by the
internal hedge shall be dynamically managed in the trading
book within the authorised limits;
e) internal transactions shall be carefully monitored using
appropriate procedures.
The treatment referred to above applies regardless of the
capital requirements applicable to the banking book leg of
the internal hedge.
When an institution sets up an internal hedge using a credit
derivative booked in its trading book to hedge a banking
book exposure, the banking book exposure is not deemed to
be hedged for the purposes of calculating capital
requirements unless the institution purchases from an
eligible third-party protection provider a credit derivative
meeting the requirements set out in Article 192-3 to hedge
the banking book exposure. In that case, and without
prejudice to the provisions of Article 338-4, neither the
internal nor the external credit derivative hedge shall be
included in the trading book for the purposes of calculating
capital requirements.
Article 298
For purposes of calculating market risk, the trading book
consists of all positions in financial instruments and
commodities held with trading intent or in order to hedge
other elements of the trading book. These instruments must
be free of any restrictive clauses on their tradability or
hedging.
Subsection 1
Trading intent
Article 299
Positions held with trading intent are those held intentionally
for short-term resale and/or with the intention of benefiting
from actual or expected short-term price differences between
buying and selling prices, or from other price or interest rate
variations. They include proprietary positions and positions
arising from client servicing and market making.
Positions held in order to hedge other elements of the
trading book are those that have been taken in order to
offset, in whole or in part, the risk factors associated with
those elements.
Trading intent shall be evidenced based on the policies and
procedures set by the institution to manage its positions or
portfolios in accordance under the following conditions:
a) the positions, the associated instruments, or the portfolios
must be covered by a clearly documented trading policy
approved by the executive body, specifying the expected
holding period;
b) the supervised institutions must have clearly defined
procedures for the active management of positions taken on
a trading desk, which include the following:
i) position limits must be set and monitored for
appropriateness;
ii) position-taking by dealers must be subject to
predetermined limits according to defined policies;
iii) positions must be reported to the executive body as an
integral part of the supervised institution’s risk management
process;
iv) positions must be actively monitored with reference to
market information sources;
v) an assessment must be made of the marketability or
hedge-ability of positions, and of the quality and availability
of market inputs to the valuation process, the level of market
activity, and the size of positions traded in the market;
c) supervised institutions must have clearly defined
procedures that permit them to monitor positions against
their trading policies, including monitoring rolled-over
transactions and short positions in the trading book.
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Subsection 3
Other specific treatments
Article 301-1
Subject to the approval of the Autorité de contrôle
prudentiel, the elements listed in point I of Article 6 of
Regulation 90-02 may be included in the trading book and
treated as equity or debt securities depending on their nature
if the supervised institution demonstrates that it is an active
market maker in the positions concerned. In that case, the
supervised institution shall have internal systems and
controls for trading the constituent elements of own funds
mentioned above.
Article 301-2
Repurchase transactions and similar trading transactions
may be included in the trading book for the purpose of
calculating capital requirements regardless of their
accounting treatment, provided that all of these transactions
are included under the same conditions.
For these purposes, ‘repurchase transactions and similar
trading transactions’ means transactions that satisfy the
requirements of Articles 298 and 299 and both legs of which
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are in the form of cash or securities eligible for inclusion in
the trading book.
Regardless of whether they classified are in the non-trading
or trading book, all of these transactions and similar
transactions are subject to the treatment of counterparty
credit risk that applies to elements of the banking book.
Subsection 4
Composition of the trading book for supervised
institutions not subject to IFRS standards
Article 302
The trading book includes:
a) the trading securities defined in Article 2 of Regulation
90-0l and all forward transactions on such securities;
b) derivative instruments whose purpose is either:
i) to maintain isolated open positions in order to benefit
from price variations;
ii) to enable specialised management of trading books
including derivatives and securities, or of equivalent
financial transactions, provided all three of the following
conditions are met:
- the supervised institution is able to sustain a constant
presence on the derivatives market;
- the trading book containing derivatives has a significant
volume of transactions;
- the book is managed globally, for example on a sensitivity
basis, at all times;
iii) to implement a pre-defined strategy of hedging against
the market risks affecting items included in the trading book;
c) repurchase transactions, securities or commodities lending
or borrowing transactions, other capital market-driven
transactions, and forward foreign-exchange transactions,
when they are carried out in order to benefit from a
favourable variation in interest rates or when they hedge
another item in the trading book;
d) other transactions with credit institutions or investment
firms when they finance one or more items in the trading
book.
Supervised institutions wishing to include other items in
their trading book must first inform the General Secretariat
of the Autorité de contrôle prudentiel, which may prohibit
them from doing so.
The Autorité de contrôle prudentiel may require the
exclusion from the trading book of items whose
marketability is not or is no longer evident, for example in
the absence of liquidity or actual trading, particularly if the
holding period for these instruments is longer than
corresponds to short-term trading intent.
In addition, the Autorité de contrôle prudentiel may prohibit
the inclusion in the trading book of items for which the
supervised institution lacks the resources and the experience
required to manage them actively or lacks adequate control
systems.
