Understanding banking secrecy in France

Banking secrecy is often seen as a bulwark against curiosity, including that of the state. This ancient principle, whose origins go back to centuries-old commercial practices designed to protect business confidentiality, was not formally enshrined in France until 1984. However, it is less protective than is commonly believed, being more relative than absolute.

Introduction to the concept of banking secrecy

Banking secrecy aims to protect both private and public interests. It guarantees the confidentiality of information held by credit institutions about their customers. This protection meets a fundamental need to preserve financial privacy, but also to maintain confidence in the banking system, an essential cog in the economy. This confidentiality is all the more important given that legislation sometimes requires individuals and businesses to use banking services.

Legal basis

Article L. 511-33 of the French Monetary and Financial Code forms the basis of French banking secrecy. This article states that "any member of a board of directors or, as the case may be, of a supervisory board, and any person who in any capacity participates in the management of a credit institution or finance company [...] or who is employed by one of them, is bound by professional secrecy". [cite: 2035]

Violation of this obligation is punishable under article 226-13 of the French Criminal Code, which carries a penalty of one year's imprisonment and a fine of €15,000.

However, unlike other professional secrecy, such as medical or legal secrecy, banking secrecy is not absolute. It is relative [cite: 2142], and Article L. 511-33 itself lists some notable exceptions. It states that "professional secrecy may not be invoked against the Autorité de contrôle prudentiel et de résolution, the Banque de France or the judicial authority acting in the context of criminal proceedings". Other exceptions exist, in particular for the tax authorities, as we shall see. The banking secrecy and tax authorities have a complex relationship.

Scope of banking secrecy

To fully understand this principle, we need to identify the people who are bound by it and the information it covers.

Persons bound to secrecy

Are legally bound to banking secrecy [cite: 2035] :

• Members of the Boards of Directors and Supervisory Boards.
• Any person involved in the direction or management of the establishment (de facto or de jure directors).
• Employees of the establishment, whatever their hierarchical level or the nature of their employment contract.
• Certain external parties receiving confidential information in the context of specific operations listed by law (for example, during the assignment of receivables or outsourced service contracts). In such cases, these third parties are themselves required to maintain the confidentiality of the information they receive.

Case law has confirmed that this obligation continues even after the employee has left the establishment (Cass. soc., 30 June 1982). The duty of discretion survives the employment relationship.

Information covered

Banking secrecy protects confidential information received by a banking institution in the course of its business [cite: 2048]. To be covered, such information must :

1. Having a character confidential They must not be public knowledge or publicly accessible.
2. Having been received by the establishment in a professional capacity It must have been obtained in the context of the banking relationship or the institution's business. Information obtained on a purely personal basis by an employee is not covered.
3. Be sufficiently precise to prejudice, if disclosed, the business secrecy or private life of the customer or a third party.

In practice, the following are typically covered by banking secrecy:

• The very existence of accounts opened in a person's name.
• The balance of the accounts (credit or debit).
• Details of account transactions (transfers, direct debits, deposits, withdrawals).
• Information on loans granted (amount, term, interest rate, guarantees).
• The identity of authorised representatives with power of attorney over an account.
• The identity of people who have stood surety for a customer.
• Asset or personal information entrusted by the customer to his banker.

An important ruling by the Cour de cassation even specified that the back of a cheque, which can reveal the identity of the beneficiary via endorsements, is covered by banking secrecy, including with regard to the drawer of the cheque himself (Cass. com. 13 June 1995).

Distinction between secrecy and commercial information

An important nuance must be made: banking secrecy does not prohibit banks from providing what is known as "commercial information" [cite: 2115]. This is general economic information about a customer's financial situation or apparent solvency, often requested by other companies before entering into a business relationship.

The Cour de Cassation (French Supreme Court) provided a framework for this practice in a ruling dated 18 September 2007, stating that "the obligation of professional secrecy prohibits the provision to a customer of information other than purely commercial information of a general and economic nature concerning the solvency" of another customer.

This information must be :

• Stay general and not to divulge precise encrypted data or specific confidential information.
• Supplied with prudence and objectivityThis is a measured opinion, not an absolute certainty.
• Don't be deceptive.

By providing commercial information, the liability and banking secrecy of the establishment. Inaccurate or excessively optimistic/pessimistic information may cause prejudice to the customer concerned or the third party claimant, and result in an order for damages.

