The French banking and financial sector is characterised by a dense ecosystem and rigorous regulation. For businesses and individuals alike, understanding who is authorised to provide banking services is an essential prerequisite. The term "credit institution" covers a wide range of situations, shaped by history, national law and European directives. The aim of this article is to provide a clear overview of the different institutions that make up the banking landscape, their missions and the framework that governs their activities. This is a high-level summary, and each point can be explored in greater depth in the dedicated articles. For any questions relating to our expertise in banking and financial lawIf you have any questions, please do not hesitate to contact us.
What is a credit institution? Definition and changes to the legal framework
The unitary definition in the Monetary and Financial Code
The legal definition of a credit institution is given in the French Monetary and Financial Code. According to article L. 511-1, a credit institution is a legal entity whose business consists, as a regular occupation, in receiving repayable funds from the public and granting loans. The combined exercise of these two activities is what underpins the status, even though the institution may also provide payment services.
The legacy of the 1984 Banking Act and recent changes
The current framework is the heir to the major banking law of 1984, which unified the status of banks and established the principles of the banking monopoly. Prior to this date, the system was segmented, with separate rules for deposit banks, investment banks and long- and medium-term credit institutions. The 1984 Act introduced the principle of universality, enabling a single institution to offer a full range of services.
The influence of European law on the French banking system
For several decades, French banking law has been profoundly influenced by European directives. The construction of the single market in financial services has led to a harmonisation of regulations. The aim is to ensure a level playing field and to strengthen financial stability across the EU, in particular through the creation of a single banking supervisor.
The core functions of credit institutions
Banking operations at the heart of the business (receipt of funds, credit transactions, means of payment)
The business of credit institutions is based on three fundamental banking operations. The first is receiving funds from the publicThe second is the granting of credit, which is the act whereby an institution makes funds available to a third party. The second is the granting of credit, which is the act whereby an institution makes funds available to a third party. Finally, the management and the provision of means of paymentThese include bank cards and credit transfers.
Related and non-banking activities: controlled diversification
In addition to banking transactions, the law authorises credit institutions to carry out so-called "related" activities. These include, for example, asset management advice, foreign exchange transactions and insurance brokerage. They may also develop non-banking activities, such as safe-deposit box rental, provided these remain ancillary to their main business.
Equity investments in non-financial companies
A credit institution may take equity stakes in existing companies. However, this ability is strictly controlled to limit the risk of conflicts of interest and to prevent an incident in a non-financial subsidiary from destabilising the institution's banking business.
Classification of credit institutions: a diversity of statuses
Universal banks and their specific features
Strictly speaking, banks are the only credit institutions authorised to carry out all banking transactions without restriction. They are the universal banking model, able to offer all services to all categories of customer (individuals, businesses, etc.).
Mutual and cooperative banks: between tradition and modernity
Mutual and cooperative banks, such as Crédit Agricole and the BPCE group, have a special governance structure. The capital is held by their customer-members, who take part in decision-making. To find out more the specific characteristics of mutual and cooperative banksThis dual role of customer and owner needs to be understood.
La Banque Postale and the Caisses d'Épargne et de Prévoyance: key players
These institutions have a strong historical status. La Banque Postale, which grew out of the financial services of La Poste, is recognised for its role in providing access to banking services. The Caisses d'Épargne, for their part, have long been major players in the collection of popular savings and are now an integral part of a major banking group.
The Caisses de Crédit Municipal: a historic social role
Commonly referred to as "ma tante", the Caisses de Crédit Municipal are public social welfare institutions run by local authorities. Their historic and best-known activity is pawnbroking, which gives them a monopoly. They can also offer other local banking services.
Finance companies and specialised financial institutions: limited scope of action
Finance companies and specialised financial institutions (SIFs) are not banks in the full sense of the term. Their authorisation limits them to certain specific activities, such as consumer credit, leasing and factoring. They are generally not authorised to receive funds on demand from the public.
