Opinion of the European Central Bank of 8 January 2010 on the merger of the banking and insurance licensing and supervisory authorities (CON/2010/4)
Date: 2010-01-08
Institutions: European Central Bank
Subjects: France, banking, financial stability, financial supervision, institutional activity, insurance, national law, supervisory power

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 8 January 2010 

on the merger of the banking and insurance licensing and supervisory authorities 

(CON/2010/4) 

Introduction and legal basis 

On 28 December 2009 the European Central Bank (ECB) received a request from the French Ministry for 

Economic  Affairs,  Industry  and  Employment  for  an  opinion  on  a  draft  order  merging  the  banking  and 

insurance licensing and supervisory authorities (hereinafter the ‘draft order’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of  the  European  Union  and  the  third  and  sixth  indents  of  Article  2(1) of  Council  Decision 

98/415/EC  of  29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities 
regarding  draft  legislative  provisions1,  as  the  draft  law  relates  to  the  Banque  de  France  and  to  rules 

applicable to financial institutions insofar as they materially influence the stability of financial institutions 

and  markets.  In  accordance  with  the  first  sentence  of  Article  17.5  of  the  Rules  of  Procedure  of  the 

European Central Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the draft order 

1.1  The  draft  order  is  mainly  aimed2  at  merging  the  four  banking  and  insurance  licensing  and 
supervisory  authorities3  and  creating  in  France  one  new  supervisory  authority,  the  Prudential 

Control Authority (hereinafter the ‘Authority’), endowed with the necessary powers for the exercise 

of  its  tasks.  The  Authority  will  become  the  single  licensing  and  supervisory  authority  for  the 
banking, payment services and investment services sector, as well as for the insurance sector4. Its 

1  
2  

3  

4  

OJ L 189, 3.7.1998, p. 42. 
On the basis of the authorisation granted to the French Government by Article 152(2) of Law No 2008-776 of 4 August 
2008 on the modernisation of the economy (Journal Officiel de la République française No 0181 of 5 August 2008). 
The  Insurance  and  Mutual  Insurance  Societies  Supervisory  Authority  (autorité  de  contrôle  des  assurances  et  des 
mutuelles),  the  Insurance  Companies  Committee  (comité  des  entreprises  d’assurance),  the  Credit  Institutions  and 
Investment Firms Committee (comité des établissements de crédit et des entreprises d’investissement) and the Banking 
Commission (commission bancaire). 
Articles L.612-1 to L.612-3 of the French Monetary and Financial Code, as proposed by the draft order. The Authority 
will  also  be  entrusted  with  other  tasks,  in  particular  concerning  the  control  of  the  marketing  of  financial  products  in 
cooperation  with  the  French  Financial  Market  Authority  (Articles  L.612-30  to  L.612-33  of  the  French  Monetary  and 
Financial Code, as proposed by the draft order). 

 
 
 
 
                                                 
objectives will include maintaining the stability of the financial system and protecting customers, 
insured parties and beneficiaries5. 

1.2  The Authority consists of a college sitting in plenary session, in restricted session, in sectoral sub-

colleges, and, where appropriate, in a specialist committee. It also includes a Sanctions Committee. 

Unless  expressly  provided  otherwise,  the  powers  conferred  on  the  Authority  are  exercised  by  the 
college6.  The  college  in  plenary  session  is  expressly  entrusted  with  the  tasks  of:  (i) considering 

national and international matters of a general scope common to the banking and insurance sectors 

and analysing risks within these sectors in the light of the economic situation, (ii) deliberating on 

control  priorities,  and  (iii)  adopting  the  Authority’s  organisational  and  functioning  principles, 

budget and internal rules. Individual matters are considered by the college in restricted session, the 

banking  sector  sub-college,  the  insurance  sector  sub-college  or  if  appropriate  a  specialist 

committee.  As  a  rule,  each  sectoral  sub-college  will  have  the  necessary  authority  to  consider 

individual  and  general  sector-specific  matters;  the  restricted  session  is  competent  for  individual 

matters  concerning  financial  conglomerates  and  significant  mergers  and  acquisitions  involving 

entities belonging to both sectors. Moreover, taking into account their impact on financial stability, 

the  scrutiny of  matters  concerning  one  of  the  two sectors  may  be  attributed  to  the  college  by  the 
president (plenary session for general matters or restricted session for individual matters)7. 

