## 1fraea2025005

## Source details

**Canonical URL:** [1fraea2025005](https://www.imf.org/-/media/files/publications/cr/2025/english/1fraea2025005.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2025/english/1fraea2025005.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2025/english/1fraea2025005.pdf.json)

---

### Executive summary: role, risks, and overall assessment
- Most systemically important French banks also head conglomerates; financial conglomerates' soundness is crucial for France's financial stability.
- Conglomerate structures integrate banking, insurance, and other services, providing diversification benefits but introducing complexity and increased financial risks that may not be fully captured under sectoral regimes.
- Robust capital adequacy, governance, and risk management regulations, along with effective supervision and strong legal enforcement powers, are critical to assess risks and ensure sufficient capital at the conglomerate level.
- The EU "supplemental" approach (FICOD) is largely effective to address risks potentially unaddressed by sectoral regimes, but it increases regulatory complexity.
- Since the 2019 FSAP, supervisors and regulators further developed good practice; ACPR has cultivated substantial capacity to address regulatory and supervisory challenges.
- Key gaps and areas for further improvement include:
  - cross-sectoral cooperation and coordination;
  - standardized methodology to identify FICOD relevant competent authorities (notably for AMF appointment);
  - need for a comprehensive regulatory framework with clearer integration of sectoral requirements at the conglomerate level;
  - development of automated tools for processing RC (risk concentrations) and IGT (intragroup transactions) data and integrating capital adequacy outcomes.
- ACPR’s means are limited where SSM/ECB is the designated coordinator for supplemental supervision.

### Market landscape — banking sector: key metrics and indicators
- Total banking sector assets: approximately €9.1 trillion, roughly 3.23 times the GDP as of December 2023.
- Market concentration:
  - Market share of systemically important institutions (SI): around 90 percent.
  - Market share of the top four banks: approximately 74 percent.
- LSI population and market share:
  - Number of banks in the LSI population: 101 banks.
  - LSI market share in total assets: around 10 percent.
- NPL ratios:
  - SI NPL ratio: approximately 2.39 percent.
  - LSI NPL ratio: 1.8 percent.
- Deposit funding:
  - Customer deposits comprise approximately 55 percent of total balance sheet of French banks.
  - Regulated (Livret A) savings represent approximately 25 percent of household deposits.
  - Regulated household savings reached €780 billion in early 2023, reflecting a year-on-year increase of approximately 6.4 percent.
  - Deposit guarantee scheme coverage: up to €100,000 per depositor.
- Income composition and profitability:
  - Fees and commissions: approximately 30 percent of total income, on average.
  - SI average RoE: around 8.00 percent in 2018, peaking at 8.35 percent in 2021, declining to 6.01 percent in 2023.
  - LSI average RoE: 4.63 percent in 2018 rising to 5.80 percent in 2023.
- Liquidity metrics (as of March 2023, SIs):
  - Average weighted LCR ratio: 157 percent.
  - Average weighted NSFR ratio: 134 percent.
- Robustness: capital and liquidity consistently above minimum regulatory requirements.