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Subsection 5
Composition of the trading book for supervised
institutions subject to IFRS standards
Article 303
The provisions of the preceding Article apply to supervised
institutions that are subject to IFRS standards, with the
exception of the elements referred to in paragraphs (a) and
(b), which are replaced by the following paragraph (a):
a) Financial instruments booked at fair value within the
meaning of Regulation (EC) 1606/2002, i.e., those held with
trading intent excluding those designated at fair value
through profit and loss.
Section 2
Valuation of trading book items
Article 304-1
This section applies to elements of the trading portfolio and
to assets on the banking book recognised at fair value.
All trading book positions and banking book assets
recognised at fair value shall be subject to prudent valuation
rules as specified in this Section.
Article 304-2
Supervised institutions shall ensure that the value applied to
each of its trading book positions correctly reflects its
market value. This valuation shall appropriately reflect the
dynamic nature of trading book positions and the demands
of prudential soundness inherent in the trading book.
Trading book positions as determined in Section 1 of
Chapter III, shall be re-valued daily.
When a market price is not available, or, on an exceptions
basis for certain convertible products, when the market price
does not reflect the intrinsic value of the position, the
supervised institution should use an alternative method of
valuation provided that the method is sufficiently prudent
and has been communicated in advance to the Autorité de
contrôle prudentiel, which may prohibit its use.
Positions shall be booked from the trading date of the
transactions.
Article 305
Supervised institutions shall establish systems and controls
to provide prudent and reliable valuation estimates.
These systems and controls shall include at least the
following elements:
a) documented procedures for the process of valuation.
These procedures shall include clear definitions of the
responsibilities of the various units involved in valuing
positions, checking market information sources and
reviewing their relevance, as well as guidelines for the use
of non-observable data corresponding to assumptions made
by the supervised institution concerning the elements on
which market participants rely to establish the prices of
positions, the frequency of independent valuations, the
timing of closing prices, procedures for adjusting valuations,
and month-end and ad-hoc verification procedures;
Selected French Banking and Financial Regulations – 2013
b) reporting lines for the department in charge of the
valuation process that are clear and independent of operating
units. The reporting line shall ultimately be to the executive
body.
Article 306
Supervised institutions must value their positions at market
prices at every possible occasion.
‘Marking to market’ means, at least, daily valuation of
trading book positions at readily available closing prices that
are sourced independently. Examples include exchange
prices, screen prices, or quotes from several reputable
independent brokers.
When marking to market, supervised institutions shall use
the more prudent side of bid/offer unless they are significant
market makers in the particular type of financial instrument
or commodity in question and can close out their positions at
mid market.
Where marking to market is not possible, supervised
institutions shall prudently mark their positions or their
portfolios to model before applying capital requirements for
the trading book.
‘Marking to model’ means any valuation that has to be
benchmarked, extrapolated, or otherwise calculated from a
market input.
The following requirements must be complied with when
marking to model:
a) the executive body must be aware of the elements in the
trading book or of other elements recognised at market value
that are marked to model and shall understand the degree of
uncertainty created in the reporting of the risk and
performance of this business;
b) the market inputs used shall, to the extent possible, be in
line with market prices;
c) the relevance of the market inputs for the position being
valued and the parameters of the model shall be reviewed
periodically;
d) where available, valuation methodologies that represent
currently accepted market practice in the markets for
financial instruments or commodities shall be used;
e) Where the model is developed by the institution itself, it
shall be based on appropriate assumptions, which have been
assessed and challenged in advance by suitably qualified
parties independent of the development process. The model
shall be developed or approved by units independent of
operational units. It shall be independently tested, including
validation of the mathematics, assumptions and software
implementation.
f) there shall be formal change-control procedures in place
and a secure copy of the model shall be held and
periodically used to check valuations;
g) the units responsible for risk management shall be aware
of the weaknesses of the models used and how best to reflect
them in the valuation output;
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h) the model shall be subject to periodic review to determine
the accuracy of its performance, in particular to ensure the
continued appropriateness of assumptions, to analyse profit
and loss in relation to risk factors, and to compare actual
close-out values to model outputs.
In addition to daily marking to market or marking to model,
independent price verification shall be performed. This shall
include a periodic verification of the accuracy and
independence of the market prices and data used by the
model. When daily marking to market is performed by
dealers, the verification of market prices and model inputs
shall be performed by a unit independent of the dealing
room, at least monthly, or more frequently depending on the
nature of the market or the trading activity. Where
independent pricing sources are not available or pricing
sources are subjective, supervised institutions shall take
prudent measures such as valuation adjustments.
Article 307-1
Supervised institutions shall establish procedures permitting
them, as appropriate, to make valuation adjustments to their
positions.
Article 307-2
The possibility of making adjustments should be considered
for the following elements: non-accrued credit spreads,
close-out costs, operational risk, early termination, investing
and funding costs, future administrative costs, and, where
relevant, model risk.
.
Article 307-3
Less liquid positions may result from market conditions, or
specific conditions to institutions when they hold
concentrated or long-term positions.
Supervised institutions must establish and maintain
procedures for calculating the adjustments to the valuation
of less liquid positions. These adjustments, where
applicable, may be in addition to any changes to the value of
the position required for the financial reporting purposes and
are designed to reflect the illiquidity of the positions. As part
of these procedures, institutions must examine several
factors to determine whether they need to adjust the value of
less liquid positions:
― the amount of time would take to hedge out the positions
or risks within the positions;
― the average volatility of bid/offer spreads for financial
instruments or hedges;
― the availability of market quotes;
― the volatility and average of trading volumes, including
volumes traded during periods of market stress for financial
instruments and their hedges;
― the level of market concentration;
― the aging of positions;
― the extent to which the valuation of the position relies on
marking-to-model and permits an assessment of the model
risk;
― the impact of other model risks.
