Key Benefits:
Mr. President of the Republic,
The financial crisis has opened a debate on the functioning of supervisory authorities. At the international level, the G20 countries decided to strengthen financial risk monitoring, including the establishment of the Financial Stability Board. The work undertaken by the French Presidency of the European Union at the end of 2008 led European Heads of State and Government to announce on 18 June 2009 an ambitious reform of the European supervisory system, being implemented through several directives and regulations. The United States, the United Kingdom and Germany are now discussing a reform of their own supervisory system.
In France, this reflection began in 2008. TheArticle 152 of Act No. 2008-776 of 4 August 2008 modernization of the economy has empowered the Government to make by order the provisions which are intended to "take measures relating to the authorities of accreditation and control of the financial sector in order to guarantee financial stability and to strengthen the competitiveness and attractiveness of the French financial place. These measures include:
(a) To redefine the missions, the organization, the means, the resources, the composition, and the rules of operation and cooperation of the authorities of the accreditation and control of the banking sector and the insurance sector, including by providing for the reconciliation, on the one hand, between the authorities of the same sector and, on the other, between the Banking Commission and the Insurance and Mutual Authority;
(b) To modernize the mandate of the supervisory and accreditation authorities in order, inter alia, to introduce a European dimension in accordance with the guidelines defined by the Council of the European Union;
(c) To adjust the jurisdictional fields of these authorities and other entities that may intervene in the control of the marketing of financial products in order to make it more homogeneous;
(d) To adapt the emergency and safeguard procedures, the disciplinary procedures of these authorities and the sanctions they may impose, in order to ensure its effectiveness and to strengthen its procedural safeguards.
A report was entrusted to the general financial inspection, which issued its conclusions to merge the Banking Commission, the Insurance and Mutual Control Authority, the Credit and Investment Institutions Committee and the Insurance Business Committee. After a long phase of consultation, this Order introduces a new supervisory authority, the prudential control authority, and gives it the powers necessary to carry out its duties. This reform aims to improve the effectiveness of the French supervisory system around three objectives: security, stability and influence.
1° Consumer safety.
The crisis has strengthened the need for security among insurance and banking consumers. This safety is primarily based on professional know-how. But it also requires increasing and sustained attention from supervisors to marketing practices. This is why reform places consumer protection at the heart of supervision. The order provides that the new authority will have to devote significant resources to customer relations issues, their control within businesses and the monitoring of intermediaries.
It strengthens the cooperation between the new prudential authority and the Autorité des marchés financiers (AMF). This cooperation is particularly motivated by the increasing imbrication between savings products (life insurance and OPCVM in particular) and the development of actors able to distribute the entire range of insurance and banking products.
The new authority and the AMF will share resources in the marketing control department. These means will be gathered in a cluster led by a coordinator under the authority of the Secretaries General of the two authorities. This pole will be responsible for promoting a joint development of control policy, a monitoring of product evolution and joint surveillance of advertising. Depending on the results of the controls, decisions will go back to the new authority (insurance and credit products) or to the AMF (financial savings) as appropriate.
2° Financial stability.
This reform will provide France with a supervisory authority capable of monitoring risks throughout the financial sector; whether banks or insurances in all their forms. By bringing the insurance and banking authorities closer to the Bank of France ― which benefits from the economic and financial expertise of the central bank ―, the reform eliminates the dead angles. This is how financial stability is strengthened.
However, the professions of insurance and bank each have their technical skills. That is why the new authority will listen to the specificities of each. Within the Bank of France, the new authority will have strong autonomy. It will be headed by a college composed of independent personalities from each of the controlled sectors. The College will be placed under the authority of the Governor of the Bank of France and an experienced vice-president in the field of insurance. Area-specific issues will be addressed in sectoral sub-collèges. The authority will also be provided with services led by a secretary general and a first deputy covering each sector.
3° Influence of France in international negotiations on financial regulation reform.
