Opinion of the European Central Bank of 19 September 2014 on the separation and regulation of banking activities (CON/2014/70)
Date: 2014-09-19
Institutions: European Central Bank
Subjects: France, banking, financial stability, financial supervision, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 19 September 2014  

on the separation and regulation of banking activities 

(CON/2014/70) 

Introduction and legal basis 

On  15  June  2014,  the  European  Central  Bank  (ECB)  received  a  request  from  the  French  Minister  for 

Finance  and  Public  Accounts  for  an  opinion  on  a  draft  ministerial  order  implementing  the  Law  on  the 

separation and regulation of banking activities of 2013 (hereinafter the ‘draft ministerial 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 sixth indent of Article 2(1) of Council Decision 98/415/EC1, 

as  the  draft  ministerial  order  relates  to  the  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 ministerial order 

1.1  The draft ministerial order implements the first Title of the Law on the separation and regulation of 
banking activities2. This law applies to credit institutions, financial holding companies and mixed 

financial  holding  companies  (hereinafter  ‘designated  financial  institutions’).  Its  purpose  is  to 

separate  banking  activities  that  finance  the  economy  from  speculative  operations.  Although  the 

latter  must  be  ring-fenced  in  dedicated  subsidiaries,  credit  institutions  can  continue  proprietary 

trading relating to financial instruments within certain limits and subject to certain conditions. 

The  draft  ministerial  order  reinforces  requirements  relating  to  internal  controls,  requires  the 

provision of market activity indicators, lays down conditions for authorised operations with hedge 

funds and sets up procedures for the oversight of such operations. 

1.2  First,  in  respect  of  activities  that  may  be  carried  out  other  than  through  a  dedicated  subsidiary, 
designated financial institutions that exceed the threshold set by Article R. 511-163 of the Monetary 

and Financial Code (MFC) shall identify internal units tasked with conducting transactions relating 

to financial instruments and classify those units into one of the categories set out in paragraph 1 of 

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2  
3  

Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
Law No 2013-672 of 26 July 2013. 
Decree No 2014-785 of 8 July 2014. 

 
 
 
 
                                                 
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Article  L.  511-47  of  the  MFC4  in  order  to  ensure  that  these  units  conduct  financial  operations 

within the limits of their mandates. 

At  least  once  a  year,  designated  financial  institutions  shall  provide  to  the  Autorité  de  Contrôle 

Prudentiel et de Résolution (ACPR, Prudential Control and Resolution Authority) and, if relevant, 

the  Autorité  des  Marchés  Financiers  (AMF,  Financial  Markets  Authority),  a  variety  of  market 

activity  indicators,  an  organisational  chart  of  the internal  units,  and  an  explanation  of  the  way  in 

which these internal units’ mandates have been established and monitored. The ACPR shall verify 

that risk limits consistent with such mandates are defined for each internal unit. 

1.3  Second,  the  draft  ministerial  order  provides  exceptions  to  the  general  prohibition  contained  in 

Article  L.  511-47  of  the  MFC  on  the  execution  by  credit  institutions  of  operations  with  hedge 

funds. These exceptions permit credit institutions to conduct such operations when guaranteed by 

securities considered as adequate under the criteria laid down in the draft ministerial order. 

1.4  Finally,  with  regard  to  large  exposure  risk,  the  draft  ministerial  order  imposes  an  exposure  limit 

equivalent to 10 % of the own funds of the dedicated subsidiary on the rest of the financial group. 

2. 

Observations 

2.1 

In line with its previous opinion on the Law on the separation and regulation of banking activities5, 

the  ECB  reiterates  that  since  these  measures  primarily  address  internationally  active  credit 

institutions, coordination and consistency in the authorities’ regulatory approach are of the utmost 

importance in order to avoid regulatory arbitrage. This is particularly true in view of the ongoing 

preparatory work in respect of the proposal for a regulation on structural measures improving the 
resilience of EU credit institutions6. Consequently, the consulting authority should closely monitor 

the development of Union legislation and consider whether it is appropriate to seek alignment with 

the forthcoming rules to be adopted at Union level.  

2.2  The  impact  of  the  forthcoming  allocation  of  supervisory  tasks  within  the  Single  Supervisory 

Mechanism  between the national authorities  and the ECB should be taken into  account. Some  of 

the activities  provided for  in the  draft ministerial  order will fall within  the  ECB’s competence in 

respect  of  significant  credit  institutions  after  4  November  2014.  These  include,  for  instance,  the 

monitoring of remuneration paid to individuals of the internal units. 

2.3  More generally, the ECB’s interpretations of criteria set out in relevant Union law7 should be taken 

into account by the ACPR when assessing such criteria pursuant to the draft ministerial order. For 

instance,  the  securities  and  guarantees  criteria  defined  in  Regulation  (EU)  No  575/2013  of  the 

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5  
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7  

ibid. 
ECB Opinion CON/2012/106, paragraph 2. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 
COM(2014) 43 final. 
Article  4(3)  of  Regulation  (EU)  No  1024/2013  of  15  October  2013  conferring  specific  tasks  on  the  European  Central 
Bank concerning policies relating to prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 

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European Parliament and of the Council8 should be taken into account when assessing the criteria 

for securities to be considered to provide adequate guarantees for credit institutions when entering 

into transactions with hedge funds (Article 7 of the draft ministerial order). 

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

Done at Frankfurt am Main, 19 September 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

8  

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1). 

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