The banking sector operates on an apparent paradox: intense competition coexists with indispensable collaboration. Credit institutions, while rivals on the market, are forced to cooperate to ensure the operation of common infrastructures and to carry out large-scale financial operations. This duality places the players in the sector in a complex legal environment, at the crossroads of banking law and competition law. Understanding this ecosystem is a prerequisite for any institution wishing to develop in complete security. While the general framework for credit institutions defines their individual obligations, the interactions between them raise specific issues that require constant vigilance. Navigating these regulatory waters requires a detailed analysis, based on our expertise in banking and financial law.
Cooperation between credit institutions: a sectoral imperative
Far from being mere competitors, credit institutions are obliged partners. The very nature of their activities, notably the management of financial flows and the financing of the economy, requires structured forms of cooperation. This cooperation is not only a market practice, but also a necessity for the stability and efficiency of the financial system as a whole. It takes the form of formal structures and joint operations which, while indispensable, must remain within the limits set by the law so as not to drift into illicit agreements.
Professional associations: collective representation (FBF, AFB)
Credit institutions are grouped together within powerful professional organisations that act as the voice of the sector. In France, the Fédération Bancaire Française (FBF) and the Association Française des Banques (AFB) are key players. Their mission is to represent the collective interests of their members to public authorities, regulators and the general public. These associations play an essential role in developing industry policy, negotiating collective bargaining agreements and promoting the Paris financial centre.
They also help to define common standards and good practice, for example in the areas of payment security and customer relations. While this standardisation function is legitimate and even encouraged, it represents a first potential point of friction with competition law. The recommendations or standards issued by a professional organisation must never become a disguised means of neutralising competition in essential areas such as prices, commercial conditions or innovation.
Banking pools: structured financing and risk sharing
For large-scale projects, such as the financing of a major infrastructure or the acquisition of a large company, it is rare for a single bank to assume the entire risk. This is where banking pools, also known as syndicated loans, come in. This technique allows several credit institutions to join forces to grant a single, large-scale loan. The operation is organised by one or more banks, known as arrangers or lead arrangers, which structure the loan and invite other institutions to participate.
There are several ways of doing this. Prior consultation between the banks is necessary to define the terms of the financing. Syndication then formalises the relationship between the lenders and the borrower in a single credit agreement. Another technique, sub-participation, allows a bank to transfer part of its risk to other institutions on a confidential basis, without the borrower being informed. Although these arrangements are common and necessary, they involve exchanges of information between competitors. There is a fine line between the legitimate cooperation required for the transaction and an agreement on credit terms that could be sanctioned.
Competition law applicable to the banking sector
The principle is clear: the banking sector is not a lawless area when it comes to competition. Credit institutions are businesses like any others and, as such, are fully subject to the rules designed to ensure that markets operate competitively. However, the application of this law takes into account the specific characteristics of a highly regulated sector, where systemic stability is a major objective. The French and European authorities keep a close watch on practices that distort competition.
French competition law: anti-competitive practices and mergers
Under domestic law, the French Commercial Code prohibits two main types of behaviour. Firstly, anti-competitive practices, which include unlawful agreements (article L. 420-1) and abuse of a dominant position (article L. 420-2). A cartel may be deemed to exist if competing banks agree, even informally, on elements of their commercial strategy, such as interest rates, commissions or customer allocation. The Autorité de la concurrence has already sanctioned banks for exchanging sensitive commercial information or agreeing on interbank commissions.
French law also controls mergers. When a proposed merger or acquisition between banks reaches certain turnover thresholds, it must be notified to the Autorité de la Concurrence. The Autorité examines whether the transaction is likely to have a substantial impact on competition, in particular by creating or strengthening a dominant position. Managing relationships between institutions can also raise complex issues, as demonstrated by the rules governing managing conflicts of interest in the banking sectorwhich are designed to preserve the integrity of the market.
