French Monetary and Financial Code
In forceI. - Credit institutions and finance companies are subject to an additional capital requirement over and above the requirements laid down respectively in part three of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 for credit institutions and in the Order of the Minister for the Economy mentioned in Article L. 611-1 for finance companies. This additional requirement constitutes the overall capital cushion requirement provided for by the aforementioned regulation.
II. - The overall capital buffer requirement referred to above corresponds to the total amount of original own funds defined in Article 26 of Regulation (EU) of 26 June 2013 referred to in I, necessary to meet the capital conservation buffer requirement, increased, where applicable:
1° The countercyclical capital buffer requirement specific to the credit institution or finance company ;
2° The cushion requirement applicable to institutions of global systemic importance;
3° The buffer requirement applicable to other systemically important institutions;
4° the cushion requirement for systemic risk.
IIa - The core capital referred to above, which is required to meet the overall capital cushion requirement, may not be used to meet the following requirements and recommendations:
1° The overall capital requirement to be met at any time in order to satisfy any requirement set out in Article 92(1)(a), (b) and (c) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 ;
2° The additional capital requirement imposed by the Autorité de contrôle prudentiel et de résolution, in accordance with the provisions of II of Article L. 511-41-3, to take account of risks other than excessive leverage risk insufficiently covered under Article 92(1)(d) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 ;
3° The recommendations on additional capital made by the Autorité de contrôle prudentiel et de résolution in accordance with the provisions of II bis of Article L. 511-41-3 ;
4° The capital requirements and eligible commitments defined in Articles 92a and 92b of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and in IV of Article L. 613-44 to cover risks other than leverage risk.
Similarly, original own funds used to satisfy one of the requirements making up the overall capital buffer requirement may not be used to satisfy another requirement making up the overall capital buffer requirement.
III. - The capital conservation buffer referred to in II is equal to 2.5% of the total amount of risk exposure of credit institutions and finance companies, calculated in accordance with paragraph 3 of Article 92 of Regulation (EU) of 26 June 2013 referred to in I.
IV. - The High Council for Financial Stability provided for in Article L. 631-2-1 sets the countercyclical capital buffer rate applicable to exposures located in France on a quarterly basis. This rate is taken into account in determining the specific counter-cyclical capital buffer requirement mentioned in 1° of II.
V.-The globally systemically important institutions referred to in 2° of II may be :
1° Credit institutions that are not subsidiaries within the meaning of the first paragraph of VI;
2° Class 1a investment firms that are not subsidiaries within the meaning of the first paragraph of VI;
3° Groups headed by an EU parent institution, an EU parent investment firm, an EU parent investment holding company, an EU parent financial holding company or an EU parent mixed financial holding company as defined in Article 4(1) of Regulation (EU) No 575/2013.
Va.The other systemically important institutions mentioned in 3° of II may be:
1° Credit institutions within the meaning of I of Article L. 511-1 ;
2° Class 1a investment firms;
3° Finance companies within the meaning of Article L. 515-1 ;
4° Groups headed by an EU parent institution, an EU parent investment firm, an EU parent investment holding company, an EU parent financial holding company or an EU parent mixed financial holding company as defined in Article 4(1) of Regulation (EU) No 575/2013;
5° Groups headed by a parent establishment in a Member State, an EU parent investment firm, an EU parent investment holding company, a parent financial holding company in a Member State or a parent mixed financial holding company in a Member State as defined in paragraph 1 of Article 4 of the Regulation;
6° Groups headed by a parent undertaking of a finance company within the meaning of Article L. 571-1.
VI.-The global systemically important institutions mentioned in V may not be subsidiaries of credit institutions, class 1 bis investment firms or financial holding companies or mixed investment or financial holding companies within the European Union or the European Economic Area.
VII. - The other systemically important institutions mentioned in Va may not be subsidiaries within the meaning of I of Article L. 511-20 of financial holding companies or mixed financial holding companies in France.
The list of these other systemically important institutions is drawn up on an individual, sub-consolidated or consolidated basis, as appropriate, by the Autorité de contrôle prudentiel et de résolution on the basis of at least one of the following criteria:
1° Their size ;
2° Their importance for the economy of the European Union or the Member State concerned;
3° The importance of their cross-border activities;
4° The interconnection of the credit institution, finance company or group with the financial system.
VIII. - The Autorité de contrôle prudentiel et de résolution shall determine, within the list provided for in VI, sub-categories within which it shall classify institutions of global systemic importance. It may modify the classification of an entity in one or other of the lists provided for in VI and VII, or within the list provided for in VI in one or other of the sub-categories, for the purposes of exercising sound supervision.
