The relationship between a credit institution and a professional, whether a business or a public body, is governed by a set of rules that go beyond the simple legal or regulatory framework. In addition to laws and regulations, banking ethics impose duties of good conduct, transparency and loyalty. These standards, which are often drawn up by the profession itself under the supervision of the authorities, are designed to establish a climate of trust and legal certainty, a requirement that has been reinforced in the wake of each financial crisis. This article provides an overview of these obligations, a concise guide to understanding the banks' commitments to economic players and territories, the details of which are given in our dedicated publications.
The general framework of banks' duties towards professionals and local authorities
The obligations of credit institutions are not limited to strict compliance with the law. A body of professional standards, variously called "codes of conduct" or "charters", completes the legal and regulatory arsenal. These rules of good conduct, which are distinct from mere morality, have their origins in a growing need for security and confidence, forming an essential foundation of the banking and financial ethics. They define standards of behaviour designed to protect customers and ensure fair practices in a constantly evolving technical sector.
The origin and usefulness of banking ethics rules
Initially, ethics in the banking sector emerged in response to security imperatives, such as verifying a customer's identity when opening an account. Gradually, its scope was extended to protect customers' interests, promoting principles of loyalty and fairness. The usefulness of these standards is manifold: they allow rapid adaptation to technical and international developments, offer flexibility that strict regulation cannot, and fill certain legal gaps. This form of flexible law is an instrument of self-regulation for the profession, laying down the principles of responsible banking practice that are binding on all directors and employees.
The role of the supervisory authorities and the approval of codes of conduct
The development of these rules is not left to the sole discretion of professionals. To ensure that they are relevant and effective, they are monitored by the public authorities. The Minister for the Economy can "approve" certain codes of conduct, making them binding on the entire sector. At the same time, the Autorité de contrôle prudentiel et de résolution (ACPR) and the Autorité des Marchés Financiers (AMF) have the power to "approve" standards proposed by professional associations, sometimes compiled in a compendium, making them binding on their members. This dual validation mechanism ensures that financial ethics serve the general interest and protect customers, under the careful supervision of the regulators.
The bank's relationship code for small businesses and SMEs: a pillar of banking ethics
Adopted in 2006, the Code of Conduct for Relations between Banks and Very Small Businesses is a cornerstone of banking ethics for professionals. Its aim is to build a lasting, transparent relationship based on mutual commitments. It covers fundamental aspects of a company's development, from start-up to expansion, with each transaction governed by clear principles. Moreover, case law has clarified the contours of bank liability in the event of termination of commercial relations abusive, pointing out that failure to comply with this type of code may constitute a fault within the meaning of the Civil Code.
Support for start-ups and access to credit for eirls: a strong commitment
An important aspect of banking ethics concerns support for entrepreneurs. The Charter on access to credit for sole proprietors with limited liability illustrates this commitment. Under this charter, banks undertake not to require collateral from the entrepreneur's personal assets when external guarantee mechanisms are used. The aim of this practice is to encourage entrepreneurs to take the initiative by limiting their personal risk, thus playing a quasi-social role. To facilitate access to finance, various bonding arrangements (such as those offered by Bpifrance, SIAGI or SOCAMA) are often mobilised, each with its own legal issues in terms of guarantees.
Ethics specific to collection services and structured loans
Ethical obligations are adapted to the nature of the services provided. For retailers, banks have adopted the best practice of providing a detailed annual summary of charges for card payment services. This increased transparency enables professionals to better control their costs and compare offers. As far as local authorities are concerned, the financial crisis and the notorious "toxic loans" affair led to the creation of a Charter of good conduct for structured loans. This text prohibits the marketing of the most speculative products, imposes a reinforced duty to advise and introduces a risk scale to help elected representatives make informed decisions. A support fund has also been set up to help the entities most affected.
Preventing and managing conflicts of interest in the bank-company relationship
The wide range of activities carried out by a bank (lending, advisory, investment) can give rise to conflicts of interest, either between the bank and its customer, or between two customers. Regulations, influenced by European directives, require credit institutions to put in place a genuine compliance policy and effective organisational measures to prevent such situations, under the supervision of a compliance officer or compliance director. Exploring conflicts of interest between the bank and its professional customers is crucial to maintaining a relationship of trust and complying with the legal framework. Preventive mechanisms include 'Chinese walls', which ensure a watertight separation between different departments, or the obligation to clearly inform the customer when a conflict cannot be avoided, with each person involved having to show particular care.
Penalties for breaches of ethics and internal control
Failure to comply with ethical rules is not without consequences. In civil law, a breach of a code of conduct may be considered by a judge to be a fault, giving rise to liability on the part of the bank and possible damages, as set out in article 1240 of the Civil Code (formerly art. 1382). On the disciplinary front, the ACPR has an arsenal of measures at its disposal, ranging from warnings to sanctions imposed by its Enforcement Committee, which can go as far as withdrawal of authorisation. These breaches may result in financial penaltiesThis sometimes leads to seizure proceedings to recover the amounts owed. Each establishment must also have a robust internal control system and provide ongoing training for each employee to ensure that these standards are properly applied.
Given the complexity of the rules governing banking ethics and the disputes that can arise from them, the assistance of a professional banker is essential. expert lawyer in banking law is essential to protecting the rights of businesses and local authorities. Our firm will work with you to analyse your situation and defend your interests.
Frequently asked questions
What is the difference between the law and banking ethics?
The law is a set of mandatory rules laid down by the State, while the banking code of conduct covers standards of good conduct, often created by the profession itself. While the law is binding on everyone, breaches of ethical rules may still result in civil or disciplinary penalties.
What is the purpose of the SME Banking Code?
This code aims to establish a relationship of trust and transparency between banks and small and medium-sized enterprises. It sets out commitments on key points such as welcoming new entrepreneurs, the conditions for granting credit and maintaining a balanced dialogue.
Can a bank require a personal guarantee from a sole trader (eirl)?
In principle, and this is a strong commitment on the part of the profession, no. The Charter on access to credit for EIRLs commits banks not to require security over the entrepreneur's personal assets if external guarantee schemes, such as those provided by Bpifrance, are put in place to guarantee the loan.
Are local authorities protected against risky loans?
Yes, a charter of good conduct governs the distribution of structured loans to local authorities. It prohibits the most speculative products, imposes a greater duty to advise on banks and has been supplemented by the creation of a support fund for entities already exposed.
What does a bank risk if it does not comply with its ethical obligations?
There are two types of penalty. A civil fault may be recognised by the courts, leading to the payment of damages. The ACPR, the supervisory authority, can also impose disciplinary sanctions, which may or may not be pecuniary, ranging from a warning to a fine, or even withdrawal of authorisation. The decision is then sent to the institution.
How do banks manage conflicts of interest?
Banks must put in place strict internal procedures, which are regularly monitored, like Chinese walls, to separate services and prevent the circulation of sensitive information. If a conflict cannot be avoided, they must clearly inform the customer concerned.
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