French Monetary and Financial Code
In forceI.-Credit institutions and investment firms shall at all times comply with a minimum requirement for own funds and eligible commitments.
This requirement is expressed as a percentage of
1° Of the total amount of risk exposure of the resolution entity concerned, calculated, for Class 1a credit institutions and investment firms, in accordance with Article 92(3) of Regulation (EU) No 575/2013 and for Class 2 and Class 3 investment firms, in accordance with the applicable requirement set out in Article 11(1) of Regulation (EU) 2019/2033 multiplied by 12.5 ;
2° And the measure of the total exposure of the relevant resolution entity calculated in accordance with Articles 429 and 429a of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013.
It shall take account, where appropriate, of the fact that subsidiaries established outside the European Union are subject to separate resolution, depending on whether or not the group's preventive resolution plan provides for this.
This requirement is met by means of own funds and eligible commitments, under conditions defined by decree in the Conseil d'Etat.
II. - The collège de résolution may waive the minimum requirement referred to in I:
1° Housing finance companies ;
2° Sociétés de crédit foncier ;
3° Credit institutions whose sole purpose is to refinance promissory notes governed by articles L. 313-42 to L. 313-49-1 and representing loans granted to finance real estate transactions by issuing, under the conditions provided for in article 13 of law no. 85-695 of 11 July 1985, bonds with characteristics identical to those of these promissory notes.
Where a waiver has been granted, the person benefiting from it is not included in the scope of consolidation for the purposes of calculating the minimum capital requirement and eligible commitments at the level of the resolution group.
III - The following shall comply with the minimum requirement for own funds and eligible commitments on a consolidated basis:
1° Resolution entities in respect of the resolution group to which they belong;
2° EU parent undertakings which are not themselves resolution entities but subsidiaries of third country entities.
IV - Credit institutions and investment firms which are subsidiaries of resolution entities or third-country entities, but which are not themselves resolution entities, shall comply with the minimum requirement for own funds and eligible commitments on an individual basis. They meet this requirement by means of own funds and eligible commitments issued mainly within the resolution group to which they belong, under conditions defined by decree of the Conseil d'Etat.
After consulting the supervisory college, the resolution college may decide to apply the minimum requirement of own funds and eligible commitments on an individual basis to a person mentioned in 3° to 6° of I of Article L. 613-34 which is a subsidiary of a resolution entity without itself being a resolution entity.
V.-In the case of resolution groups made up of a central body and all its members :
1° In order to ensure that the resolution group as a whole meets the minimum requirement for own funds and eligible commitments at consolidated level, the resolution college shall designate, taking into account the characteristics of the solidarity mechanism and the preferred resolution strategy, the entities within the resolution group which are subject to compliance with this requirement ;
2° Affiliates, the central body which is not itself a resolution entity, and any resolution entity in respect of which the resolution college has not taken a decision pursuant to 1° shall comply with the minimum capital requirement and eligible commitments on an individual basis.
VI.The collège de résolution shall determine, after obtaining the opinion of the collège de supervision, the level of the minimum capital requirement and eligible commitments, under conditions defined by decree of the Conseil d'Etat, on the basis of the following criteria:
1° The resolution measures applied, including the internal bail-in instrument, must enable the resolution of the resolution group by fully meeting the resolution objectives;
2° The resolution entity and its subsidiaries, which are not themselves resolution entities, must, where applicable, have sufficient own funds and eligible liabilities to ensure that, if the internal bail-in instrument or their write-down or conversion were to be applied to them the losses can be absorbed and the total capital ratio and, where appropriate, the leverage ratio of the persons concerned can be reduced to the level necessary to enable them to continue to fulfil the conditions of their authorisation and to carry on the activities for which they have been authorised;
3° In the event that the preventive resolution plan provides that certain categories of eligible commitments may not be subject to an internal bail-in measure, pursuant to II of Article L. 613-55-1, or that certain categories of eligible commitments may be transferred in full to an acquirer in the context of a partial transfer, the resolution entity must have a sufficient amount of own funds and eligible commitments to enable losses to be absorbed and its total capital ratio and, where applicable, its leverage ratio to be raised to the level necessary to enable it to continue to fulfil the conditions of its authorisation and to carry on the activities for which it was authorised;
4° The size, business model, funding model and risk profile of the person concerned;
5° The negative effects of the failure of the person concerned on financial stability, in particular through a contagion effect on other persons due to its interconnection with these other persons or with the rest of the financial system.
VII.-A.-Where it is the resolution authority of the resolution entity of a resolution group, the resolution college shall endeavour to reach a joint decision, within the college of resolution authorities set up for this purpose, with the resolution authorities of the subsidiaries of this resolution group in the other Member States which are not themselves resolution entities and which are subject to the minimum capital requirement and eligible commitments on an individual basis and, where applicable, with the resolution authority on a consolidated basis within the meaning of 8° of Article L. 613-34-1 unless the resolution college is itself that authority.
In the latter case, it shall set up a college of resolution authorities for this purpose pursuant to Article L. 613-59 or, where applicable, Article L. 613-59-1.
The joint decision referred to above concerns :
1° The level of the minimum capital requirement and eligible commitments applied on a consolidated basis at the level of the resolution group; and
2° The level of the minimum capital requirement and eligible commitments applied on an individual basis to each subsidiary of this group which is not a resolution entity.