- Selected time-series indicators (percent)
  - Return on equity (RoE)
    - SI: 2019 7.90; 2020 4.24; 2021 7.16; 2022 5.99; 2023 6.01
    - LSI: 2019 5.40; 2020 2.70; 2021 4.50; 2022 5.00; 2023 5.80
  - Return on assets (RoA)
    - SI: 2019 0.40; 2020 0.20; 2021 0.38; 2022 0.42; 2023 0.39
    - LSI: 2019 0.60; 2020 0.25; 2021 0.35; 2022 0.40; 2023 0.63
  - Net interest margin
    - SI: 2019 1.18; 2020 1.15; 2021 1.09; 2022 1.12; 2023 1.34
    - LSI: 2019 1.05; 2020 1.00; 2021 0.96; 2022 1.05; 2023 1.08
  - Cost-to-income ratio
    - SI: 2019 52.00; 2020 48.00; 2021 50.00; 2022 48.30; 2023 49.12
    - LSI: 2019 53.00; 2020 60.00; 2021 50.00; 2022 52.00; 2023 52.41
  - CET1 to RWA
    - SI: 2019 15.80; 2020 16.00; 2021 15.60; 2022 15.80; 2023 16.18
    - LSI: 2019 21.50; 2020 20.00; 2021 19.00; 2022 20.50; 2023 23.35
  - Leverage ratio
    - SI: 2019 5.40; 2020 5.20; 2021 5.80; 2022 5.60; 2023 5.80
    - LSI: 2019 9.50; 2020 9.00; 2021 10.00; 2022 9.80; 2023 9.18
  - NPL ratio
    - SI: 2019 1.45; 2020 1.80; 2021 1.75; 2022 1.70; 2023 2.39
    - LSI: 2019 1.50; 2020 1.90; 2021 1.95; 2022 1.80; 2023 1.80
  - RWA density
    - SI: 2019 31.50; 2020 30.00; 2021 29.00; 2022 30.50; 2023 33.23
    - LSI: 2019 45.00; 2020 39.00; 2021 38.00; 2022 40.00; 2023 40.16
  - Loan to deposit ratio
    - SI: 2019 106.00; 2020 104.00; 2021 103.00; 2022 105.00; 2023 108.04
    - LSI: 2019 96.00; 2020 94.00; 2021 93.00; 2022 95.00; 2023 95.04

### Market landscape — financial conglomerates (FCs)
- Bancassurance model is long-established in France; conglomerates cross-sell products and use shared distribution channels.
- Share of banking assets held by FCs: approximately 91 percent to 92 percent of banking assets over the last ten years.
- Number of FCs operating in France: 13 FCs.
- Governance of FC supervision:
  - ACPR acts as coordinator for 3 FCs: MNH, Milleis Banque, and AXA.
  - ACPR serves as the relevant competent authority for 10 FCs.
  - Coordinators for two FCs are located abroad: Allianz Europe BV and Generali.
- All FCs operating in France are led by a regulated entity except one, which is managed by a Mixed Financial Holding Company.
- Top 6 groups (selected items)
  - Groupe BNPP — Home supervisor: ECB/ACPR — Leading firm or bank: BNPP — B/S share of banking business: 91% — B/S share of insurance business: 9%
  - Groupe Société Générale — Home supervisor: ECB/ACPR — Leading firm or bank: Société Générale — B/S share of banking business: 90% — B/S share of insurance business: 10%
  - Groupe Crédit Agricole — Home supervisor: ECB/ACPR — Leading firm or bank: Crédit Agricole — B/S share of banking business: 85% — B/S share of insurance business: 15%
  - Groupe BPCE — Home supervisor: ECB/ACPR — Leading firm or bank: BPCE — B/S share of banking business: 83% — B/S share of insurance business: 7%
  - Groupe Credit Mutuel — Home supervisor: ECB/ACPR — Leading firm or bank: Credit Mutuel — B/S share of banking business: 89% — B/S share of insurance business: 11%
  - Groupe La Banque Postale — Home supervisor: ECB/ACPR — Leading firm or bank: La Banque Postale — B/S share of banking business: 44% — B/S share of insurance business: 56%

### Institutional setting, ACPR operational independence, funding, and staffing
- EU rulebook and SSM standards largely determine supervision of France-headquartered FCs.
- As of September 1, 2024, the ECB is responsible for the direct supervision of 113 SIs, which includes 12 French SIs.
- The ACPR supervises 101 LSIs and is the primary supervisory authority for insurance companies in France.
- Legal and governance features:
  - ACPR mission anchored in the French Monetary and Financial Code (CMF).
  - Ministry of Economics and Finance (MoEF) participation in ACPR decision-making bodies is a specific feature; de facto no political interference identified in practice but arrangements would not meet requirement that boards operate free from the risk of political interference.
- Funding and 2023 financials:
  - Main revenue: levies on supervised entities; insurance companies’ levy fixed at 0.23 percent for 2023 by the MoEF within a legislative range of 0.15 to 0.25 percent (Article L.612-20 of the FMFC).
  - Levies remitted to BdF and allocated to ACPR subject to annual parliamentary cap; any excess directed to the State budget.
  - Total levies: EUR 231 million.
  - Transfers to State budget due to cap: EUR 31 million.
  - ACPR expenditures exceeded total income after the cap by EUR 22 million, leading to depletion of most of the reserve held at the BdF.
  - Parliamentary cap increased for 2024; ACPR anticipates ongoing deficits and complete exhaustion of the BdF reserve by 2026.
  - Headcount cap eliminated by Parliament in the 2024 Budget Act, though headcount remains under BdF oversight.
- Human resources and remuneration:
  - ACPR sets salary levels based on BdF salary grades and has limited autonomy.
  - Recommendation #3: Implement the practice of a periodic benchmarking of supervisors’ salary levels against relevant peers in the financial industry; a summary report shall be discussed by the General Secretariat and submitted to the Supervisory College for information.