If they use third-party valuations or mark-to-model,
supervised institutions shall determine whether they need to
205
adjust the valuation of their positions. They must also
examine the need to make adjustments to the valuation of
less liquid positions and review their appropriateness on an
on-going basis.
In the case of complex products, including, but not limited
to, exposures to securitisation and nth-to-default credit
derivatives, supervised institutions must explicitly assess the
need for valuation adjustments to reflect the model risk
associated with using a possibly incorrect valuation
methodology and the risk associated with using
unobservable (and possibly incorrect) calibration parameters
in the valuation model.
Section 3
Management of the trading book
Article 308-1
Supervised institutions shall have clearly defined procedures
for determining which positions to include in the trading
book for the purposes of calculating their capital
requirements. These procedures shall be adapted to the
institutions’ risk management methods. Compliance with
these procedures shall be subject to periodic internal audit.
Article 308-2
Supervised institutions shall have clearly defined procedures
for management of the trading book. These procedures shall
identify:
a) the activities the institution considers as trading and as
constituting part of the trading book for capital requirement
purposes;
b) the extent to which a position can be marked-to-market
daily by reference to an active liquid market;
c) for positions that are marked-to-model, the extent to
which the institution can:
i) identify all material risks associated with a given
position;
ii) hedge all material risks of the position with
instruments for which there is an active liquid two-way
market as defined in Article 347-2;
iii) derive reliable estimates for the key parameters and
assumptions used in the model;
d) the extent to which the supervised institution can generate
valuations that can be validated externally;
e) the extent to which legal restrictions or other operational
requirements could impede the institution’s ability to
liquidate or hedge its exposure in the short term;
f) the extent to which the supervised institution can actively
manage its exposure within its trading operation;
g) the extent to which the supervised institution may transfer
risk or positions between the banking and trading books and
the criteria for such transfers.
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CHAPTER III
CAPITAL REQUIREMENTS FOR MARKET RISK IN
THE TRADING BOOK
Section 1
Calculating the net position
Subsection 1
General provisions
Article 309
For the purposes of Sections 2 and 3 of this Chapter and, if
relevant, Section 1 of Chapter VIII, the supervised
institution shall calculate its net position as set out in this
Section. The net position shall be the long balance (or net
long position) or short balance (or net short position) of the
transactions recorded by the institution in each of the
securities or instruments classified in the trading book as
defined in this Title.
In calculating its net positions, a supervised institution may
fully offset its long and short positions in:
- equities from the same issuer;
- debt securities from the same issuer with the same maturity
that are directly fungible under the terms of the bond
indenture.
Net positions shall be converted daily into the reporting
currency used for the returns, at the spot exchange rate.
Subsection 2
Positions in the form of investments in units in collective
investment undertakings
Article 310-1
The capital requirements for positions in the form of
investments in units of collective investment undertakings
that meet the conditions set out in Chapter II shall be
calculated in accordance with the following provisions.
Article 310-2
Without prejudice to the provisions of the following
Articles, these positions shall be subject to a capital
requirement for position risk (specific and general) of 32%.
Without prejudice to the provisions of the last indent of
subparagraph (ii) of paragraph (a) of Article 331 and
paragraph (d) of Article 346, when the specific treatment for
gold set out in those provisions is applied, these positions
shall be subject to a capital requirement for position risk
(specific and general) and foreign-exchange risk of no more
than 40%.
Unless otherwise noted, no netting is permitted between the
underlying investments of a collective investment
undertaking and other positions held by the supervised
institution.
Article 311
In order to apply the specific treatments set out in Articles
312-1 to 312-4 to positions in the form of investments in
companies supervised or incorporated in a Member State,
the following conditions must be satisfied:
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a) the collective investment undertaking’s prospectus or an
equivalent document (such as a management mandate) must
include:
i) the categories of assets in which the collective investment
undertaking is authorised to invest;
ii) any relative limits applied to investments and the
methodologies to calculate them;
iii) if the collective investment undertaking is authorised to
borrow, the maximum level of debt authorised;
iv) if the collective investment undertaking is authorised to
invest in OTC financial derivatives or repurchase (or
similar) transactions, the measures put in place to limit
counterparty risk from these transactions;
b) the business of the collective investment undertaking
must be reported in semi-annual and annual reports to enable
an assessment to be made of the assets and liabilities,
income, and operations over the reporting period;
c) the units of the collective investment undertaking must be
redeemable in cash, out of the undertaking’s assets, on a
daily basis at the request of the unit holder;
d) investments in the units of the collective investment
undertaking must be segregated from the assets of its
manager;
d) the investing institution must conduct an adequate risk
assessment of the collective investment undertaking.
The specific treatments set out in Articles 312-1 to 312-4
shall also apply to positions in the form of investments in
companies supervised or incorporated in a third country, if
the conditions set out in paragraphs (a) to (e) above are
satisfied.
