II-6.10 : Two decrees implementing Ordinance n° 2010-76 of 21 January 2010, relative to the merger of approval and supervisory authorities for the banking and insurance sectors, were published on 3 March 2010.

http://www.legifrance.gouv.fr/affichTexte.do;jsessionid=E8C7DEC5FCAD41D2D1ED83F7DF2B2BD4.tpdjo10v_1?cidTexte=JORFTEXT000021902669&categorieLien=id

Context and Summary

Two Decrees published on 3 March 2010 were published in order to implement the Ordinance of 21 January implementing the ACP – Autorité de contrôle prudentiel (Prudential Control Authority), the new supervisory authority for the banking and insurance sectors. They specify the authority’s budget and remuneration of its members, on one hand, and define its operational structure and the powers granted to the ACP, on the other.

The second decree first defines, besides the remuneration of the ACP’s members, the budgetary structure of the ACP. In this regard, the new Authority benefits from true management autonomy, and it will establish its own budget on the basis of a tax levied on all businesses subject to its supervision. The decree sets the percent of tax levied on all businesses subject to the ACP’s supervision. It is either in the form of a progressive or a fixed-rate tax, according to the situation, for example, of banking and insurance intermediaries, a tax which will finance the Authority’s budget.

Next, the manner in which the powers granted to the ACP will be exercised is addressed, with, in first place, the operation of the specialised commissions that can be formed by a plenary session of the ACP’s College, via a decision that must very precisely define the powers of these commissions: the areas in which they are able to take decisions, the members of the commission and the lifespan of the commission. However, it is essentially the contents and the consequences of the ACP’s powers that are defined by this decree, amongst which its supervisory power. Besides the possibility granted by the ACP’s General Secretary to begin supervisory missions by habilitating a controller with a letter of mission, the controllers habilitated to exercise a permanent supervisory mission can “at any time of the year verify, through documents provided or on the premises of the corporation, any operations performed by these corporations.” Moreover, Article R612-26 of the Monetary and Financial Code determines the documents that the controller can request, which is extremely broad, for the controller will have access to all documents relative to the financial situation of the supervised corporation, as well as all operations it performs, which submits these corporations to the obligation of providing access to these documents and employing personnel competent to provide the necessary information. This supervisory power remains subject to the double limit of conflict-of-interest control, and the obligations of professional confidentiality.

Similarly, by dint of the Ordinance of 21 January 2010, and the administrative enforcement powers granted to the ACP, the ACP can demand “of any organisation subject to its supervision a recovery programme in order to restore or reinforce its financial situation, improve its management methods or to insure the adequacy of its organisation with its activities or development goals” (Article 1). Precisions on these recovery programmes are given by the decree. First of all, the programme must be sent to the ACP within a month following the ACP’s request. Secondly, corporate supervision is impacted, for it will obligatory to nominate a controller informed of the implementation, follow-up and execution of the recovery programme. Moreover, the ACP is granted, for the purposes of the recovery programme, the power to restrict or forbid supervised corporations from freely disposing of their assets, as well as the ability to nominate a provisory administrator for the corporation.

Finally, the disciplinary procedure has been detailed, at each step of the proceedings, especially as concerns the notification of grievances, for the concerned party will be obliged to present his observations to the sanctions committee within 15 days of receipt of the notification, and will have the possibility to challenge any member of the disciplinary commission. The Finance Minister, Christine Lagarde,  had specified during her presentation of the law, that she desired to reinforce the respect of the adversarial principle and the equity of disciplinary proceedings.

Beyond the powers granted to the ACP, the regulators’ network is also defined, with, on one hand, the creation of a “common area” with the Autorité des marches financiers (AMF - Financial Markets Authority), and also the reinforcement of consumer protection via the strengthening of information sharing between the ACP’s General Secretary and the Directorat générale de la concurrence, de la consommation et de la repression des fraudes – DGCCRF (The French Fair Trading Office) on supervisory activities relating to the provisions of the Consumer Code (Article 1 of the Decree 2010-218 of 3 March 2010).

Brief commentary

These two decrees confirm the orientation taken by the Ordinance of 21 January 2010, which instigated a movement towards closer cooperation and communication between regulators. The question of a regulators’ network is therefore at the heart of the plan, with the legal consecration of links between the ACP, the AMF and the DGCCRF. This is an illustration of the tenacious desire to no longer conceive regulation hermetically, sector by sector, but rather to structure information sharing. Financial analyses, knowledge of banks and insurance companies, and their situation in regards to prudential objectives, allows for a better diagnostic and a more precise analysis of the issues and needs at hand. Such knowledge is very useful in light of the upcoming debates on the definition of prudential norms in the insurance sector with the publication of Europan Regulation “Solvency II”, and in the banking sector, with the publication of “Basel III”.

If the redefinition of the architecture of banking and insurance regulation provides new potentialities for analysis, reactivity and credibility, the decrees implementing the operational methods of the new ACP are especially surprising as to the means employed to realise the ACP’s missions of consumer protection, reinforcing banking and insurance supervision, surveillance of advertising campaigns, and targeted supervision of commercial practices. Mr. Christian Noyer, the President of the ACP, in his inauguration speech on 9 March 2010, recalls the proposition of the ACP’s general secretary, Madame Danièle Nouy, to create a Directorate for the Supervision of Commercial Practices, which must be examined by the College. In order to fulfil its missions, the ACP is not only given very broad supervisory purview, and reinforced links with other regulators, but especially it is granted extremely significant powers, legitimated by teleology, which are also very intrusive, for the ACP can go so far as to nominate a provisory administrator to run a firm. If classic guarantees of a fair trial and professional confidentiality limit these powers, they do not hide the very firm preference in favour of efficient regulation, which illustrates the strength of the authority to which banks and insurance companies will henceforth be submitted.