IX. - Credit institutions and finance companies are required to comply with the systemic risk cushion rate set by the Haut Conseil de la Stabilité Financière pursuant to 4° bis of Article L. 631-2-1, in order to prevent and mitigate macroprudential or systemic risks that are not covered by Regulation (EU) of 26 June 2013 cited in I or by the countercyclical cushion or the cushion for global systemically important institutions or for other systemically important institutions. The qualification of systemic risk applies to a risk of disruption of the financial system likely to have serious repercussions on the financial system and the real economy.
X. - A credit institution or finance company that meets the overall capital buffer requirement and the leverage ratio buffer requirement in accordance with Article 92(1a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 shall be prohibited from making a distribution on a scale that would reduce its own funds to a level that would no longer allow it to meet either of those requirements.
A credit institution or finance company that does not meet the overall capital cushion requirement set out in II or the cushion requirement linked to the leverage ratio referred to in the previous paragraph is prohibited from:
1° To make a distribution in relation to the original own funds defined in Article 26 of Regulation (EU) of 26 June 2013 referred to in I ;
2° To create an obligation to pay discretionary pension benefits or variable remuneration or to pay such pensions or remuneration, unless the obligation to pay arose prior to the breach of the overall capital buffer requirement or the leverage ratio buffer requirement;
3° To make payments linked to additional capital instruments as defined in Article 51 of Regulation (EU) of 26 June 2013 referred to in I.
For the purposes of the second paragraph, a credit institution or finance company is deemed not to satisfy:
1° The overall capital buffer requirement when it does not have sufficient own funds of the quality required to meet both the overall capital buffer requirement and each of the following requirements at the same time:
a) The requirement set out in Article 92(1)(a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and the additional capital requirement imposed under II of Article L. 511-41-3 to address risks other than excessive leverage risk ;
b) The requirement set out in Article 92(1)(b) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and the additional capital requirement imposed under II of Article L. 511-41-3 to address risks other than the risk of excessive leverage ;
c) The requirement set out in Article 92(1)(c) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and the additional capital requirement imposed under II of Article L. 511-41-3 to address risks other than the risk of excessive leverage ;
2° To the cushion requirement linked to the leverage ratio where it does not have sufficient Tier 1 capital to meet at the same time the requirement set out in Article 92(1a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and the requirements set out in Article 92(1)(d) of that Regulation and the additional capital requirement imposed under II of Article L. 511-41-3 to address excessive leverage risk.
XI. - The distributions referred to in X include :
1° The payment of dividends in cash ;
2° The distribution of bonuses in the form of fully or partially paid-up shares or other capital instruments referred to in a, paragraph 1 of Article 26 of Regulation (EU) of 26 June 2013 referred to in I for credit institutions;
3° The redemption or repurchase by a credit institution or finance company of its own shares or other capital instruments referred to in Article 26(1)(a) of Regulation (EU) No 26 June 2013 referred to in I ;
4° The repayment of sums paid in connection with capital instruments referred to in Article 26(1)(a) of Regulation (EU) No 26 June 2013 referred to in I;
5° Distributions of items mentioned in b to e of Article 26 of the Regulation (EU) of 26 June 2013 referred to in I.
XII. - The prohibitions mentioned in X do not apply where their implementation is likely to be considered by the insolvency regime applicable to the credit institution or finance company as an event of default or a condition for initiating insolvency proceedings.
XIII. - A credit institution or finance company which does not meet the overall capital buffer requirement or the leverage ratio buffer requirement or which does not exceed either of these two requirements shall determine the maximum distributable amount applicable to it on the basis of its profits. The prohibition provided for in the third, fourth and fifth paragraphs of X applies to credit institutions and finance companies which have not met this obligation and, for the others, beyond this maximum amount as determined.
XIV. - Notwithstanding the provisions of X, where a credit institution or finance company does not meet the overall capital buffer requirement set out in II or the leverage ratio buffer requirement in accordance with Article 92(1a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, it shall draw up a capital conservation plan which it shall submit to the Autorité de contrôle prudentiel et de résolution.
The Autorité de contrôle prudentiel et de résolution approves the capital conservation plan if it considers that its implementation can reasonably enable the credit institution or finance company to meet the overall capital buffer requirement set out in II or the buffer requirement linked to the leverage ratio mentioned above. Otherwise, it shall impose on the credit institution or finance company at least one of the measures provided for in Article L. 511-41-3 and in 9° and 10° of I of Article L. 612-33.
XV. - The conditions for application of this article are set by order of the Minister for the Economy.
