Key Benefits:
The Prime Minister,
On the report of the Minister of Health and Solidarity,
Considering the code of mutuality (regulatory party);
In light of Order No. 2004-1201 of 12 November 2004 on the supplementary supervision of credit institutions, insurance companies and investment companies owned by a financial conglomerate;
Having regard to the opinion of the Higher Council of the mutuality of 25 May 2005;
The State Council (Finance Section) heard,
Decrete:
Chapter II of Book II title I of the mutuality code is thus amended:
1° After the article R. 211-7, it is created an article R. 211-7-1 of the mutuality code as follows:
"Art. R. 211-7-1. - Where, pursuant to Article L. 211-7-1, the competent administrative authority in respect of approval shall consult with the competent authority, within the meaning of Article L. 212-7-1, the competent administrative authority shall have a period of one month to make its observations. Upon request, this period may be extended for one month. »
2° The I of Article R. 212-11 is thus completed:
"When the mutual or union is not subject to additional monitoring under section L. 212-7-2 or section L. 212-7-4, the margin of solvency is reduced by the following:
“(a) Participations within the meaning of 2° of Article L. 212-7-1 that the mutual or union holds in credit institutions, investment companies or financial institutions;
“(b) Subordinate receivables and other financial instruments that the mutual or union holds on credit institutions, investment companies or financial institutions in which it holds an interest, and which are considered to be equity for the calculation of the requirements of equity applicable to the above-mentioned companies and institutions.
"When an interest in a credit institution, an investment company or a financial institution is temporarily held to facilitate the remediation and preservation of that entity, the Insurance, Mutual and Provident Institutions Commission may authorize the mutual or union not to make the deductions provided for in a and b."
3° Article I R. 212-15 is thus completed:
"When the mutual or union is not subject to additional monitoring under section L. 212-7-2 or section L. 212-7-4, the margin of solvency is reduced by the following:
“(a) Participations within the meaning of 2° of Article L. 212-7-1 that the mutual or union holds in credit institutions, investment companies or financial institutions;
“(b) The receivables and other financial instruments that the mutual or union holds on credit institutions, investment companies or financial institutions in which it holds an interest, and which are considered to be equity funds for the calculation of the specific requirements of funds applicable to the above-mentioned companies and institutions.
"When an interest in a credit institution, an investment company or a financial institution is temporarily held by a mutual or a union in order to facilitate the remediation and preservation of that entity, the Insurance, Mutual and Provident Institutions Commission may authorize the mutual or union not to make the deductions provided for in the preceding two paragraphs. »
4° In article R. 212-18, after the words: "by the same elements as those defined in article R. 212-15", the words "taking into account the deductions provided for in the first paragraph of paragraph I of this article".
Chapter III of Book II title I of the same code is amended as follows:
1° In article R. 213-1, after the words: "a union governed by title III of Book IX of the Social Security Code", the words "a company governed by the Insurance Code".
2° The first paragraph of section R. 213-2 is thus completed:
"However, where these mutual funds and unions are participating organizations of a credit institution, an investment company or a financial institution, they may, alternatively, present a positive adjusted solvency in the manner specified in sections R. 213-9 and R. 213-10. »
3° The second paragraph of Article R. 213-3 is thus supplemented:
"In addition, are deducted from participations, subordinate receivables and other financial instruments held on credit institutions, investment companies and financial institutions, and referred to in section I R. 212-11. »
4° Section R. 213-4 is amended as follows:
(a) The words: "method #1:" are replaced by the words: "method #1: deduction and aggregation";
(b) The words: "method #2:" are replaced by the words: "method #2: deduction of a requirement";
(c) The last paragraph is as follows:
"For the calculation of adjusted creditworthiness under these two methods, intra-group transactions are disposed of in a manner equivalent to that for the preparation of consolidated or combined accounts referred to in Article L. 212-7. In addition, the shares, receivables and other instruments held on credit institutions, investment companies and financial institutions referred to in I of section R. 212-11 are deducted from eligible credit margin elements. »
(d) It is inserted a last paragraph, as follows:
"When the mutual or union is a participating agency of a credit institution, an investment company or a financial institution, the Insurance, Mutual and Provident Institutions Commission is also authorized to apply, as an alternative to these two methods, the methods defined in sections R. 213-9 and R. 213-10. »
5° Section R. 213-5 is amended as follows:
(a) In the first paragraph, after the words: "an insurance group company", the words are inserted: "a joint holding company whose coordinator is the Insurance, Mutual and Provident Institutions Supervisory Board";
(b) In the fourth and fifth paragraphs, after the words "insurance group society", the words are inserted: "a joint holding financial company whose co-ordinator is the Insurance, Mutual and Provident Institutions Supervisory Commission".