Finally, this reform aims to strengthen France's influence on the international scene to influence financial regulation reforms. Our national regulations are largely based on supranational standards or standards. The sole authority will represent France in the international bodies of insurance and bank. By joining the banking and insurance forces, it will weigh more heavily in the negotiations. The supervisory authority must devote an essential part of its efforts to dialogue with its foreign partners and to defend the French vision of supervision.
Title I defines the authority's powers with respect to all areas under the authority's supervision.
Section 1 of the order creates fifty articles within the monetary and financial code, describing the missions, organization and powers of the new authority.
TheArticle L. 612-1 of the Monetary and Financial Code establish authority as an independent administrative authority without a moral personality. It sets its objectives by placing on the same level the stability of the financial system and the protection of the clients (comprising in the broad sense: borrowers, depositors, holders of securities, insured, mutualists, beneficiaries, entitled). It lists its general missions, which have been declined and supplemented in other legislative and regulatory provisions. The rules whose authority verifies the application are contained in monetary and financial codes, insurance, mutuality and social security, as well as in Book III of the Consumer Code, but also in their application texts (including uncodified orders in the banking sector) and in the codes of conduct approved by the Minister, which therefore take regulatory value. The authority also controls compliance with other provisions when their lack of knowledge leads to that of the first mentioned provisions (e.g., Trade code and Civil code for compliance with contractual obligations to clients). Finally, in the area of customer protection, the authority checks compliance with the rules of good practice relating to the professions concerned. The III of the article establishes the general framework for cooperation of the authority with its foreign counterparts, and requires it to take into account an objective of financial stability not only national, but also European, in accordance with the commitments of France.
Section L. 612-2 specifies the list of entities entering the jurisdiction of the authority. This list is not limited to the extent that other provisions can establish a specific monitoring or monitoring regime (cases of the Caisse des dépôts et consignations within the framework of the FundArticle L. 518-15-2 of the Monetary and Financial Code introduced by the law of modernization of the economy). Article L. 612-3 reproduces the exclusions of the field currently contained in the insurance code.
Articles L. 612-4 to L. 612-14 relate to the architecture of authority. It respects several imperatives: the presence of the various skills required for missions, the effectiveness of decision-making and responsiveness, the coherence of decisions, an "affectio societatis" between members. This is why the authority is made up of a college that will rule in several formations (plenary, restricted, sectoral subcollèges, specialized commissions) and a sanctions commission.
The College is relatively broad to deal with general matters of supervision and the functioning of the authority: macroprudential issues, international issues, control priorities, annual report, doctrine questions, cross-sectional studies, budget, organizational matters. On the other hand, it is necessary to entrust individual cases, which lead to a very detailed examination of the internal functioning of enterprises, as well as questions specific to a sector to smaller trainings. This is why the college meets in differently composed formations according to the case (article L. 612-4).
The composition of the College of the Whole of the Authority is the subject of Article L. 612-5 and is specified for the various formations in the following articles. It is organized around the following principles:
– in the light of the crisis, maintaining a strong connection with the Bank of France is likely to allow the authority to benefit from the economic and financial expertise of the central bank and to ensure effective treatment of emergencies. The authority is therefore chaired by the Governor of the Bank of France;
- to take into account the high specificities of the insurance professions, a vice-president with an insurance experience is designated by the ministers responsible for the economy, social security and mutuality; the President may delegate the presidency of the College of the Whole or its training to a Deputy Governor or Vice-President on the basis of the subjects; the Vice-President shall, in any event, preside over the sub-collège assurances (III of Article L. 612-12);
- public figures are three representatives of the courts and the president of the Authority of Accounting Standards;
―the vice-president and two other personalities express competence in the multiple matters within the authority, particularly in the areas of client protection and quantitative and actuarial techniques; the vice-president is jointly appointed by the Ministers responsible for the economy, mutuality and social security, while the other two members are appointed by the Minister responsible for the economy;
― eight qualified personalities come from parity between the two sectors (bank sector, investment and payments, on the one hand, insurance, mutuality and insurance, on the other hand).
