The failure of a bank or insurance company is a dreaded event that can cause legitimate concern among individuals and business owners. Contrary to popular belief, the failure of a financial institution does not mean the automatic loss of funds or customer rights. Specific and robust protection mechanisms exist, designed to preserve the confidence and stability of the system. These mechanisms are part of a global and specific legal framework for regulated companieswhich derogates in many respects from the ordinary law governing companies in difficulty. Understanding how this protection works is essential for any depositor, investor or policyholder.
The foundations of customer protection
The protection of customers of companies in the financial sector is not covered by ordinary insolvency law. It is governed by specific legislation with a dual objective: to prevent a crisis from spreading to the entire system and to ensure that customers' assets are repaid within set terms and deadlines.
The post-crisis context and European objectives
The global financial crisis of 2008, marked by the collapse of Lehman Brothers, acted as an electroshock. It highlighted so-called systemic risk, i.e. the risk that an isolated failure could cascade and destabilise the entire economy, underlining the importance of mechanisms for securing financial markets and payment systems. To ensure that such a scenario does not happen again, and that taxpayers no longer have to bear the cost of rescuing banks, the European Union has radically overhauled its legislation. Directives such as the Directive on the Recovery and Resolution of Credit Institutions (BRRD) have introduced administrative resolution procedures. These make it possible to manage the failure of a bank in an orderly fashion, by having its shareholders and some of its creditors contribute first, a mechanism known as internal bail-in (or "bail-out"). bail-in). At the same time, the deposit guarantee framework has been standardised and strengthened to reassure savers and prevent panic movements (bank run).
Guarantee mechanisms: compensation outside the insolvency proceedings
The central pillar of customer protection is based on guarantee funds. The aim is not to draw on the assets of the failing institution to compensate customers, but to use a mutualised insurance mechanism, financed upstream by contributions from all institutions in the sector. These funds act as an external mechanism to the compulsory liquidation procedure. Their intervention is triggered by the supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR) in France, when it finds that the institution is no longer in a position to return its customers' assets. This approach enables compensation to be paid quickly and separately from the fate of the company's other creditors.
The Deposit Guarantee and Resolution Fund (FGDR)
The FGDR is the main player in the protection of customers of banks, finance companies and investment firms in France. It is responsible for managing several mechanisms, each with its own scope and compensation ceilings.
Compensation scope and ceilings
The FGDR covers several types of assets, with different protection rules. It is essential to distinguish between them.
The deposit guarantee covers all sums left in current accounts, term accounts, passbook savings accounts (excluding Livret A, LDDS and LEP passbook savings accounts, which are guaranteed by the State) and home savings plans (PEL). Compensation is capped at €100,000 per depositor and per institution. This ceiling applies to all accounts held by the same customer with the same bank. For a joint account, each joint holder has his or her own ceiling of 100,000 euros.
The securities guarantee protects investors whose financial instruments (shares, bonds, UCITS units) held in a securities account or a PEA (Plan d'Épargne en Actions) become unavailable. The compensation ceiling is €70,000 per investor and per institution.
The surety guarantee covers regulated surety commitments made by professionals (builders, estate agents, etc.) to a credit institution. Compensation is 90 % of the amount of the guarantee, with a minimum uncompensated amount of 3,000 euros.
Certain deposits and instruments are explicitly excluded from the guarantee. This is the case, for example, for deposits between banks, deposits of insurance organisations or certain public entities.
Compensation process and deadlines
The process is initiated by a decision of the ACPR, which notes the "unavailability of deposits" and refers the matter to the FGDR. From this point onwards, the legal deadlines for compensation start to run. For the deposit guarantee, this period is particularly short: 7 working days. The FGDR then contacts the customer directly to pay out the compensation, with no initial action required on their part. Once the compensation has been paid, the FGDR is subrogated to the customer's rights. In practical terms, this means that the fund takes the customer's place as a creditor in the institution's liquidation proceedings, in an attempt to recover the sums advanced from the bank's remaining assets. For securities guarantees, the compensation period is longer, generally three months, due to the complexity of the checks to be carried out.