### Key recommendations (selected, verbatim titles and identifiers)
- Organization of Supervision
  - 1. To avoid any perception of a potential conflict of interest and facilitate operationally independent functioning, the government should recuse itself from all supervisory decision-making committees at the ACPR (¶ 20)
    - Addressee: ACPR, AMF, MoEF, H
    - Priority: H
    - Time-frame: MT
  - 2. Ensure that the funding of the ACPR provides adequate resourcing while respecting its financial autonomy based on a thorough review of the sufficiency of resources to meet future needs. (¶ 22)
    - Addressee: ACPR, AMF, MoEF
    - Priority: H
    - Time-frame: ST
  - 3. Implement the practice of a periodic benchmarking of supervisors’ salary levels against relevant peers in the financial industry; a summary report shall be discussed by the (APCR) General Secretariat and submitted to the Supervisory College for information. (¶ 24)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: ST
- Financial Conglomerates: Coordination of Supervision and Cooperation
  - 4. Promote with relevant European authorities the development of a standardized methodology to identify FICOD relevant competent authorities, in particular for supervising asset management companies, to guide the decision on the AMF’s appointment a relevant competent authority. (¶ 41)
    - Addressee: ACPR, AMF
    - Priority: M
    - Time-frame: ST
  - 5. Promote and contribute to further enhancements in opportunities for collaboration between relevant sectoral supervisors, including the SSM, by (i) sharing work program proposals in a timely manner to facilitate coordination; (ii) conducting joint thematic deep dives; (iii) performing other collaborative supervisory actions to promote a consistent and comprehensive approach to supervision; (iv) contributing to the development of tools to enable the secure sharing of confidential data among financial conglomerate college members, thereby enhancing preconditions for their collaborative activities. (¶ 46)
    - Addressee: ACPR
    - Priority: H
    - Time-frame: ST
- Financial Conglomerates: Supervisory Powers
  - 6. Work with relevant European authorities to develop a strengthened framework for effective execution of supervisory powers according to Article 16 of the FICOD, including in relation to Articles 6 and 9 of the FICOD, to address conglomerate-wide risks and availability of capital at the conglomerate level while also incorporating a mechanism for coordinating supervisory actions, and work towards its implementation. (¶ 62)
    - Addressee: ACPR
    - Priority: H
    - Time-frame: MT
- Financial Conglomerates: RC and IGT Monitoring
  - 7. Contribute to the development of automated tools for processing RC and IGT data to enhance supervisory analysis and ensure consistency, facilitating the integration with the outcomes of capital adequacy calculations to deliver a comprehensive and granular perspective on the risk profiles of financial conglomerates. (¶ 71)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: MT
- Less Significant Institutions: Supervisory Practice
  - 8. Further prioritize targeted onsite examinations to enhance onsite supervision coverage and allocate limited resources more efficiently. (¶ 80)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: I
  - 9. Ensure a consistent reflection of LSIs’ diverse business models in supervisory assessments through sufficient flexibility surrounded by a robust governance of the supervisory process. (¶ 82)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: MT