1.3  The Authority will be closely connected to the Banque de France. The Governor of the Banque de 

France,  or  the  Deputy-Governor  he  will  designate  to  represent  him,  will  be  the  president  of  the 

college  of  the  Authority  (plenary,  restricted  session  and  banking  sector  sub-college).  The  vice-

president  will  chair  the  insurance  sector  sub  college,  in  which  the  Governor  of  the  Banque  de 
France,  or  his  designated  deputy,  will  also  be  a  member8.  As  the  Authority’s  president,  the 
Governor of the Banque de France will adopt the agenda for the college’s different configurations9. 

For  the  purposes  of  fulfilling  the  tasks  entrusted  to  the  Authority,  the  Authority’s  president  will 

5  

6 
7  
8  

9  

Article L.612-1 of the French Monetary and Financial Code, as proposed by the draft order. The draft order also provides 
that in performing its tasks, the Authority takes into account the objectives of financial stability throughout the European 
Economic Area (EEA) and convergent implementation of national and Community provisions having regard to the good 
practices and recommendations emanating from Community supervisory mechanisms. It cooperates with the competent 
authorities of other States. In particular, within the EEA, it  participates in structures to supervise cross-border groups. 
Article L.612-4 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-11 of the French Monetary and Financial Code, as proposed by the draft order. 
On  the  composition  of  colleges  and  commissions,  see  Articles  L.612-5  et  seq.  of  the  French  Monetary  and  Financial 
Code, as proposed by the draft order. In particular, to take account of the strong specificities of the insurance profession, 
the vice-president of the college in plenary session must have professional experience in the insurance field and will as a 
rule chair the insurance sector sub-college; the president may also delegate to him the presidency of the college or of one 
of  its  configurations  or  committees.  Four  members  of  the  college  in  plenary  session  are  the  Accounting  Standard 
Authority’s president, a member of the Council of State, a member of the Court of Cassation and a council member of the 
Court of Auditors. Three members, among which the vice-president will be chosen, will be appointed on account of their 
expertise in the fields of client protection, quantitative and actuarial expertise or any other fields under the Authority’s 
responsibility.  Four  members  will  be  appointed  based  on  their  expertise  in  the  fields  of  insurance,  mutual  insurance, 
pensions and reinsurance, whereas four other members will be appointed based on their expertise in the fields of banking 
operations,  payment  services  or  investment  services.  The  Sanctions  Committee  is  competent  to  order  a  disciplinary 
sanction  once  disciplinary  proceedings  have  been  initiated  by  one  of  the  college  configurations;  its  composition  is 
completely different from that of the college. 
Article L.612-11 of the French Monetary and Financial Code, as proposed by the draft order. 

2 

                                                 
have  standing  to  bring  proceedings  before  any  court10.  The  Authority’s  staff  will  consist  of  the 
Banque  de  France  staff  and  civil  servants  assigned  to  the  Banque  de  France11.  The  Authority’s 

budget  will  be  annexed  to  the  Banque  de  France’s  budget.  The  Authority  will  receive  financial 

resources  from  the  Banque  de  France,  within  the  limit  of  the  proceeds  of  the  contribution  for 
supervision  costs12,  the  balance  of  which  will  be  carried  forward  each  year,  and  additional 
contributions that the Banque de France may allocate to the Authority13. 

