Banking ethics rules: specific protection for professionals and local authorities

Banking is not just a matter for individuals. Businesses and local authorities, major economic players, also benefit from specific protections in their dealings with financial institutions. A set of ethical rules, complementing the legal framework, aims to balance this relationship and guarantee fair and transparent practices. These professional standards, which are sometimes little known, are nonetheless essential in defending the rights of these entities.

1. Greater protection for retailers and businesses

Professionals, whether self-employed traders or companies, interact with their bank on a daily basis for a variety of transactions. This relationship is governed by a number of ethical rules.

Card payment services: greater transparency

For retailers accepting card payments, clarity of charges is essential. French banks have undertaken to provide a detailed annual summary of the amounts charged for these services. This document must clearly distinguish :

• Contracts linked to each card network.
• The volume of transactions processed.
• The total amount of annual commissions.
• The cost of optional services (terminal hire, assistance).

This "good professional practice", encouraged by the authorities, is designed to give retailers a better understanding of their invoicing and make it easier to compare offers from different banks.

Code for relations between very small banks and SMEs: a framework for trust

Adopted in 2006 under the aegis of the French Banking Federation (FBF), the "Code des relations Banque TPE/PME" aims to structure exchanges between banks and small and medium-sized enterprises. It is based on three principles:

• A special welcome for business start-ups and takeovers.
• Promoting a banking relationship defined as "solid, sustainable and balanced".
• A transparent description of the credit granting process.

Although it is a voluntary commitment by the profession and not a strict regulatory obligation, this code provides a useful benchmark for assessing the quality of the banking relationship. It emphasises the importance of clear communication and mutual understanding of expectations. The responsibility towards professionals may be incurred if the bank fails to meet its obligations to provide information in this respect.

Access to credit for EIRLs: a step forward for sole traders

The creation of the status of Sole Proprietor with Limited Liability (EIRL) has necessitated changes to banking practices. The charter on access to credit for EIRLs, signed on 31 May 2011, commits banks not to systematically require guarantees on the entrepreneur's personal assets.

Article 2 of this charter is particularly important: the banks undertake not to request personal or real security over private assets if professional guarantee solutions (such as those offered by mutual guarantee companies) can be implemented. This provision is intended to preserve the separation of assets that is the aim of the EIRL status, and provides significant, albeit sometimes underestimated, protection for these entrepreneurs.

2. Specific rules for local authorities

Because of their nature and their public-interest missions, local authorities are also subject to specific rules of banking ethics, particularly with regard to borrowing.

Charter of good conduct on structured loans: learning from the past

The "toxic loans" crisis, which severely affected the finances of many local authorities, led to the adoption in 2010 of a charter of good conduct between associations of elected representatives and credit institutions. This charter aims to provide a stricter framework for the marketing of complex financial products:

• Ban offering products that are clearly speculative and unsuited to the needs and capacities of local authorities.
• Enhanced information obligation on the risks inherent in structured loans, including worst-case scenarios.
• Setting up a product classification according to a transparent risk scale ("Gissler charter").
• Reinforcement of the duty to advise the banks, which must ensure that the mechanisms are properly understood by the elected representatives and financial departments of local authorities.

An interministerial circular dated 25 June 2010 sets out the terms and conditions for applying this charter, demonstrating the public authorities' determination to clean up practices.

Support fund and regulatory framework for borrowing

Faced with persistent difficulties, a specific support fund was set up by the Act of 26 July 2013 to help local authorities get out of the riskiest loans, by covering part of the early repayment indemnities. The operation of this fund has been detailed in several decrees (in particular D. no. 2014-444 and D. no. 2015-619).

At the same time, Decree 2014-984 of 28 August 2014 introduced a much stricter regulatory framework for borrowing conditions for local authorities and their groupings. This text classifies the different types of loans according to their level of risk and prohibits or severely limits access to the most dangerous categories. This regulation marks a major change, moving away from a logic of simple good conduct to a genuine legal obligation for banks and local authorities.

3. Banking mobility and after-sales service quality for professionals

Making it easier to switch banks and guaranteeing high-quality monitoring are key issues for companies.

Commitments to facilitate banking mobility

As early as 2004, the banking profession made commitments to simplify banking mobility for businesses:

• Account closure fees abolished.
• Quick delivery (at a reasonable cost) of the list of recurring transactions (transfers, direct debits).
• Provision of a "mobility guide".

These initial measures were deemed insufficient.

Professional standards for account changes (2008)

Under European impetus, new standards were adopted in 2008 to automate and accelerate the process:

• The new bank takes care of the administrative formalities on behalf of the business customer.
• Notification of changes in direct debit to creditors/debtors within 5 working days.
• Standing orders set up within 5 days.
• The old account is closed within 10 working days (provided there are no outstanding transactions).

Despite these standards, difficulties persist in practice, often linked to the complexity of companies' recurring transactions. The CCSF and the ACPR are closely monitoring the application of these commitments.

4. Maintaining banking services in difficult economic situations

Continuity of banking services is vital for businesses and professionals facing difficulties.

Continuity of services in the event of overindebtedness (professionals)

Although over-indebtedness mainly concerns private individuals, similar situations can affect sole traders. The spirit of the professional standards approved by the decree of 24 March 2011 (initially set out for individuals in article L. 312-1-1 of the Monetary and Financial Code) is to ensure :

• Clear information on how the business account works.
• Maintaining banking relationships as far as possible.
• A range of services adapted to the situation of fragility.
• Any adjustment to the authorised overdraft, in agreement with the customer.

Banking inclusion and prevention charter

The banking inclusion charter (approved by order of 5 November 2014), although focused on individuals, contains principles that can be transposed to vulnerable professionals: early detection of difficulties, support, training for bank advisers.

Adjustment of overdraft in the event of difficulties

A commitment made by the CCSF in 2010 concerns the adjustment of the overdraft granted to business customers when their economic situation deteriorates. In theory, the bank should adjust the overdraft line (upwards or downwards) in line with the company's actual needs and capacity.

However, this commitment is often difficult to enforce in practice, as banks tend to reduce or withdraw credit lines at the first sign of difficulties, which can worsen the company's situation. The responsibility towards professionals may then be questioned if the withdrawal is deemed abusive.

Navigating these rules and charters requires a certain amount of expertise. Visit ethical rules are a complex mix of voluntary commitments and regulatory obligations.

If you are a professional or represent a local authority and are experiencing difficulties in your banking relationship, or if you want to anticipate the risks associated with complex financial transactions, the assistance of a corporate banking lawyer is recommended. Our firm can analyse your situation in the light of these specific rules and defend your interests.

Sources

• Monetary and Financial Code, in particular articles L. 312-1-1, L. 312-1-3, L. 312-1-5.
• Law no. 2013-672 of 26 July 2013 on the separation and regulation of banking activities.
• Decree no. 2014-444 of 29 April 2014 on the support fund for local authorities.
• Decree no. 2014-984 of 28 August 2014 on the framework for local authority borrowing conditions.
• Order of 24 March 2011 approving the professional standard on the maintenance of banking services.
• Order of 5 November 2014 approving the banking inclusion and over-indebtedness prevention charter.
• Charter on access to credit for sole traders (31 May 2011).
• Code des relations Banque TPE/PME (FBF, 2006).
• Charte de bonne conduite relative aux opérations de crédit des collectivités locales (Gissler Charter).