### FICOD, capital adequacy, and implementation challenges
- FICOD central concept: supplementary supervision addressing Own Funds Adequacy, Intragroup Transactions, Risk Concentration, Internal Control Mechanisms and Risk Management Processes and Stress-Tests; last amended in 2023 (Directive 2023/2864/EU).
- Delegated/implementing rules referenced:
  - DR on capital required at the level of the financial conglomerate: No 342/2014.
  - DR on risk concentration and intra-group transactions: 2015/2303.
  - Implementing technical standards on supervisory reporting of risk concentrations and intra-group transactions: 2022/2454.
  - Article 21a, paragraph 1 (d) mandates technical standards to “ensure a uniform format (with instructions)” of capital adequacy.
- FICOD capital calculation methods:
  - Method 1: Accounting consolidation method.
  - Method 2: Deduction and aggregation approach.
  - Method 3: Combination method.
  - French implementation prescribes Method 1 to bank-led financial conglomerates.
- Implementation challenges highlighted:
  - Lack of harmonized templates for capital calculation reporting and disclosure.
  - Outstanding interpretative differences: treatment of minority interest; application of sectoral own funds recognition limits; determination of surplus own funds.
  - Example: La Banque Postale consolidated CET1 ratio of 18.3percent may overstate solvency due to the “Danish compromise” (equity stakes in insurance subsidiaries risk-weighted at 100percent rather than deducted), amplified because LBP uses the standardized approach while peers under A-IRB may apply up to 370percent risk weight.
- Recommendation #6: Work with relevant European authorities to develop a strengthened framework for effective execution of supervisory powers according to Article 16 of the FICOD, including in relation to Articles 6 and 9 of the FICOD.

### Intragroup transactions (IGT), risk concentrations (RC), and data reporting
- FICOD and delegated/implementing regulations anchor monitoring and reporting of IGT and RC; standardized reporting introduced in 2024.
- ECB Guide reporting thresholds (highlights):
  - RC: Counterparty risk exposures that exceed 10percent of own funds or €300 million must be reported.
  - RC: Country and currency concentrations surpassing 5percent of own funds must be reported.
  - IGT: Transactions involving equity or debt transfers that exceed 5percent of capital adequacy or €300 million must be reported.
  - IGT: Same thresholds apply to derivatives, off-balance sheet liabilities, insurance and reinsurance, and profit and loss transactions surpassing 5percent of total revenues.
  - Two or more transactions between group entities that contribute to the same risk, serve the same purpose, or are temporally connected in a plan will be regarded as a single economic operation.
- 2024 reporting experience:
  - French banks and EU peers reported RC and IGT for the first time through a newly harmonized EU format.
  - ECB’s initial analysis highlighted need for further consistency checks and possibly additional guidance, particularly regarding reporting granularity.
- Automated processing roadmap:
  - Objectives: standardize reporting format; develop automated tools; integrate automated outputs into overall assessment framework to complement capital adequacy outcomes.
  - Recommendation #7 reiterates contribution to development of automated tools for processing RC and IGT data to enhance supervisory analysis and facilitate integration with capital adequacy calculations.

### Supervision of Less Significant Institutions (LSIs) — organization, practice, and priorities
- ACPR LSI supervision framework:
  - Clear organizational structure; responsibilities delineated; annual process collects proposals for supervisory priorities.
  - ACPR publishes objectives, outcomes, actions undertaken, and resources utilized in its annual report.
  - ACPR applies EU Single Rulebook and SSM methodologies, incorporating proportionality.
- Onsite activity coverage and targeting:
  - Each year, ACPR conducts around 5 to 6 on-site examinations of LSIs.
  - Two targeted onsite inspections were undertaken in 2024; several targeted onsite examinations are planned in 2025.
  - Enhanced risk-based supervision under development will include a principle imposing targeted onsite examinations every year.
  - Recommendation #8: Further prioritize targeted onsite examinations to enhance onsite supervision coverage and allocate limited resources more efficiently.
- SREP for LSIs:
  - SREP process aligns with SSM methodology and EBA guidelines; builds on quantitative and qualitative assessments and supervisory judgment.
  - Limitation: common methodology may be too rigid for heterogeneous LSI sector; enhanced embedded flexibility, supported by robust governance, recommended.
  - Recommendation #9: Ensure a consistent reflection of LSIs’ diverse business models in supervisory assessments through sufficient flexibility surrounded by a robust governance of the supervisory process.
- Risk-specific supervisory practices covered: credit risk classification, IRRBB, liquidity risk, operational risk, business continuity and disaster recovery expectations.