1.4  Pursuant  to  the  draft  order,  the  Authority  is  an  independent  administrative  authority14.  Moreover, 

the  draft  order  ensures  the  functional  independence  of  the  Authority,  which  means  that  the 

necessary resources for the performance of its tasks will be managed in an autonomous manner. A 

secretary-general  will  be  appointed  by  decree  of  the  Minister  for  Economic  Affairs,  following  a 

proposal  from  the  Authority’s  president.  The  Secretary-General  will  organise  and  direct  the 

Authority’s departments. Following a proposal from the Secretary-General, the Authority’s college 

will  adopt  departmental  organisation  principles,  determine  the  ethical  rules  applying  to  staff  and 

establish  the  general  framework  for  staff  recruitment  and  employment  in  accordance  with  the 
provisions  applying  to  statutory  staff  and  to  civil  servants15.  The  Authority  will  adopt  its  budget, 

following  a  proposal  from  the  Secretary-General.  The  college  will  set  up  an  internal  audit 
committee responsible for checking, in particular, the proper use of the Authority’s resources16. 

2. 

General observations 

2.1 

In  line  with  Article  127(5)  of  the  Treaty,  which  provides  that  the  European  System  of  Central 

Banks  (ESCB)  must  contribute  to  the  smooth  conduct  of  policies  pursued  by  the  competent 

authorities  relating  to  the  prudential  supervision  of  credit  institutions  and  the  stability  of  the 

financial system, the ECB has stressed the importance of having the central banks closely involved 
in prudential supervision17. Against this background, the ECB welcomes that the draft order ensures 

that  the  Banque  de  France  will  be  closely  involved  in  the  Authority,  in  particular  through  its 

Governor, or designated Deputy-Governor, acting as the Authority’s president. 

2.2  Furthermore,  the  nature  and  scope  of  systemic  risk  is  widening  due  to  the  closer  links  between 

credit  institutions,  insurance  companies,  investment  firms  and  pension  funds.  Traditional 

boundaries  between  the  banking,  insurance  and  securities  segments  of  the  financial  system  are 

increasingly blurred, as demonstrated by the emergence of hybrid financial products, the increased 

10  
11  
12  

13  
14  
15  
16  
17 

Article L. 612-15 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-18 of the French Monetary and Financial Code, as proposed by the draft order. 
This contribution will have to be paid to the Banque de France by the persons supervised by the Authority in accordance 
with Article L.612-20 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-17 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-1 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L. 612-19 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L. 612-17 of the French Monetary and Financial Code, as proposed by the draft order. 
See  ‘The  role  of  central  banks  in  prudential  supervision’,  ECB,  22.3.2001,  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

3 

 
                                                 
use  of  risk  transfer  instruments,  such  as  credit  derivatives,  between  the  sectors,  and  the  growing 
role  of  financial  conglomerates18.  The  integration  of  micro-prudential  supervisory  tools  under  the 

draft order acknowledges the growing importance of financial groups that combine different types 

of  financial  services.  This  should  help  to  address  specific  prudential  concerns  concerning  such 

groups and to ensure an overall level playing field between competing intermediaries. This should 

also facilitate a more effective assessment of risks in the financial system as a whole. 

2.3  Closely involving ESCB national central banks (NCB) in prudential supervision may support their 

contribution to the macro-prudential oversight of the financial sector. In this respect, the financial 

crisis demonstrates the need to strengthen supervision and regulation of the financial system as  a 

whole.  With  respect  to  the  insurance  sector  in  particular,  experience  has  shown  that  insurance 

companies  are 

important  for  systemic  financial  stability  because  of 

their  size, 

their 

interconnectedness  with  the  financial  sector  and  the  economic  function  of  insurance  products.  In 

view of the systemic relevance of the insurance sector for financial stability, insurance is part of the 

macro-prudential  oversight  to  be  exercised  by  the  proposed  European  Systemic  Risk  Board 

