Navigating the jungle of banking ethics rules is no easy task. Between the codes approved by the Minister for the Economy and simple professional recommendations, it is difficult for bank customers to find their way around. These rules form part of the wider framework of the banker's liability. Here is an explanation of the hierarchy of these specific standards and the consequences of non-compliance.
Classification of banking ethics rules
The regulatory landscape of the banking sector is characterised by a complex stratification, ranging from the banking soft law with more stringent obligations. In November 2009, the French Banking Federation (FBF) drew up a three-level typology that provides a better understanding of this diversity.
Professional standards
These rules constitute the first and most restrictive level. They apply to all banking institutions. They may be :
- Approved by the Minister of the Economy after consultation with the Consultative Committee on Financial Legislation and Regulation (CCLRF). These standards are general in scope and form part of the banks' mandatory internal control system.
- Approved by the Autorité de contrôle prudentiel et de résolution (ACPR). Their scope is generally limited to members of the professional organisation that drew them up.
A concrete example is the Banking Accessibility Charter, approved by decree on 18 December 2008, which reinforces the effectiveness of the right to an account and applies to all credit institutions.
Good professional practice
At the intermediate level, good professional practice represents an implementation that is deemed adequate to meet legal or regulatory requirements, but is not the only possible method. They offer banks a certain degree of flexibility in their application.
Take, for example, the annual summary provided to merchants of the sums collected for card payments. Although this practice is not strictly compulsory by law, it is recognised and encouraged by the ACPR because it enables merchants to compare charges between banks more easily.
Simple recommendations
At the lower end of the normative scale, simple recommendations are not, in principle, directly binding. They often represent one-off commitments made by the banking profession in response to a particular situation or to promote a certain professional ethic.
The legal value of the different categories
The binding force of these rules varies considerably depending on their category. Understanding this hierarchy is essential for determining the remedies available in the event of breach of obligations by an establishment.
Binding force of approved codes
The codes of conduct approved by order of the Minister for the Economy have real binding force. Article L. 611-3-1 of the Monetary and Financial Code sets out the approval procedure. Failure to comply with the codes may result in disciplinary action by the ACPR's Enforcement Committee, pursuant to article L. 612-39 of the same code.
An approved code therefore has quasi-regulatory status. It is binding on all the establishments concerned, even those that have not joined the professional association that drew it up.
Scope of the codes approved by the ACPR
The codes of conduct approved by the ACPR have a more limited scope. According to article L. 612-29-1 of the Monetary and Financial Code, this approval makes them mandatory only for members of the professional association that submitted them.
The June 2017 document on the ACPR's transparency policy states that publication of the approval decision makes the approved provisions binding, but only within the scope of the signatory organisation's members.
Uncertain status of recommendations
The simple professional recommendations are in a less clear legal area. As the FBF Ombudsman stated in his 2010 activity report, these texts are "more pragmatic and flexible in their application". However, the ACPR is taking care to ensure that these texts do not misuse terms such as "good practice" or "good conduct" to avoid any confusion with more restrictive standards.
Failure to comply with these recommendations does not lead directly to disciplinary action. However, the ACPR may issue an individual warning to an institution whose practices deviate significantly from the recommendations, especially if these practices jeopardise the interests of customers.
Civil penalties for breaches
Failure to comply with the rules of professional conduct, even those based on "soft law", may have consequences in terms of the bank's civil liability.
The ethical rule as a standard for assessing misconduct
The civil judge may use a professional rule, even one that is not strictly mandatory, to assess whether the bank's conduct was wrongful. In this case, the professional rule serves as a reference, a standard for assessing the conduct that one is entitled to expect from a normally prudent and diligent banker.
This approach is all the more relevant for approved codes. The more the standard has received some form of validation by a public authority (minister, ACPR), the more it constitutes a solid reference for the judge to characterise a fault engaging the civil liability of the institution.
Case law on the consideration of ethical rules
Case law has confirmed that a judge may take into account the rules of professional conduct when assessing misconduct. In two important rulings handed down on the same day (Cass. 1re civ. and Cass. com., 29 April 1997), the Cour de cassation recognised this relevance, albeit with nuances.