When a competent authority in a Member State recognises a
collective investment undertaking in a third country as
eligible for the application of the above provisions, that
investment undertaking shall be treated in accordance with
Articles 312-1 to 312-4.
Article 312-1
If an institution is aware of the underlying exposures of the
collective investment undertaking on a daily basis, it may
look through to those underlying exposures in order to
calculate the capital requirements for position risk (general
and specific) for those positions in accordance with the
provisions of this Chapter or, if applicable, in accordance
with the provisions of Chapter VII. Under this approach,
positions in the form of investments in units in collective
investment undertakings shall be treated as positions in the
underlying investments. Netting is permitted between
positions in the form of investments in units in the collective
investment undertaking and other positions held by the
institution, as long as the institution holds a sufficient
quantity of units to permit an exchange for the underlying
investments.
Chapter VII, for assumed positions representing the
positions they would have to hold to replicate the
composition and performance of an index or basket of
equities or debt securities referred to in paragraph (a) below,
subject to the following conditions:
a) the collective investment undertaking’s mandate is to
replicate the composition and performance of an externally
generated index or basket of equities or debt securities;
b) a correlation of at least 0.9 between daily price
movements of the units of the collective investment
undertaking and the index or basket of equities or debt
securities that it tracks can be clearly established over a
minimum period of six months. ‘Correlation’ in this context
means the correlation coefficient between daily returns on
the collective investment undertaking on a traded market
and the index or basket of equities or debt securities that it
tracks.
Article 312-3
If the institution is not aware of the underlying investments
of the collective investment undertaking on a daily basis, the
institution may calculate the capital requirements for
position risk (general and specific) in accordance with the
methods set out in this Chapter, subject to the following
conditions:
a) it shall be assumed that the collective investment
undertaking first invests to the maximum extent allowed
under its mandate in the asset class attracting the highest
capital requirement for position risk (general and specific),
and then continues making investments in descending order
until the maximum total investment limit is reached. The
positions in the form of investments in units of collective
investment undertaking shall be treated as if these assumed
positions were held directly;
b) The institution shall take account of the maximum
indirect exposure that it could achieve by taking leveraged
positions in the form of investments in units of the collective
investment undertaking, by proportionally increasing its
position up to the maximum exposure to the underlying
investments, as authorised by the investment mandate;
c) the capital requirement for position risk (general and
specific), calculated in accordance with the preceding
paragraphs, shall be capped at the level specified in Article
310-2.
Article 312-4
For the purposes of the specific treatments set out in Articles
312-1 to 312-4, supervised institutions may rely on a third
party to calculate and report capital requirements for
position risk (general and specific) for their positions in the
form of investments in units of collective investment
undertakings. Supervised institutions shall verify the
correctness of that calculation and that report.
Article 312-2
Supervised institutions may calculate the capital
requirements for position risk (general and specific), in
accordance with the methods set out in this Chapter or, if
applicable, in accordance with the methods set out in
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207
Subsection 3
Positions in derivatives
Article 313-1
Forward positions and option positions shall be converted
into equivalent positions in the underlying instrument or
instruments, subject to compliance with the provisions set
forth below.
Article 313-2
Interest-rate futures, forward rate agreements, and forward
commitments to buy or sell debt securities shall be treated as
combinations of long and short positions:
- a long position in financial futures based on interest rates
or interest-rate futures shall be treated as a combination of a
borrowing maturing on the delivery date of the financial
future and a long position in the instrument underlying the
contract concerned. Short positions shall be treated
symmetrically;
- a forward commitment to buy a debt security shall be
treated as a combination of a borrowing maturing on the
delivery date and a long position in the security. Forward
commitments to sell shall be treated symmetrically.
Article 313-3
For calculation of interest-rate risk as defined in Section 2,
swaps shall be treated on the same basis as instruments
carried on the balance sheet. An interest-rate swap under
which an institution receives a floating rate and pays a fixed
rate shall be treated as a combination of a long position in a
floating-rate instrument of maturity equivalent to the period
until the next interest-rate fixing and a short position in a
fixed-rate instrument with the same maturity as the swap
itself.
When the floating rate causes more complex behaviour, the
institution shall break down the overall position into as
many elementary positions as necessary, or use a sensitivity
algorithm.
Article 313-4
For certain methods for treating options specified in Chapter
VIII, options and warrants on interest rates, debt securities,
equities, stock indices, financial futures, swaps, and foreigncurrencies shall be treated as positions of equal value to the
amount of the instrument underlying the option, multiplied
by the delta. The positions so calculated may be netted
against any offsetting positions in identical underlying
securities or derivatives as specified in Sections 2 and 3 of
this Chapter. The delta used shall be that of the exchange
involved or, where that is not available or for options traded
over the counter, the delta calculated by the institution itself,
provided that the institution uses a standard Cox, Ross,
Rubinstein or Black and Scholes type algorithm or another
type of comparable and equivalent algorithm based on
sufficiently prudent assumptions. In the latter case, the
General Secretariat of the Autorité de contrôle prudentiel
shall receive prior notice of the algorithm chosen and may
prohibit its use.
Article 313-5
Stock-index futures and the delta equivalents of options in
stock-index futures may be broken down into as many
individual positions as securities constituting the index.
These positions may then be offset against the positions
208
taken in the underlying assets as specified in Sections 2 and
3 of this Chapter.