(ESRB). In the context of the establishment of the ESRB, which will be responsible for the conduct 
of macro-prudential oversight in the EU19, the framework established by the draft order is likely to 

enhance  the  ability  of  the  Banque  de  France  to  contribute  analytical  support  to  the  ESRB,  in 
particular  through  its  Governor  acting  as  a  member  with  voting  rights20.  In  this  respect,  the 

involvement  of  the  Banque  de  France  in  the  Authority,  in  particular  through  its  Governor  or 

Deputy-Governor  acting  as  the  Authority’s  president,  is  positive.  The  ECB  understands  that  the 

proposed framework will allow the Governor of the Banque de France to perform, independent of 

any external influence, his duties as the Governor and as a member of the ECB’s decision-making 

bodies as required by the Treaty. 

3. 

Central bank independence and monetary financing  

3.1  Member States must ensure that NCBs have sufficient financial resources to carry out their ESCB-

related  tasks.  In  this  respect,  the  ECB  understands  that  the  functions  to  be  performed  by  the 

Governor of the Banque de France, or the Deputy Governor as the case may be, will be conducted 

in  a  manner  that  is  fully  compatible  with  the  Banque  de  France’s  institutional  and  financial 

independence and with the Governor’s personal independence, which is designed to safeguard the 

proper  performance  of  their  tasks  under  the  Treaty  and  the  Statute  of  the  European  System  of 

Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). 

18 

19 

20  

See, e.g. paragraph 5 of Opinion CON/2004/16 of 11 May 2004 at the request of the Italian Ministry of Economic Affairs 
and Finance on a draft law on the protection of savings. 
See  Opinion  CON/2009/88  of  26  October  2009  on  a  proposal  for  a  regulation  of  the  European  Parliament  and  of  the 
Council  on  Community  macro-prudential  oversight  of  the financial  system  and establishing  a  European  Systemic  Risk 
Board  and  a  proposal  for  a  Council  decision  entrusting  the  European  Central  Bank  with  specific  tasks  concerning  the 
functioning of the European Systemic Risk Board. 
Input will also be provided by a high level representative of the Authority to the General Board of the ESRB. 

4 

 
                                                 
3.2  Situations where financial supervisory authorities are placed within an NCB do not pose problems 

from the perspective of the financial independence of central banks if such authorities are subject to 
the  NCB’s  independent  decision-making21.  The  draft  order  provides  that  the  Authority  is  an 
independent administrative authority22; however, the Authority will not have legal personality and 

the  ECB  understands  that,  as  was  the  case  for  the  Banking  Commission,  the  State  and  not  the 

Banque  de  France  will  be  liable  for  the  activities  of  the  Authority  and  that  Banque  de  France’s 

finances will thus not be burdened by a liability for the Authority’s decisions. 

3.3  Moreover, the ECB expects that care will be taken to ensure that the Banque de France, in view of 

the  possible  appointment  of  its  staff  members  to  the  Authority,  has  sufficient  financial  and 

personnel resources both in terms of quantity and quality to continue to carry out all its tasks, and in 

particular, that its capacity to carry out ESCB-related tasks will not be affected. 

3.4  The ECB notes that the draft order contains a provision according to which the duties of a college 

member  may  be  terminated  by  reasoned  decree  of  the  Minister  for  Economic  Affairs  under  the 
conditions it provides23. The draft order, as submitted to the ECB, does not specify clearly that this 

provision does not apply to the Governor of the Banque de France as the Authority’s president. The 
ECB suggests clarifying the draft order in this respect24. 