Two sectoral sub-collèges are established in the college, respectively for the bank and insurance (Article L. 612-7). Each is competent for individual files and specific issues within its sector. However, taking into account their potential impact on financial stability, records may be processed, if they are general, by the College of the Whole and, if they are individual, by a limited training of eight members including connoisseurs from both sectors. This limited training is also intended to examine cross-cutting issues by nature (financial conglomerates, significant reconciliations of both banking and insurance entities). The College of the Whole may establish specialized commissions (e.g. bleaching, intermediaries...), as permitted in article L. 612-8. The distribution of training, on the basis of the agendas decided by the President of the authority (on the proposal of the Vice-President in the case of the insurance sub-collège), is provided in Article L. 612-12.
Article L. 612-9 specifies the composition of the sanctions commission, entirely separate from the college. Reintegration, it comprises five members: two personalities from the courts, including a state councilor, president; three qualified personalities for matters of authority. They have alternates.
The regime applicable to members of the College and the Sanctions Commission aims to ensure their independence, whether they are irrevocable (Article L. 612-5) or the prevention and treatment of their conflicts of interest (Article L. 612-10).
A Government Commissioner from the Treasury and Economic Policy Branch sits with the authority. A second commissioner of the Government from the Social Security Directorate sits on matters relating to mutual funds and welfare institutions (Article L. 612-11).
The functioning of the college, described in articles L. 612-13 and L. 612-14, establishes a genuine collegiality and strictly supervises the conditions under which decisions under the authority may, in particular, be taken in cases of emergency other than at meetings of the college.
Articles L. 612-15 to L. 612-20 deal with the operation of the authority and guarantee its functional independence, which consists in the autonomous management, within the framework of the Bank of France, of the means necessary to carry out its tasks: human resources and financial resources:
– the Secretary General of the Authority is appointed by the Minister responsible for the economy on the proposal of the President. He reports to the college. He directs the services of authority;
– a first Deputy Secretary General, whose profile is complementary to that of the Secretary General, is appointed by the President on the advice of the Vice-President, after the approval of ministers responsible for the economy, social security and mutuality. Depending on the case, the Secretary General may be a specialist in insurance control issues and his first assistant to the bank, or reciprocally;
― the authority has the capacity to sue: for example, to initiate proceedings on its behalf or to be heard by the judge in proceedings concerning its scope of activity. The president of the authority may appeal against the decisions of the sanctions commission after agreement of the training having opened the sanctions;
– a strict professional secret is imposed on the authority without, however, prohibiting it from cooperating with certain jurisdictions or with a parliamentary commission of inquiry, or with the public statistical system;
the authority has its own resources: the college votes the budget on the proposal of the Secretary General, within the limit of the proceeds of a tax collected on the subject bodies. The Bank of France can provide the authority's budget for non-earmarked staffing;
― this tax is allocated by law to the Bank of France for the benefit of the mission of the authority (in case of surpluses, reserves would be made for the benefit of the authority) and the budget is annexed to the budget of the Bank of France, without the General Council being able to modify it;
― the personnel of the services of the authority are made up of public officials, including commissioners of insurance controllers, and agents of the Bank of France statutes, including agents under contract and, in particular, officials of other bodies who will be detached from the authority;
– upon the proposal of the Secretary-General, the College sets out the conditions of employment of staff and the rules of conduct applicable to staff.
Article L. 612-21 requires the authority to publish the list of persons entering its jurisdiction (especially in application of the accreditation skills detailed in other parts of the monetary and financial codes, insurance, mutuality and social security). Article L. 612-22 provides for a consultation of the authority by the Autorité de la concurrence in the context of concentration control.
Sections L. 612-23 to L. 612-29 describe the authority's control powers. On-site and on-site controls are organized by the Secretary-General of the authority (Article L. 612-23), who may decide to extend on-site control to other entities related to persons subject to control of the authority (Article L. 612-26). Sections L. 612-24 and L. 612-25 specify the terms and conditions for obtaining information by the authority and establish a binding power towards persons who are obstructing it. Article L. 612-27 organizes the preparation of control reports in a contradictory and transparent framework. In addition, the authority may refer the public prosecutor to facts justifying criminal proceedings (Article L. 612-28) or the competition authority on practices within the jurisdiction of the public prosecutor (Article L. 612-29).