Article 313-6
Institutions may treat as fully offsetting any positions in
interest-rate derivatives (forward rate agreements, interestrate swaps, floors and ceilings, swap options) that meet at
least the following conditions:
a) the positions are offset up to the same nominal amount
and are denominated in the same currency and relate to the
same underlying;
b) the reference rates for floating or adjustable rate positions
are identical and the differential between coupons for fixedrate positions is at most equal to 20 basis points;
c) the next interest-rate fixing date or, in the case of fixedcoupon positions, the residual maturity meets the following
conditions:
- less than one month: same day;
- between one month and one year: within seven days;
- over one year: within thirty days.
Article 313-7
The positions for which capital requirements are determined
according to the risk assessment calculated by a clearing and
guarantee house under the conditions set out in Section 2 of
Chapter VIII shall be dissociated from positions determined
for purposes of the calculations set out in Section 2 of
Chapter III, Chapter V, and Section 1 of Chapter VIII.
Subsection 4
Positions in underwriting commitments
Article 314
- Positions linked to underwriting commitments shall be
taken into account only from the day on which the
institution makes an irrevocable commitment to accept a
known quantity of securities at an agreed price (working day
zero).
Two types of reduction shall then be applied to calculate the
amount of the positions to be included in the corresponding
positions in equities or debt securities:
a) positions that are subscribed or sub-underwritten by third
parties on the basis of formal agreements shall be deducted
from the underwriting positions taken by the institutions,
b) for the calculation of specific risk and also, in the case of
equities, for the calculation of general risk, the net positions
so calculated shall be included only for their amount
multiplied by the following coefficient:
- working day zero: 0%;
- working day 1: 10%;
- working days 2 and 3: 25%;
- working day 4: 50%;
- working day 5: 75%;
- after working day 5: 100%.
Debt securities, for the calculation of general risk, are
included for their full value from working day zero.
From the time of the initial commitment, the supervised
institution must ensure that it takes risks only to the extent
compatible with its level of own funds.
Selected French Banking and Financial Regulations – 2013
Subsection 5
Positions in credit derivatives
Article 315
Unless otherwise specified, supervised institutions that are
sellers of protection shall use the notional amount of credit
derivatives to calculate the capital requirements for market
risk associated with their positions. The supervised
institution may, however, choose to replace the notional
amount by the notional amount adjusted for the market value
of the credit derivative.
For credit derivatives other than total return swaps,
supervised institutions shall use the maturity of the contract
to calculate specific risk.
Positions shall be determined as follows, according to the
type of instrument:
i) A total return swap shall be treated as:
- for general risk, a long position in the reference asset
and a short position in a government bond with a
maturity corresponding to the next interest-rate fixing
and that is assigned a 0% risk weight under the
Standardised Approach for credit risk; and
- for specific risk, a long position in the reference asset;
ii) a credit default swap does not create any position for
general risk. For the purposes of specific risk, it shall be
treated as:
- a synthetic long position in an obligation of the
reference entity if the derivative instrument is not rated
externally and does not meet the eligibility conditions
set out in Section 2;
- a long position in the derivative instrument if it is rated
externally and does meet the eligibility conditions set
out in Section 2.
If premium or interest payments are due under the
contract, these cash flows shall be treated as notional
positions in government bonds.
iii) A single-name credit-linked note shall be treated as:
- for general risk, a long position in the note itself,
considered as an interest-rate instrument;
- for specific risk, a synthetic long position in an
obligation of the reference entity; and
- a long position for specific risk in the issuer of the
credit-linked note.
If the credit-linked note has an external rating and meets
the eligibility conditions set out in Section 2, supervised
institutions shall record a single long position in the
specific risk of the instrument.
iv) A multiple-name credit-linked note
proportional protection shall be treated as:
v) a first-asset-to-default credit derivative shall be treated
as creating positions for the notional amount in an
obligation of each reference entity. If the amount of the
maximum credit event payment is lower than the capital
requirement calculated under this paragraph, the
maximum payment amount may be taken as the capital
requirement for specific risk.
A second-asset-to-default credit derivative shall be treated
as creating positions for the notional amount in an
obligation of each reference entity except the entity that
has the lowest capital requirement. If the maximum credit
event payment amount is lower than the capital
requirement calculated under this paragraph, the
maximum payment amount may be taken as the capital
requirement for specific risk.
If an nth-to-default credit derivative is subject to an
external credit assessment, supervised institutions may
calculate a single capital charge that reflects the external
credit assessment of the instrument and apply the
respective securitisation position weights, as applicable.
Article 316
Supervised institutions that are buyers of protection shall
calculate their positions as the mirror-image of the treatment
applied to their positions as sellers of protection, except for
credit-linked notes, which do not give rise to any short
position in the issuer.
If at a given date there is a call option associated with a stepup, that date shall be treated as the maturity of the
protection.
In the case of credit derivatives first-to-default and nth-todefault credit derivatives, the following treatment is applied
instead of the principle of perfectly matched positions:
First-to-default credit derivatives:
When a credit institution obtains a credit protection for a
certain number of reference entities underlying a credit
derivative on condition that the first credit event triggers
payment and terminates the contract, this institution can
offset the specific risk for the reference entity to which the
lowest capital requirement applies with specific risk among
the underlying reference entities, according to the table set
out in Article 321.
providing
- a long position in the specific risk of the issuer of the
note; and
- a position in the specific risk of each reference entity.