3.5  The  ECB  notes  that  it  is  important  to  safeguard  compliance  with  the  prohibition  of  monetary 

financing  under  Article  123  of  the  Treaty,  which  is  essentially  designed  to  prevent  central  bank 

financing  of  the  public  sector.  The  Authority  will  be  primarily  financed  by  the  proceeds  of  the 

contribution  for  supervision  costs,  which,  in  principle,  would  alleviate  monetary  financing 

concerns. Moreover, the draft order also provides that the Banque de France may allocate additional 
contributions to the Authority25. The provision of such financial resources by the Banque de France 

to  the  Authority  under  the  draft  order  does  not  appear  to  present  monetary  financing  concerns 

insofar  as  the  Banque  de  France  will  be  financing  the  performance  of  a  legitimate  financial 

supervisory task under French law. This particular task will also facilitate the performance by the 

Banque de France of its ESCB-related task under Article 127(5) of the Treaty to contribute to the 

smooth conduct of policies pursued by the Authority relating to the prudential supervision of credit 

institutions and the stability of the financial system. In this respect, it is crucial that the Banque de 

France  is  in  a  position  to  make  a  meaningful  contribution  to  the  conduct  of  supervisory  and 

stability-related  policies  by  the  Authority.  The  ECB  considers  that  the  role  envisaged  for  the 

Banque de France under the draft order goes in the right direction as the Governor is the president 

21  
22  
23  
24  

25  

The ECB’s Convergence Report 2008, p. 21 and 22. 
Article L.612-1 of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-5, I., sixth paragraph, of the French Monetary and Financial Code, as proposed by the draft order. 
The draft order could for example expressly state that the provision only applies to members mentioned in paragraphs 3° 
to  8°  as  in  the  case  of  the  third  paragraph  of  the  same  Article;  that  would  exclude  the  president  of  the  Authority, 
mentioned in paragraph 1°. 
Article L.612-17 of the French Monetary and Financial Code, as proposed by the draft order. 

5 

                                                 
of the Authority’s college26. Also, the Banque de France’s provision of staff to the Authority should 

serve to enhance the Banque de France’s contribution to the Authority’s supervisory and stability-
related policies27. 

3.6.  The ECB notes that national legislation requiring an NCB to take over the liabilities of a previously 

independent public body as a result of a national reorganisation of certain tasks and duties without 

insulating the NCB from financial obligations resulting from the prior activities of such previously 
independent  public  bodies  is  incompatible  with  the  monetary  financing  prohibition28.  The  draft 

order  provides  that  ‘all  assets,  rights  and  obligations  of  the  Insurance  and  Mutual  Insurance 

Societies Supervisory Authority … are transferred by force of law and full ownership to the Banque 
de France on behalf of the [Authority]’29. However, the draft order also specifies that ‘the Authority 

shall  take  over  the  respective  rights  and  obligations  of  [the  four  merged  banking  and  insurance 
licensing and supervisory authorities]’30. Based on this provision, and on the fact that the Authority 

is  an  independent  administrative  authority  separate  from  the  Banque  de  France,  the  ECB 

understands  that,  under  French  law,  Banque  de  France  will  not  be  liable  for  any  activities  of  the 

Insurance  and  Mutual  Insurance  Societies  Supervisory  Authority  undertaken  prior  to  the  coming 

into force of the draft order. 

4. 

Ethical rules applying to the Authority’s staff 

The  draft  order  provides  that  Authority  staff  are  subject  to  the  ethical  rules  adopted  by  the Authority’s 

college and that, if necessary, because of their involvement in the Banque de France duties, staff members 
could be subject to the Banque de France’s ethical rules31. The draft order provides that the Authority’s 

college  determines  the  ethical  rules  applying  to  staff  and  establishes  the  general  framework  for  staff 

recruitment  and  employment  in  accordance  with  the  provisions  applying  to  the  Banque  de  France  staff 
and to civil servants32. It is not clear from the above provisions whether the ethical rules applying to the 

Authority  staff  are  determined  in  accordance  with  the  Banque  de  France’s  ethical  rules.  The  ECB 

recommends  stating  this  explicitly  in  the  draft  order  and  expects  that  the  ethical  rules  adopted  by  the 

Authority will not materially deviate from those applicable to the Banque de France’s staff.  