The authority will have broad administrative police powers to intervene adequately in the event of difficulties of supervised entities. Sections L. 612-30 to L. 612-34 depict successively caution when practices infringe upon the rules of good practice of the profession, the reinstatement, the reinstatement of a financial recovery strategy within one month or, in the most serious cases, the precautionary measures (special monitoring, limitation or temporary prohibition of transactions, including on life insurance contracts, suspension of portfolio office) Articles L. 612-35 to L. 612-37 impose on these measures the principles of conflict and transparency.
Sections L. 612-38 to L. 612-42 detail the disciplinary power of the authority. In the event of a breach of control, the authority may impose a penalty, ranging from warning to prohibition of activity, a monetary penalty of up to 50 million euros (1 million euros for manual exchangers or intermediaries), and the assortment of an offence. In order to ensure a complete separation of the notification of grievances and judgment, the opening of the sanction procedure will be carried out by the college, while the judgment will be pronounced by the sanctions commission. The procedure will be detailed by a decree in the Council of State, which will specify in particular the conditions for the exercise of the principle of the contradictory.
Articles L. 612-43 to L. 612-45 reproduce and harmonize the provisions relating to relations between the existing supervisory authorities and the auditors.
Article L. 612-46 deals with the consultation of bank and insurance guarantee funds in cases of registrations of persons within their scope of intervention.
Sections L. 612-47 to L. 612-50 put in place an innovative operating system between the new authority and the Autorité des marchés financiers (AMF) in order to supervise the marketing conditions and the compliance of the operators with their customers, borrowers, insured, adherents, beneficiaries and entitled. This common hub will ensure the coherence of the control policy and ensure that there is no uncovered area. This co-operation is motivated by the increasing imbrication between products (life insurance, credits with UCITS) as well as by the fact that the same networks (bank cards, some independent intermediaries...) distribute the entire range of financial products.
The Unit will be led by a coordinator under the authority of the Secretaries General of the two authorities. The pole will be able to monitor the evolution of the products as part of an observatory, ensure joint surveillance of advertising, establish a common entry point for customer requests. Upstream, it will analyze the risk areas for customers and be able to result from the screening priority proposals submitted to the respective Secretaries General's appreciation. Downstream, it will be able to access the findings of the monitoring reports carried out by both authorities and feed on its analysis. The two authorities will jointly prepare a report each year on the activity of the Unit and their respective activities in this area.
The common-pole device does not add or reconnect any competence or power to these authorities and does not change anything to their distribution. Any decision will remain made only by the supervisory authority or by the AMF, as appropriate, in particular with respect to the follow-up of the due process.
Title II, which includes articles 2 to 6, amends monetary and financial code to take into account the provisions relating to the prudential control authority.
In particular, in section 5, the prudential injunctions that the authority may make to request a level of equity greater than the minimum amount ("pillar 2") of the "Basel 2" regime are reclassified in Book V on Credit Institutions, Investment Companies and Payment Institutions.
Article 6 adapts the code plan to the establishment of this new authority, by maintaining the existing provisions relating, on the one hand, to the liquidation and remediation of credit institutions, investment companies and payment institutions, on the other hand, to the supplementary monitoring. Finally, he clarified the article on the criminal sanction of a breach of professional secrecy, so that he would cover all persons involved in the missions of the authority (members of the various formations, agents, service providers).
Title III, which includes Articles 7 to 10, amends insurance code to take into account the creation of the new authority:
– maintains the specific competence of the insurance authority: modification or withdrawal of documents, verification of publications;
―it aligns criminal sanctions in the event of a breach of control over those of the Autorité des marchés financiers (a year and a maximum fine of 15,000 €);
―it clarifies the plan insurance code with regard to the exercise of activities in open establishment or in the free provision of services in the European Economic Area and supplementary monitoring;
―it brings together in the same article the provisions on credit margin;
― it assigns to the College of Authority the capacity to request the intervention of the guarantee funds of compulsory insurance and insurance of persons.
Title IV changes code of mutuality.