Selected French Banking and Financial Regulations – 2013
The total notional amount of the contract shall be allocated
across all of the positions according to the proportion of
the total notional amount that each position on a reference
entity represents. If there is more than one obligation of
the same reference entity, supervised institutions shall use
the obligation with the highest risk weighting to determine
the specific risk.
If a multiple-name credit-linked note has an external rating
and meets the eligibility conditions set out in Section 2,
supervised institutions shall record a single long position
in the specific risk of the instrument;
Nth-to-default credit derivatives:
When the nth default among the exposures triggers the credit
protection payment, the protection buyer only offset the risk
specific risk of the protection has also been obtained for
defaults 1 to n-1 or when the n-1 credit events have already
occurred. In such cases, the methodology indicated above
209
for first-to-default credit derivatives is applied in an
appropriate manner to the nth-to-default products.
Article 317
Supervised institutions shall apply the following provisions
to the calculation of capital requirements for specific risk for
trading book positions covered by credit derivatives:
a) full allowance shall be given when the value of two legs
always move in the opposite direction and broadly to the
same extent. This will be the case in the following
situations:
underlying asset must be subject to physical delivery under
the documentation of the credit derivative contract.
In each of those situations, supervised institutions shall
apply the higher of the two specific risk capital requirements
for each leg of the transaction;
d) in all situations not falling under the preceding
paragraphs, supervised institutions shall calculate a specific
risk capital requirement for each of the two legs of their
positions.
Subsection 6
Positions in other items in the trading book
i) the two legs consist of completely identical instruments;
ii) a long cash position is hedged by a total rate of return
swap (or vice versa) and there is an exact match between the
reference asset and the underlying exposure. The maturity of
the swap may be different from that of the underlying
exposure.
In these situations, supervised institutions shall not apply
any capital requirement for specific risk to either leg of the
position;
b) An 80% offset shall be applied when the value of the two
legs always move in the opposite direction and where the
following conditions are satisfied:
i) there is an exact match in terms of the reference asset, the
maturity of both the reference asset and the credit derivative,
and the currency of the underlying exposure;
ii) the key features of the credit derivative contract do not
cause the price of the credit derivative to deviate materially
from the price of the cash position.
To the extent that the transaction transfers risk, an offset of
80% of the specific risk shall be applied to the leg of the
transaction with the higher capital charge. The specific risk
capital requirement for the other leg shall be zero;
c) partial allowance shall be given when the value of two
legs usually move in the opposite direction. This would be
the case in the following situations:
i) the position corresponds to the situations described to in
subparagraph (ii) of paragraph (a), but there is an asset
mismatch between the reference asset and the underlying
exposure. However, the positions must meet the following
requirements:
- the reference asset ranks pari passu with or is junior to the
underlying obligation;
Article 318-1
A convertible bond should be treated as a bond when the
probability of exercise is very low, and as an equity when,
because of market conditions, conversion is likely and the
institution does not incur any loss thereby. In intermediate
cases, it should be split into an interest-rate component and
an equity component using a suitable method.
Article 318-2
Positions in warrants shall be treated like equity call options.
Article 318-3
Positions in certificates of securities on deposit may be
offset against positions in the corresponding equities or
identical equities on different markets.
Article 318-4
Repurchase transactions, securities lending and borrowing,
and other capital market-driven transactions shall not affect
the institution’s net position in these securities. They may
generate an interest-rate risk when they are made for cash. In
that case they are regarded as purchases coupled with sales
at different value dates and are treated according to the
provisions of Article 313-2.
Section 2
Capital requirements for interest-rate risk
Article 319
Supervised institutions shall classify their net positions,
reported at market value, according to the currencies in
which they are denominated and shall calculate the capital
requirement for general and specific risk in each currency
separately.
- the underlying obligation and reference asset share the
same obligor and have legally enforceable cross-default or
cross-acceleration clauses;
Subsection 1
Capital requirements for specific risk
ii) the two legs consist of completely identical instruments
or the position corresponds to the situations described in
paragraph (b), but there is a currency or maturity mismatch
between the credit protection and the underlying asset.
Currency mismatches shall be included in the reporting on
foreign exchange risk as set out in Section 1 of Chapter IV;
Article 320
The following items have no capital requirement for specific
risk:
- items deducted from own funds;
- positions resulting from the decomposition of derivative
products as described in Article 313-1, provided they are not
covered by the other Articles of this Subsection;
- the items listed in paragraphs and (c) and (d) of Article
302.
iii) the position corresponds to the situations described in
paragraph (b), but there is an asset mismatch between the
cash position and the credit derivative. However, the
210
Selected French Banking and Financial Regulations – 2013
specific risk capital charges for securitisation positions in
accordance with Article 323-1.
Article 321
Supervised institutions shall assign their net positions in the
trading book in financial instruments that are not
securitisation positions, to the appropriate categories in the
following table on the basis of the internal rating or external
credit assessment of the issuer or obligor, and their residual
maturity. These net positions shall then be multiplied by the
weightings shown in the table to yield capital requirements.