26  

27 
28 

29  
30  
31  
32  

An  enhancement  of  the  Banque  de  France’s  role  in  the  composition  of  the  college  or  in  the  nomination  process  of  its 
members could be beneficial, for instance by making the Banque de France’s representation in the Authority’s college 
stronger. 
Taken in isolation, the provision of staff might not have been sufficient to overcome monetary financing concerns. 
The ECB’s Convergence Report 2008, p. 23 and 24. See also paragraphs 8 to 12 of Opinion CON/2005/24 of 15 July 
2005 at the request of the Ministry of Finance of the Czech Republic on a draft law on the integration of financial market 
supervisors  and  paragraph  4(2)(d)  of  Opinion  CON/2008/16  of  4  April  2008  at  the  request  of  the  Finnish  Ministry  of 
Finance  on  a  draft  government  proposal  for  a  law  on  the  Financial  and  Insurance  Supervisory  Authority  and  certain 
related draft laws. 
Article 24-III(4) of the draft order. 
Article 24-III of the draft order. 
Article L.612-18-III of the French Monetary and Financial Code, as proposed by the draft order. 
Article L.612-19 of the French Monetary and Financial Code, as proposed by the draft order. 

6 

 
 
                                                 
5. 

Audit of the Authority’s accounts 

As  the  Banque  de  France’s  annual  accounts  are  audited  by  independent  external  auditors  under 

Article 27.1 of the Statute of the ESCB, the ECB understands that the auditors’ mandate will be extended 

to the audit of the Authority’s accounts, as they will not be distinct from the Banque de France’s accounts 

and as they will be held by the NCB. 

6.   The appropriate time to consult the ECB 

6.1 

In  cases  of  particular  urgency  that  do  not  allow  for  a  normal  consultation  period,  the  consulting 

authority may indicate urgency in the consultation request and ask for a shorter time limit for the 

ECB’s  opinion  to  be  adopted.  This  does  not  prejudice  the  national  authorities’  duty  under 

Articles 127(4) and 282(5) of the Treaty to consult the ECB on national draft legislative provisions 

falling within its fields of competence in due course of the national legislative process. The second 

sentence  of  Article  4  of  Decision  98/415/EC  states  that  the  ECB  must  be  consulted  ‘at  an 

appropriate stage’ in the legislative process. This implies that the consultation should take place at a 

point in the legislative process that affords the ECB sufficient time to examine the draft legislative 

provisions  and  to  adopt  its  opinion  in  the  required  language  versions  and  which  also  enables  the 

relevant national authorities to take the ECB’s opinion into consideration before the provisions are 

adopted. In this respect, as noted by the Court of Justice, the obligation to consult the ECB under 

the Treaty is intended ‘essentially to ensure that the legislature adopts the act only when the body 

has been heard which, by virtue of the specific functions that it exercises in the [Union] framework 

in the area concerned and by virtue of the high degree of expertise that it enjoys, is particularly well 
placed  to  play  a  useful  role  in  the  legislative  process  envisaged.33’  Given  that  the  consulting 

authority set the ECB a short time limit within which to submit its opinion and that the only reason 

given  was  the  tight  timetable  established  by  the  consulting  authority,  the  ECB  considers  that  the 

minimum  consultation  period  of  one  month  provided  for  in  Article  3(1)  of  Decision  98/415/EC 

applies. 

6.2  According  to  Article  3(4)  of  Decision  98/415/EC,  Member  States  are  obliged  to  suspend  the 

process  for  the  adoption  of  draft  legislative  provision  pending  submission  of  the  ECB’s  opinion. 

This means that the adopting authority must have a real opportunity to consider the ECB’s opinion 

in a meaningful manner prior to taking its decision on the substance. 

33  

Case C-11/00 Commission of the European Communities v European Central Bank [2003] ECR I-7147, paragraphs 110 
and 111. 

7 

 
 
                                                 
This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 8 January 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

8