Entities excluded from banking status: an essential distinction
Organisations partly excluded: financial institutions, IOBSPs, money changers, electronic money
Some players are authorised to carry out transactions that are similar to banking services without actually being credit institutions. This is the case for intermediaries in banking transactions (IOBSP), manual money changers or even electronic money and payment institutionswhich operate under a separate status and licence.
Entities totally excluded: Treasury, Banque de France, Caisse des Dépôts
Certain large public institutions are not considered to be credit institutions because of their nature and their public interest missions. The French Treasury, Caisse des Dépôts et Consignations and the role and status of the Banque de France place it outside the field of traditional competition.
Licensing and the banking monopoly: conditions for admission to the profession
Conditions for granting and withdrawing approval
No one may act as a credit institution without having obtained authorisation issued by the Autorité de contrôle prudentiel et de résolution (ACPR), after consulting the European Central Bank (ECB). The conditions are strict: appropriate legal form, minimum capital, reputable and competent management and a viable business plan. For a detailed overview, see our article on banking authorisation explained.
The scope of the banking monopoly and its exceptions
Anyone other than a credit institution is prohibited from carrying out banking transactions on a regular basis. This "banking monopoly" is designed to protect the public and the stability of the system. There are, however, exceptions, such as participative financing and payment terms between businesses. Our dedicated article details the scope of and exceptions to the banking monopoly.
Supervision and regulation of credit institutions
The role of the banking authorities: ACPR, ECB and Haut Conseil de Stabilité Financière (High Council for Financial Stability)
The sector is supervised by several bodies. The ACPR is the French supervisor. role and missions cover the supervision of banks and insurance companies. At European level, the ECB directly supervises the largest banks under the Single Supervisory Mechanism (SSM). The Haut Conseil de Stabilité Financière (HCSF), for its part, prevents systemic risks.
Prudential and accounting rules: guaranteeing financial stability
Credit institutions are subject to very strict management rules, known as prudential rules (solvency ratios, liquidity ratios, etc.). These standards, largely derived from the Basel agreements, are designed to ensure that banks have sufficient capital to cover any losses and thus guarantee the safety of deposits. To find out more, read our guide on prudential rules and control mechanisms.
Support for credit institutions from Solent Avocats
The complexity of the regulatory framework demands constant vigilance on the part of players in the sector. A firm of lawyers specialising in banking law can provide essential assistance, whether it's applying for authorisation, structuring new products, managing litigation or ensuring compliance with new directives. It also sheds light on the dynamics of cooperation and competition between credit institutionsThis is a major challenge in a fast-changing market.
Credit law is a technical field that is constantly evolving. For an analysis of your situation and advice tailored to your projects, contact our team of lawyers.
Frequently asked questions
What is the main difference between a bank and a finance company?
A bank may carry out all banking transactions, including receiving sight deposits from the public. A finance company has a more restricted licence, often limited to a specific type of credit, and generally cannot receive funds from the public.
Who authorises a company to become a bank in France?
Approval is granted by the Autorité de Contrôle Prudentiel et de Résolution (ACPR), an independent administrative authority attached to the Banque de France. For the largest institutions, the decision is taken by the European Central Bank (ECB).
What does "banking monopoly" mean in simple terms?
This means that only companies with the status of credit institution have the right to carry out banking transactions (receive funds from the public, grant loans) on a regular basis.
Are all banks in France supervised by the same authority?
No, supervision is shared. The largest French banks are supervised directly by the European Central Bank (ECB), while the others are supervised by the national authority, the ACPR, under the indirect supervision of the ECB.
Can any company receive funds from the public?
No, receiving repayable funds from the public is a banking transaction that falls within the monopoly of credit institutions. There are very few exceptions, strictly regulated by law.
Why is European law so important for French banks?
Because France is part of the European single market. European law aims to harmonise the rules between Member States to guarantee healthy competition, protect consumers and ensure the stability of the financial system throughout the Union.
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