Supervised institutions shall sum their weighted positions
(whether long or short) to calculate their capital requirement
for specific risk. Supervised institutions must calculate
For the purposes of this Article and Articles 321-1 and 3231, supervised institutions may cap the product of the risk
weights multiplied by the net positions at the maximum
possible loss from a default. In the case of a short position,
this cap is the variation in the valuation of the underlying
assets in the event of the sudden disappearance of the default
risk.
²Risk weight
Debt securities issued or guaranteed by central governments, issued or
guaranteed by central banks, international organisations, multilateral
development banks, or regional governments or local authorities of
Member States that would qualify for credit quality step 1 or that
would receive a 0% risk weight under the provisions of Title II
Debt securities issued or guaranteed by central governments, issued or
guaranteed by central banks, international organisations, multilateral
development banks, or regional governments or local authorities of
Member States that would qualify for credit quality step 2 or 3 under
the rules for the risk weighting of exposures under the provisions of
Title II
Debt securities issued or guaranteed by institutions that would qualify
for credit quality step 1 or 2, under the provisions of Title II
Debt securities issued or guaranteed by corporates would qualify for
credit quality step 1, 2 or 3, under the provisions of Title II.
Other qualifying items defined in Article 323
Debt securities issued or guaranteed by central governments, issued or
guaranteed by central banks, international organisations, multilateral
development banks, regional governments or local authorities of
Member States, or institutions that would qualify for credit quality
step 4 or 5 under the provisions of Title II.
0%
.
0.25 % if the residual maturity is 6 months or less)
8%
Debt securities issued or guaranteed by institutions that would qualify
for credit quality step 4 under the provisions of Title II.
Debt securities issued or guaranteed by corporates that would qualify
for credit quality step 3 or 4 under the provisions of Title II
Positions for which no external credit rating is available
Debt securities issued or guaranteed by central governments, issued or
guaranteed by central banks, international organisations, multilateral
development regional banks, governments or local authorities of
Member States, or institutions that would qualify for credit quality
step 6 under the provisions of Title II.
Debt securities issued or guaranteed by corporates that would qualify
for credit quality step 5 or 6 under the provisions of Title II.
12%
For supervised institutions that use the IRB approaches for
credit risk, the obligor, in order to qualify for an external
credit assessment corresponding to a given credit quality
step, must have an internal rating associated with a PD lower
than or equal to that associated with the credit quality step in
question, as provided in the Standardised Approach for
credit risk.
a) The total capital charges for specific risk that would apply
just to the net long positions in the correlation trading
portfolio;
Article 321-1
By way of exception to Article 321, supervised institutions
may use the largest of the following amounts for the capital
charges for the specific risk of the correlation trading
portfolio:
Article 321-2
The correlation trading portfolio is made up of securitisation
positions and nth-to-default credit derivatives that meet the
following criteria:
Selected French Banking and Financial Regulations – 2013
b) The total capital charges for specific risk that would apply
to just the net short positions in the correlation trading
portfolio.
211
a) The securitisation positions are neither re securitisation
positions, nor derivatives of securitisation exposures that do
not provide a pro-rata share in the proceeds of a
securitisation tranche, (or a synthetically leveraged supersenior tranche, LSS); and
b) All reference instruments are either single-name products,
including credit derivatives, for which a liquid two-way
market exists, or commonly traded indices based on singlename financial instruments. A two-way market means a
market where there are independent bona fide offers to buy
and sell so that a price based on the latest sales prices or
current bids can be determined within one day and settled at
such a price within a relatively short time, in accordance
with market practices.
Article 321-3
Positions that make reference to one of the following two
categories are not included in the correlation trading
portfolio:
a) An underlying asset that can be classified in the exposure
categories specified in Articles 18 and 19; or
b) A claim on a special purpose entity representing a
securitisation position backed by an asset that is not eligible
for the correlation trading portfolio.
Supervised institutions may include positions that are
neither securitisation positions nor nth-to-default credit
derivatives, but still hedge other positions in the said
portfolio, provided that there is a liquid two-way market, as
described in Article 321-2, for the instrument or its
underlying assets.
Article 322
For items that do not qualify under Articles 321 and 323, the
risk weight for specific risk shall be 8% or 12% according to
the table in the preceding Article.
Securitisation positions that would be subject to deduction
treatment under Article 6a of Regulation 90-02, or riskweighted at 1250% under Title V, shall be subject to a
capital charge that is no less than that which would result
from those treatments. Unrated liquidity facilities shall be
subject to a capital charge that is no less than that which
would result from the application of the provisions of
Title V.
A risk weight of 0% shall be applied to debt securities
issued or guaranteed by the central governments and central
banks mentioned in the table in the preceding Article when
they are denominated and funded in the currency of the
borrower.
Article 323
For the purposes of the preceding Articles, qualifying items
shall include:
a) long and short positions in assets qualifying for a credit
quality step corresponding at least to investment grade as
defined in Title II;
b) long and short positions in assets that, because of the
solvency of the issuer, have a PD less than or equal to that of
212
the assets referred to in paragraph (a) under the IRB
Approaches for credit risk;
c) long and short positions in assets that do not have an
external credit assessment, when the following conditions
are met:
i) they are considered by the supervised institutions
concerned to be sufficiently liquid;
ii) their quality is judged by the supervised institution to be
at least equivalent to that of the assets referred to in
paragraph (a)
iii) they are listed on at least one recognised market in a
Member State or on a recognised stock exchange in a third
country;
d) long and short positions in assets issued by supervised
institutions or by institutions in a Member State, that are
considered by the supervised institution concerned to be
sufficiently liquid and whose investment quality is judged
by that institution to be at least equivalent to that of the
assets referred to in paragraph (a);
e) securities issued by institutions that are deemed to be of
equivalent or higher credit quality than that associated with
credit quality step 2 as defined in Title II and that are subject
to a prudential supervisory regime comparable to the regime
that applies to supervised institutions.