B.-In the absence of a joint decision on the requirement levels mentioned in A after a period of four months, the resolution college alone decides:
1° On the level of requirement mentioned in 1° of this A, after having examined the assessment of the subsidiaries carried out by the resolution authorities of the other Member States concerned and the opinion of the resolution authority on a consolidated basis, where applicable;
2° On the level of requirements mentioned in 2° of A applicable only to subsidiaries under its jurisdiction, after having taken into account the observations and reservations expressed in writing by the resolution authority of the resolution entity or, where applicable, the observations and reservations expressed in writing by the resolution authority on a consolidated basis.
C.-However, the resolution college shall defer the decision referred to in B if, on expiry of the aforementioned four-month period, the matter is referred to the European Banking Authority on the basis of Article 19 of Regulation (EU) No 1093/2010, either by another resolution authority concerned or by the resolution college itself, in either of the following cases:
1° If it is unable to reach a common position with the relevant resolution authorities of the other Member States on the level of requirement at group level referred to in 1° of A;
2° In the event of disagreement with these other relevant resolution authorities when the latter intend to take decisions alone on the level of the minimum requirement referred to in 2° of A for the subsidiaries under their jurisdiction.
However, the collège de résolution shall refer the matter to the European Banking Authority only if the requirements that these other resolution authorities intend to impose on their subsidiaries:
(a) Deviate, by more than 2%, from the total amount of the subsidiary's risk exposure calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013 for Class 1a credit institutions and investment firms or in accordance with the applicable requirement set out in Article 11(1) of Regulation (EU) 2019/2033, such requirement being multiplied by 1,25 in the case of Class 2 and Class 3 investment firms, of the amount that would be obtained by applying to the total amount of the risk exposure of the subsidiary the percentage that the amount of the requirement at the consolidated level of the resolution group referred to in 1° of A represents of the consolidated amount of the risk exposure of the resolution group ;
b) Do not comply with the requirement mentioned in 1° of I.
The collège de résolution shall make its observations and reservations known in writing to the resolution authorities mentioned in the first paragraph.
D.-In the event that the matter has been referred to the European Banking Authority as indicated above, the collège de résolution shall take a decision in accordance with the decision adopted by the Authority. In the absence of a decision by the latter within one month of the referral, the decision of the resolution college referred to in B shall apply.
Decisions taken by the resolution authorities of other Member States concerning subsidiaries under their jurisdiction are applicable in France.
The resolution college shall notify:
1° the resolution authority and, where applicable, the parent undertaking in the Union where the latter is not itself a resolution entity of the resolution group concerned, of the joint decisions referred to in A and the decisions referred to in B and C;
2° the subsidiaries under its jurisdiction of the decisions referred to in 2° of A and C.
These decisions shall be subject to regular review.
They may provide that, where this is consistent with the resolution strategy and the resolution entity has not purchased, directly or indirectly, sufficient instruments meeting the minimum capital requirements and eligible commitments of subsidiaries which are not themselves resolution entities, these requirements are partially met by these subsidiaries by means of instruments issued to and purchased by entities which are not part of the resolution group.
VIII.-A.- When the resolution authority of the resolution entity of another Member State refers a matter to the resolution college, in its capacity as resolution authority of subsidiaries under its jurisdiction which are not resolution entities themselves, with a view to reaching a joint decision relating to 1° and 2° of A of VII, the resolution college shall provide all the cooperation required. It shall take into account the level of the minimum capital requirement and eligible commitments applied to the group at a consolidated level in order to determine the level applied to the subsidiaries concerned.
It shall ensure that the assessment of these subsidiaries is taken into account by the resolution authority of the resolution entity when the latter intends to take a decision applicable on a consolidated basis at the level of the resolution group. It shall submit its observations and reservations, if any, in writing.
B.-In the absence of a joint decision within four months, the resolution college alone shall decide on the level of the minimum requirement applied to the subsidiaries under its jurisdiction, after having taken into account the observations and reservations expressed in writing by the resolution authority of the resolution entity of the resolution group and, where applicable, the observations and reservations expressed in writing by the resolution authority on a consolidated basis if different.
In cases where the matter is referred to the European Banking Authority under the conditions mentioned in C of VII, either on its own initiative or on that of the resolution authority of the resolution entity, the college of resolution shall defer its decision pending that of the Authority. It shall take its decision in accordance with the decision adopted by the Authority. In the absence of a decision by the latter within one month of the referral, the decision of the resolution college referred to in the first paragraph shall apply.
C.- Joint decisions taken pursuant to A, decisions taken pursuant to B and decisions taken by the resolution authorities of resolution entities in another Member State shall apply in France.
The resolution college shall notify the subsidiaries under its jurisdiction of the decisions referred to in A which concern them or the decisions referred to in B.
These decisions are subject to regular review.
IX - The collège de résolution, in its capacity as resolution authority for a subsidiary of a resolution group, may fully exempt this subsidiary from the requirement mentioned in I, under conditions defined by decree in the Conseil d'Etat.
In coordination with the college of supervisors:
1° It shall inform the European Banking Authority of the requirements set for subsidiaries falling within its remit pursuant to this article;
2° It shall require and verify that subsidiaries subject to a minimum capital requirement and eligible commitments comply with this requirement and shall take all measures to this end in parallel with the preparation and updating of preventive resolution plans.
X.-The persons referred to in Article L. 613-34 who are subject to the minimum capital requirement and eligible commitments shall communicate to the supervisory board and the resolution board the amounts of such capital and commitments and shall ensure their publication in accordance with the procedures specified by decree of the Conseil d'Etat.
