20 December 2016

Financial Times: French banks to sue ECB over capital requirements

France’s largest banks are suing the European Central Bank in an attempt to get an exemption from holding capital against certain state-backed deposits, in the first time that a group of large European lenders have taken the supervisor to court.

The case will pit France’s financial elite against the ECB’s supervisory board, which itself is led by the former head of the French prudential authority, Daniele Nouy.

Lawsuits have been brought by BNP Paribas, Société Générale, Crédit Agricole, Crédit Mutuel, BPCE and La Banque Postale over the past month, according to filings with the European Court of Justice.

People close to the banks said that they are protesting the ECB’s demand that they set aside capital against money from a special tax-free saving account which is deposited largely with the Caisse des Dépôts (CDC).

The French banks are arguing that they are forced by law to deposit the bulk of the money collected under the schemes with the CDC, and therefore should not be penalised for their exposure. The CDC is also state-owned, and therefore secure, they say.

The money collected in regulated deposits is relatively small for the large listed banks such as BNP and SocGen but they are a serious business for BPCE and La Banque Postale, which had a monopoly on certain products until 2007.

In February, La Banque Postale said its capital was worth 5.2 per cent of assets but if its deposits with the CDC were included in the calculation, its leverage ratio would fall to 3.5 per cent.

Full article on Financial Times (subscription required)

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