Insurance guarantee funds (FGAP and FGAO)
The insurance sector also has its own guarantee funds to protect policyholders in the event of a company's default. Their operation and scope of intervention are adapted to the specific features of insurance contracts.
The guarantee fund for policyholders against the failure of life and health insurance companies (FGAP)
The FGAP intervenes in the event of the failure of a life insurance or capitalisation company, or one covering risks of bodily injury (accidents, illness). Its primary mission is to preserve the continuity of contracts. Referred to by the ACPR, the FGAP issues a call for tenders to transfer the defaulting company's portfolio of policies to one or more other companies. If the transfer is successful, the contracts continue with the transferee. If no transfer is possible, the FGAP compensates policyholders directly. Compensation is capped at 70,000 euros per policyholder and per company, for all their policies. This ceiling is raised to 90,000 euros for incapacity or disability annuities and benefits arising from death insurance contracts.
The compulsory insurance guarantee fund (FGAO)
The FGAO has a more specific role. If an insurer defaults, it intervenes to guarantee the payment of compensation due to victims under insurance contracts that are compulsory by law. The two main areas concerned are motor third-party liability insurance and building damage insurance. The FGAO's mission is to ensure that accident victims and clients faced with serious defects are compensated, even if the insurer of the responsible party or builder has gone bankrupt. The FGAO takes the place of the defaulting insurer in honouring its commitments. Compensation is limited to 90 % of the compensation that would have been due, except for bodily injury in motor insurance, where it is paid in full.
Techniques for preserving clients' rights in insolvency proceedings
In addition to the external compensation provided by the guarantee funds, specific rules protect customers at the very heart of the company. collective proceedings applicable to financial entities. These techniques depart from ordinary law to simplify the procedures for customers and secure their assets.
Exemption from declaration for financial deposits and securities
Under ordinary law, all creditors of a company in liquidation must declare their claim to the liquidator within a strict time limit if they hope to be paid. This obligation can be a source of errors and oversights. For customers of banks and investment firms, the law provides a major protection: exemption from the obligation to declare claims. Article L. 613-30 of the Monetary and Financial Code states that depositors and investors whose assets are covered by a guarantee mechanism do not have to make this declaration. It is the FGDR or the liquidator, on the basis of the institution's accounting statements, that draws up the list of customer claims. This system considerably reduces the administrative burden on individuals and SMEs, and secures their rights within the procedure.
Protection of funds held by payment institutions
Payment institutions, which are not banks, are subject to very strict fund protection rules. The law requires them to "ring-fence" funds received from their customers. This means that users' money must be kept completely separate from the institution's own funds. This segregation can take two forms: either a deposit in a dedicated account opened in a bank, or the taking out of an insurance policy or equivalent guarantee. In the event of insolvency proceedings against the payment institution, these segregated funds do not form part of the assets to be shared between all creditors. They are allocated on a priority basis to customer restitution. This mechanism, provided for in article L. 522-17 of the French Monetary and Financial Code, is a fundamental guarantee for users of these services.
The failure of a financial institution is an event governed by a complex and protective legal arsenal. Between external guarantee funds and overriding mechanisms within the procedures themselves, customer protection is a priority. However, the diversity of ceilings, guarantee perimeters and applicable procedures can make the situation difficult to grasp. To navigate these procedures and assert your rights, you need the assistance of an expert. lawyer specialised in insolvency proceedings is a decisive asset in securing your interests.
Sources
- Monetary and Financial Code, in particular articles L. 312-4 et seq. (Deposit guarantee and resolution fund), L. 322-1 et seq. (Securities guarantee), L. 522-17 (Protection of payment service users' funds), L. 613-30 (Exemption from declaration of claims).
- French Insurance Code, in particular articles L. 421-1 et seq (Fonds de garantie des assurances obligatoires de dommages), and L. 423-1 et seq (Fonds de garantie des assurés contre la défaillance des sociétés d'assurance de personnes).
- Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit-guarantee schemes.
- Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms.
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