Historical developments and the relative nature of banking secrecy

Contrary to popular belief, banking secrecy has not always existed as such in French law [quote: 1948, 1951]. Prior to 1984, there was no specific legislative provision. Case law did recognise an obligation of professional discretion for bank employees, based on the general duty of loyalty and contractual liability, but its criminal basis remained debated.

Article 57 of Act 84-46 of 24 January 1984 on the activity and control of credit institutions formally enshrined this duty, which is now codified in article L. 511-33 of the French Monetary and Financial Code.

Since then, the French legislator has constantly introduced modifications and exceptions to this principle. French banking secrecy is therefore intrinsically relative [cite: 2142]. It yields to a number of interests deemed to be superior:

• Combating money laundering and the financing of terrorism obligation to report suspicions to TRACFIN.
• Tax audit The tax authorities' extensive right of disclosure.
• International cooperation These include agreements such as FATCA with the United States and European directives facilitating the automatic exchange of tax information.
• Criminal proceedings : secrecy not enforceable against the judicial authority acting in this context.
• Prudential supervision : not enforceable against the ACPR and the Banque de France.
• Necessities of the banking business itself The 2008 law on the modernisation of the economy introduced cases of sharing banking secrecy without the customer's prior consent, in particular for syndicated loans, assignment of receivables or outsourcing of services.

This gradual erosion, dictated by the imperatives of public security, the fight against fraud and international transparency, considerably limits the practical scope of banking secrecy today. The exceptions to banking secrecy are numerous and cover a wide range of fields.

Lifting of secrecy by the customer

As banking secrecy is principally in the customer's interest, the customer may waive it and authorise his banker to disclose information about him [cite: 2146, 2160]. However, to be valid, this waiver of confidentiality by the customer must comply with strict conditions:

• Express consent Authorisation must be clear and unequivocal. Tacit or implicit consent is generally not sufficient, especially since the 2008 law requires agreement on a "case-by-case" basis.
• Informed consent The customer must be fully informed of the nature of the information that will be communicated, the recipients of this information and the purpose of this communication. A general clause waiving confidentiality included in the general terms and conditions of a membership contract is often deemed insufficient to guarantee informed consent.
• Specific consent Ideally, authorisation should relate to a specific communication, for a specific purpose and targeted at identified individuals.

The heirs of a deceased customer may also, by proving their status, authorise the lifting of confidentiality concerning the deceased's assets. Similarly, the legal representative of an incapacitated person (guardian, curator under certain conditions) may access the information necessary for his or her mission. The lifting of banking secrecy is therefore possible, but within a framework.

Penalties for breaches

A breach of banking secrecy by a person who is bound by it carries a twofold penalty:

1. Criminal sanctions Article 226-13 of the French Penal Code punishes the disclosure of secret information by a person who is entrusted with it by status or profession with one year's imprisonment and a fine of €15,000.
2. Civil penalty Civil liability: As an employer, a bank is civilly liable for the misconduct of its employees. The victim of the disclosure (the customer or a third party whose information has been revealed) may seek compensation for the loss suffered (material or non-material) by invoking the bank's civil liability.

It should be noted that the Monetary and Financial Code also provides for specific penalties for managers who obstruct requests for information from supervisory authorities such as the ACPR.

Although French law severely punishes breaches of banking secrecy, the proliferation of legal exceptions and the growing trend towards transparency, particularly in tax and prudential matters, have considerably limited the effective scope of this obligation. Nevertheless, it remains an essential duty for bankers in their day-to-day relationship with their customers. If there is any doubt about the legitimacy of a request for information or about the consequences of disclosure, recourse to a banking secrecy lawyer is recommended.

For an in-depth analysis of your situation and tailored advice, contact our team of lawyers.

Sources

• Monetary and Financial Code, article L. 511-33
• Criminal Code, article 226-13
• Law no. 84-46 of 24 January 1984 on the activity and control of credit institutions
• Law no. 2008-776 of 4 August 2008 on the modernisation of the economy
• JurisClasseur Droit bancaire et financier, Fasc. 141: PROFESSIONAL DUTIES OF CREDIT INSTITUTIONS. BANKING SECRECY - General.
• Cass. com. 13 June 1995
• Cass. com., 18 September 2007, no. 06-10.633
• Cass. soc., 30 June 1982