In addition to the reference to the new provisions of monetary and financial code (as with the insurance code), section 11 amends the procedures for the accreditation, withdrawal of approval, mergers, transfers of portfolios to transfer jurisdiction to the new supervisory authority. As of 2011, the National Register of Mutuals has been abolished. He attributes to the Minister responsible for mutuality the control of the mutual funds under Book III of the Code (health and social action). It reclassifies various provisions of code of mutuality on supplementary monitoring, the dissolution of the mutuals. He assigns authority to the College of Authority to use the guarantee fund.
Title V changes Social Security Code and Public Health Code.
In addition to the reference to the new provisions of monetary and financial code (as with the insurance code), section 12 amends the procedures for the approval, withdrawal of approval, mergers, transfer of portfolio provided by the Social Security Codeto transfer jurisdiction to the new supervisory authority. It reclassifies various provisions of Social Security Code on supplementary monitoring. He assigns authority to the College of Authority to use the guarantee fund. This article further states that it will be up to the new authority to prepare the report on the complementary protection of health risk.
Section 13 amends the Public Health Code.
Title VI, which includes articles 14 to 18, amends other references to the authorities to which the prudential control authority succeeds:
― General Tax Code, Trade code, public procurement code, Administrative Justice Code ;
– uncodified legislation. Article 18 allows the reference to the prudential control authority to be substituted in all legislative and regulatory provisions for those of the four merged authorities.
Title VII, which includes sections 19 to 21, extends the device to the overseas.
The order will apply in full right in the absence of express mention in the overseas regions and departments, in Saint-Barthélemy, Saint-Martin, Mayotte and Saint-Pierre-et-Miquelon, which are governed by the principle of legislative identity.
An express mention of application is, however, necessary for New Caledonia, French Polynesia and the Wallis and Futuna Islands, which are governed by the principle of legislative specialty. Currently, in the first two territories, the banking and financial authorities (excluding insurance) exercise the same prerogatives as in metropolis. The only regime disparities are related to the non-community position of these territories. Therefore, the prerogatives of the new authority will be exercised in these territories under the same conditions as in metropolis. The provisions on the supplementary monitoring of financial conglomerates (issues of community law) are not extended.
On the contrary, the right to insurance, mutuality and social security falls within the competence of New Caledonia and French Polynesia. The new authority will control persons governed by these codes only with respect to the provisions of title VI of book V of the monetary and financial code. A provision of section 20 will allow the authority to cooperate with the French Polynesia government for the powers of the French Polynesia in insurance matters.
In Wallis-et-Futuna, the prerogatives of the new authority will be exercised in all areas in the same conditions as in metropolis.
Title VIII includes the transitional and final provisions.
Article 22 introduces in its I a transitional arrangement until the establishment of the new authority, which will be materialized by the first meeting of its college. Prior to this meeting, the existing authorities continue to exercise the fullness of their missions in accordance with the law in force prior to the issuance of this order.
II adapts the rule prohibiting more than one renewal of a term, providing that members of the current authorities may be appointed to the future authority, and may therefore be renewed once, unless they have already exercised a term of more than six years.
The III transfers to the new authority all the rights and obligations of existing authorities, including their contractual commitments and international commitments. The procedural deadlines are not interrupted by the installation of the new authority. In addition, sanctions controls and procedures are resumed, without their legal validity being challenged by the amendment of the texts by the order. A provision ensures financial and accounting continuity: the existing taxes for control by the ACA and the CB are maintained until the tax financing the new authority is established (taking of orders specifying the rates and lump sums applicable within the ranges established by the order). The continuity of the positions of the agents is also ensured and complemented by the possibility, for the Bank of France, to offer them integration in its frameworks within eighteen months of the installation of the authority.
Section 23 introduces a transitional mechanism to identify all mutual unions and intermediaries in bank transactions.
Article 24 provides for a reform assessment report after three years of operation of the new authority.
Section 25 is the enforcement article.
This is the subject of this order that we have the honour to submit to your approval.
Please accept, Mr. President, the assurance of our deep respect.
