The 2008 financial crisis showed the extent to which difficulties in the banking sector can spill over to the real economy and the financial system. Although French banks proved broadly resilient, French legislators responded by reinforcing the system for preventing and managing banking crises, in line with the reforms being undertaken at the global level. As a consequence, in 2013, the ACPR was made the resolution authority for banks and was given extraordinary powers to deal with – or resolve – bank failures liable to cause disruption in the financial sector or the broader economy.
Under Article L. 613-35 of the French Monetary and Financial Code, the following types of firm fall within the scope of the resolution regime:
- credit institutions supervised directly by the European Central Bank and credit institutions or investment firms that are an important part of the financial system;
- credit institutions and investment firms that are not part of a group subject to consolidated supervision;
- Union parent institutions.
Union parent institutions are financial holding companies (FHCs), mixed financial holding companies (MFHCs) or credit institutions (CIs) or investment firms (IFs) which:
- (i) are subsidiaries of an entity (FHC, MFHC, CI, IF) established outside the European Union, and
- (ii) hold entities (FHC, MFHC, CI, IF) established in the European Union.
The resolution of these entities contributes to the four objectives mentioned in Article L. 613-50 I of the Monetary and Financial Code:
- ensure the continuity of critical functions;
- avoid significant adverse effects on financial stability;
- protect public funds by minimising reliance on extraordinary public financial support;
- protect client funds and assets.