Supervised institutions shall apply the maximum weighting
shown in the table in Article 321 to instruments that show a
particular risk because of the insufficient solvency of the
issuer.
Article 323-1
In the case of instruments in the trading book that are
securitisation positions, the supervised institutions shall
assign the following risk weights to the net positions, as
calculated in accordance with Article 309:
a) For securitisation positions in the banking book under the
standard approach to credit risk, 8% of the risk weight
calculated in accordance with the provisions of Chapter III
of Title V of this Order;
b) For securitisation positions in the banking book under the
internal ratings-based approach for credit risk, 8% of the risk
weight calculated in accordance with the provisions of
Chapter IV of Title V of this Order.
For the purposes of b, a supervised institution other than the
originator or sponsor cannot use the supervisory formula
method without the authorisation of the Autorité de contrôle
prudentiel. Originators and sponsors can apply this method
for the same securitisation position in their banking book.
Where applicable, the probability-of-default and loss-givendefault estimates used for the purposes of the Supervisory
Formula Method shall be computed in accordance with Title
III of this Order or, with the explicit and special
authorisation of the Autorité de contrôle prudentiel, on the
basis of estimates computed using an approach described in
Article 347-2 that comply with the quantitative standards of
the Internal-Ratings-Based Approach.
Selected French Banking and Financial Regulations – 2013
Notwithstanding points a and b, supervised institutions shall
apply an 8% risk weight to securitisation positions that are
risk weighted in accordance with Article 217-1, if they are in
the banking book of the supervised institution.
Supervised institutions shall sum all of the weighted
positions (both long and short) to calculate the specific risk
capital charges.
Subsection 2
Capital requirements for general risk
Article 324
Positions shall be reported at market value and classified
using the Maturity Method set out in Article 325, the
Duration Method set out in Article 326, or the Sensitivity
Algorithm Method set out in Article 327.
Article 325
The Maturity Method involves the three following steps,
elaborated in paragraphs (a), (b), and (c) below:
- weighting of the previously determined net positions,
instrument by instrument and by maturity. This weighting is
designed to reflect their sensitivity to general interest-rate
movements;
- matching of the weighted net positions, successively:
within the same maturity band, between different bands in
each zone, and between different zones;
- calculating the capital requirement.
a) Supervised institutions shall calculate their weighted net
positions as follows:
i) net positions are allocated to the appropriate maturity
bands in the following table:
Net positions corresponding to collective investment
undertakings may be assigned in full to the maturity
corresponding to the actuarial sensitivity of the portfolio.
ZONE
MATURITY BAND
Coupon of 3 % or more
(1)
One
Two
Three
(2)
0 ≤ 1 month
> 1 ≤ 3 months
> 3 ≤ 6 months
> 6 ≤ 12 months
> 1 ≤ 2 years
> 2 ≤ 3 years
> 3 ≤ 4 years
> 4 ≤ 5 years
> 5 ≤ 7 years
> 7 ≤ 10 years
> 10 ≤ 15 years
> 15 ≤ 20 years
> 20 years
Coupon of less than
3%
(3)
0 ≤ 1 month
> 1 ≤ 3 months
> 3 ≤ 6 months
> 6 ≤ 12 months
> 1 ≤ 1.9 year
> 1.9 ≤ 2.8 years
> 2.8 ≤ 3.6 years
> 3.6 ≤ 4.3 years
> 4.3 ≤ 5.7 years
> 5.7 ≤ 7.3 years
> 7.3 ≤ 9.3 years
> 9.3 ≤ 10.6 years
> 10.6 ≤ 12 years
> 12 ≤ 20 years
> 20 years
RISK WEIGHT
(in %)
ASSUMED CHANGE
in interest rate (in %)
(4)
0.00
0.20
0.40
0.70
1.25
1.75
2.25
2.75
3.25
3.75
4.50
5.25
6.00
8.00
12.50
(5)
1.00
1.00
1.00
0.90
0.80
0.75
0.75
0.70
0.65
0.60
0.60
0.60
0.60
0.60
ii) Securities shall be assigned to the maturity bands on the
basis of the residual maturity in the case of fixed-rate
securities and of the period remaining until the next
interest-rate fixing in the case of other instruments. A
distinction shall also be drawn between securities with a
coupon of 3% or more and those with a coupon of less than
3%;
ii) by zones, the supervised institution shall calculate the
sum of the unmatched weighted long positions in the bands
of each of the zones in the table to derive the unmatched
weighted long position of each zone. Similarly, the
unmatched weighted short positions of the bands of each
zone shall be summed to calculate the unmatched weighted
short position of that zone.
iii) each position shall then be multiplied by the risk weight
shown in column (4) of the table for the maturity band
concerned;
That part of the unmatched weighted long position for a
given zone that is matched by the u