The First Civil Chamber simply approved the inclusion of these rules as an element of assessment. The Commercial Chamber, in its formulation, seemed to go further by suggesting that the violation of a rule of professional conduct could in itself establish the existence of a civil fault. This more clear-cut position has been debated in academic circles, with some seeing in it a possible confusion between the professional standard and the law. The approach adopted is therefore that of a body of evidence in which the ethical rule informs the assessment of fault.
No automatic impact on the validity of contracts
It is essential to emphasise that a banking institution's failure to observe a rule of professional conduct does not automatically render the contract (loan, account agreement, etc.) entered into with the customer null and void. This was clearly established in a landmark ruling by the First Civil Chamber on 5 November 1991.
While the judge may draw on professional standards to assess misconduct and award damages, he cannot annul a contractual clause on the sole ground that it contravenes a rule of professional conduct, which does not have the same force as a mandatory legal provision. The main sanction is civil liability.
Disciplinary sanctions
The repressive arsenal at the disposal of the regulatory authorities is particularly well developed in the banking sector, thus ensuring a certain degree of transparency. application of the rules.
Administrative police measures
Before imposing sanctions, the ACPR has administrative police powers to correct non-compliant behaviour:
- Warning Article L. 612-30 of the Monetary and Financial Code allows the ACPR to issue a warning to an institution whose practices compromise the interests of its customers or deviate from best practice.
- Formal notice Article L. 612-31 authorises it to give formal notice to an institution to take, within a specified period, any measures necessary to comply with its legal, regulatory or ethical obligations (if they are approved or homologated).
The aim of these preventive measures is to ensure that breaches are rectified quickly, without necessarily initiating formal sanction proceedings.
Disciplinary sanctions by the ACPR
In the event of proven and persistent breaches, in particular failure to comply with the "approved codes of conduct applicable to the profession", the ACPR's Enforcement Committee may impose various disciplinary sanctions. Article L. 612-39 of the Monetary and Financial Code lists a range of possible sanctions, graduated according to the seriousness of the offence:
- Warning
- Reprimand
- Prohibition on carrying out certain operations
- Restrictions on the exercise of the activity
- Temporary suspension of one or more directors (with or without the appointment of a provisional administrator)
- Compulsory resignation of one or more directors
- Partial or total withdrawal of approval (or removal from the list of approved persons)
In addition to or instead of these penalties, the Commission may impose a financial penalty. This can amount to up to €100 million or 10% of the institution's annual net turnover.
Penalty procedure and possible appeals
Proceedings before the ACPR's Enforcement Committee are adversarial, guaranteeing the defendant institution's rights of defence. Decisions are generally made public, barring exceptions (risk of serious market disruption, disproportionate damage).
The decisions of the Enforcement Committee are not final. They may be appealed before the Conseil d'État. This remedy ensures judicial review of the sanctions imposed.
It is important to remember that for simple good practices or recommendations that have not been homologated or approved, the ACPR prefers to issue a warning. It is only in the event of persistent non-compliance with this warning that disciplinary proceedings may be considered on this basis.
If you are faced with a breach of obligations of your bank, or if you wish to understand the scope of a specific ethical rule, the assistance of a specialist can help. lawyer in banking sanctions can be invaluable in analysing your situation and defending your interests. Do not hesitate to contact our firm for an assessment of your case.
Sources
- Monetary and Financial Code, articles L. 611-3-1, L. 612-1, L. 612-29-1, L. 612-30, L. 612-31, L. 612-39
- Explanatory document on "the transparency policy of the Autorité de contrôle prudentiel et de résolution", June 2017.
- JurisClasseur Droit bancaire et financier, Fasc. 140: Professional duties of credit institutions - Ethics in banking transactions - Conflicts of interest
- Cass. 1re civ., 18 March 1997, no. 95-12.576 and Cass. com., 29 Apr. 1997, no. 94-21.424
- Cass. 1st civ. 5 Nov. 1991, JCP E 1992, II, 255
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