6° In the first paragraph of Article R. 213-6, after the second sentence, the following sentence is inserted: "The mutual or union also has procedures for risk management and internal controls to detect, measure, supervise and control these operations. »
7° After the article R. 213-6, articles R. 213-7 to R. 213-11 are inserted as follows:
"Art. R. 213-7. - When a union of mutuals exerts, as a principal, a dominant influence on another body having an economic activity because of the existence of important and lasting bonds of solidarity resulting from financial commitments or common leaders or services, it is obliged to transmit to the supervisory committee referred to in Article L. 510-1, within one month, all the information necessary to the appreciation of the honour. The list of this information is set by order of the Minister responsible for mutuality.
"Art. R. 213-8. - The additional requirements for the adequacy of the equity referred to in Article L. 212-7-8 are determined on the basis of the consolidated or combined accounts of the financial conglomerate established in accordance with the provisions of Article L. 212-7.
"They are the result of the difference, calculated in terms specified by order of the Minister responsible for mutuality, between the equity of the financial conglomerate and the solvency requirements for the various financial sectors of the conglomerate. This difference must be positive.
"Art. R. 213-9. - When co-ordinating, the Insurance, Mutual and Provident Institutions Commission may, after consultation with the other relevant authorities and the financial conglomerate concerned, apply, instead of the method provided for in section R. 213-8 for the calculation of the additional requirements, one of the following three methods, if it appears to be more relevant to the financial monitoring requirements, in particular because of the structure of the conglomerate,
"1° Method #1: deduction and aggregation.
"Additional requirements result from the difference between:
“(a) On the one hand, the sum of the equity of all financial sector entities;
“(b) And, on the other hand, the sum of the solvency requirements of all entities in the financial sector and the accounting value of participation in other entities of the group.
"The solvency requirement of a non-regulated entity is a notional requirement calculated under the sectoral rules that would apply if it were a regulated entity in the sector.
"The difference must be positive.
"2° Method #2: book value/deduction of a requirement.
"Additional requirements result from the difference between:
“(a) On the one hand, the equity of the reference agency or entity that is at the head of the financial conglomerate;
“(b) And, on the other hand, the sum of the solvency requirement of the organization referred to in a and the accounting value of the organization's participation in other entities of the financial group or the solvency requirements of those entities, the highest amount of the two being retained.
"The solvency requirement of a non-regulated entity is a notional requirement calculated under the sectoral rules that would apply if it were a regulated entity in the sector.
"The difference must be positive.
« 3° Method 3: combination of the three methods.
"When co-ordinating, the Insurance, Mutual and Provident Institutions Commission may, under the conditions mentioned in the first paragraph, allow the financial conglomerate to combine two or three of the methods referred to in R. 213-8 and this section.
"An order by the Minister responsible for mutuality determines the modalities for calculating the equity and solvency requirements of an entity to be retained in the application of methods 1 to 3.
"Art. R. 213-10. - Without prejudice to the provisions of Article L. 212-7-16, the Insurance, Mutual and Provident Institutions Control Board may, when designated as a coordinator commm, and if the financial conglomerate situation in the area of equity adequacy warrants it, request that the additional requirements be covered by prudential elements recognized both by the regulations applicable to the insurance sector and by the regulations applicable to the banking sector and by the limits
"Art. R. 213-11. - I. - Regulated entities belonging to a financial conglomerate have coordinated risk management and internal control procedures.
“II. - The risk management procedures mentioned in the preceding paragraph relate to:
« 1° Periodic approval and review, by the governing bodies at the financial conglomerate level, of strategies and policies for the overall risks involved;
« 2° The satisfaction of regulatory requirements for equity adequacy and the existence of procedures to anticipate the impact of development strategies on the risk profile and requirements for equity;
« 3° Procedures to ensure that risk monitoring devices are adapted to the organization of the financial conglomerate and that the measures put in place within each entity, to ensure that the risks can be measured, monitored and controlled at the conglomerate level, are consistent.
"III. - The internal controls established shall enable:
« 1° Identify and measure all significant risks and determine a level of equity appropriate to risks;
« 2° Identify, measure, supervise and control intra-group transactions and risk concentration through appropriate reporting and accounting procedures.
"IV. - Regulated entities belonging to a financial conglomerate have an internal control system for the production of data or information intended to allow for further monitoring. »
Existing mutualist group unions are required to transmit to the Insurance, Mutual and Provident Institutions Supervisory Board, within two months of the coming into force of this Order, all the information necessary for the appraisal of the honesty, competence and experience of their leaders specified by the order set out in Article R. 213-7 of the Code of Mutuality.
The Minister of Health and Solidarity is responsible for the execution of this Order, which will be published in the Official Journal of the French Republic.
Done in Paris, October 7, 2005.
Dominique de Villepin
By the Prime Minister:
Minister of Health and Solidarity,
Xavier Bertrand