Community competition law: direct and widespread application
European Union competition law applies directly to French credit institutions. Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) are the fundamental instruments. Article 101 TFEU prohibits agreements and concerted practices between undertakings which have as their object or effect the restriction of competition. Article 102 TFEU punishes the abuse of a dominant position.
The European Commission has extensive powers of investigation and sanction. It has carried out numerous investigations in the financial sector, notably into the manipulation of reference rates (Libor, Euribor) and agreements relating to derivatives. These cases have shown that even technical cooperation, deemed necessary by the industry, can be reclassified as an illegal cartel if it is not properly supervised. European case law has consistently held that the regulated nature of the banking sector does not justify a blanket exemption from competition rules.
Banking merger control: specific features and European thresholds
When a merger (merger, acquisition) between banks has a European dimension, the European Commission has jurisdiction to examine it. This jurisdiction is determined by the high turnover thresholds set out in the European Merger Regulation. The purpose of the Commission's analysis is to determine whether the transaction would significantly impede effective competition in the internal market or a substantial part of it.
The examination takes into account the specificities of the banking sector. The Commission is analysing the effects of the merger on different product markets (retail banking, investment banking, asset management, etc.) and different geographical areas. It pays particular attention to the consequences for end consumers, both private individuals and businesses. The European Central Bank (ECB) is also being consulted on the prudential aspects of the transaction, but the competitive analysis remains the exclusive responsibility of the Commission.
The balance between cooperation and competitive regulation
The challenge for public authorities and regulators is to maintain a delicate balance. The aim is to allow interbank cooperation that is beneficial to the economy and stability, while preventing cooperation that is detrimental to competition, innovation and, ultimately, customers. This ongoing trade-off lies at the heart of regulation of the sector.
The challenges for financial stability
Excessive competition can sometimes lead banks to take excessive risks in order to maintain their margins, thereby threatening their own soundness and, by domino effect, the stability of the entire system. Conversely, a lack of competition leads to rent-seeking, lower efficiency and higher costs for users of banking services. Regulation must therefore draw a line. It authorises and provides a framework for cooperation in areas such as payment systems and market infrastructures, where cooperation is a public good. On the other hand, it is intransigent on agreements affecting strategic commercial variables.
The role of the regulatory authorities (ACPR, Autorité de la concurrence, European Commission)
The banking sector is supervised by a complex institutional structure in which several authorities interact. The main task of the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which is part of the Banque de France, is to ensure that banks are financially sound. Its approach is primarily prudential. The Autorité de la Concurrence is the market watchdog, tracking down and punishing cartels and abuses of dominant positions. Finally, at European level, the European Commission (for competition) and the ECB (for prudential supervision of the largest banks) have key responsibilities.
These authorities work closely together. A proposed banking merger, for example, will be subject to a competition analysis by the Autorité de la concurrence or the Commission, but the ACPR and the ECB will also give an opinion on the financial stability aspects. This interaction is fundamental to the consistent application of prudential rules and banking supervision while ensuring compliance with competition law.
solent avocats' legal expertise in interbank relations
The line between legitimate interbank cooperation and anti-competitive practice is often difficult to draw. Exchanges of information within the framework of a banking pool, standards defined by a professional association or discussions in preparation for a joint operation can all present significant legal risks. A case-by-case analysis is essential to secure these practices. The complexity of the regulations requires support from lawyers who are familiar with both the subtleties of banking law and the requirements of competition law.
Our firm assists credit institutions in structuring their relationships with their peers. Whether to validate the compliance of a cooperation agreement, to support a merger operation or to defend an institution in the context of an investigation by the competition authorities, our team provides a clear vision of the risks and solutions. For an in-depth analysis of your situation and tailored advice, contact our team of lawyers with expertise in banking and finance law.
Sources
- French Commercial Code, in particular Articles L. 420-1 et seq. on anti-competitive practices.
- Monetary and Financial Code.
- Treaty on the Functioning of the European Union (TFEU), in particular articles 101 and 102.
- Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.
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