### Authorizations, fit & proper, enforcement, and supervisory tools
- Authorizations and Fit & Proper assessments:
  - Conducted by ACPR in conjunction with ECB; ECB adopts final decisions.
  - Approval of qualifying holdings requires prior authorization by the ECB/ACPR, assessing reputation, expertise, financial soundness, compliance capacity, and AML risk.
  - ECB Fit and Proper Handbook and ECB Guide to Fit and Proper Assessments applied.
- Enforcement framework and tools (select measures and legal references)
  - Injunctions under Article L. 511-41-3 of the CMF.
  - Warnings under Article L. 612-30 of the CMF.
  - Formal notices (mise en demeure) under Article L. 612-31 of the CMF.
  - Recovery program requirements under Article L. 612-32 of the CMF.
  - Protective measures under Article L. 612-33 of the CMF.
  - Appointment of provisional or temporary administrators under Article L. 612-34 of the CMF.
  - Sanctions Committee powers; decisions contestable before French Administrative Court.
- ACPR’s escalation strategy is flexible and does not adhere to formal internal policy thresholds or triggers; punitive powers may be exercised directly in serious violations.

### Climate-related financial risks and supervisory integration
- ACPR integrates climate-related financial risks into the Pillar 2 approach as mandated by CRR3/CRD6.
- ACPR conducted a 2023 thematic review of approximately sixty institutions to assess integration of climate-related risks into governance and risk management.
- ACPR and AMF produce annual joint reports evaluating trends and commitments in climate change control, including exposures to fossil fuels.
- BdF initiatives: Transition Progress Indicator and company ratings for over 300,000 companies; BdF provides climate-related company ratings free to firms.

### Regulated savings and CDC role
- Regulated savings:
  - Represent approximately 25percent of household deposits as of 2023.
  - Regulated household savings reached €780 billion by early 2023, a year-on-year increase of approximately 6.4percent.
- Caisse des Dépôts et Consignations (CDC):
  - Established in 1816; CDC consolidated assets: €280 billion by end-2022.
  - Centralization and investment uses: Livret A, LDDS, LEP partially centralized to CDC to fund social housing and SMEs; claims on CDC treated as zero-risk weighted assets.
  - CDC subject to ACPR oversight; upcoming reforms will enhance its prudential oversight and alignment with banking standards.

*This Technical Note was prepared by David Lukáš Rozumek, Monetary and Capital Markets Department, in the context of the 2024 France Financial Sector Assessment Program.*

### EXECUTIVE SUMMARY __________________________________________________________________________ 6

### EXECUTIVE SUMMARY

### Role and Risks of Financial Conglomerates
- Most systemically important French banks also head conglomerates; financial conglomerates' soundness is crucial for France's financial stability.
- Conglomerate structures integrate banking, insurance, and other services, providing diversification benefits but introducing complexity and increased financial risks that may not be fully captured under sectoral regimes.
- Robust capital adequacy, governance, and risk management regulations, along with effective supervision and strong legal enforcement powers, are critical to assess risks and ensure sufficient capital at the conglomerate level.
- Developments in this technical note complement assessments against the BCBS Core Principles (Euro Area FASP) and the IAIS Insurance Core Principles in France.

### Effectiveness of the EU "Supplemental" Approach
- The EU approach with the concept of supplemental supervision is largely effective to address risks potentially unaddressed by sectoral regimes.
- Supplemental supervision provides policy tools to ensure soundness of financial conglomerates but increases regulatory complexity.
- French supervisors (ACPR and partners) have effectively addressed these complexities and contributed to EU frameworks.

### Supervisory Capacity and Progress Since 2019 FSAP
- Since the 2019 FSAP, supervisors and regulators further developed good practice; financial conglomerate supervision has seen significant regulatory and supervisory enhancements.
- ACPR has cultivated substantial capacity to address regulatory and supervisory challenges.
- Supervision of Less Significant Institutions (LSI) is effective: ACPR’s approach is intrusive and proportionate, supervisory practices adequately cover financial stability risks.

### Key Gaps and Areas for Further Improvement
- Cross-sectoral cooperation and coordination: make cooperation more effective, timely sharing of work programs, and joint supervisory actions.
- Identification of FICOD relevant competent authorities: develop a standardized methodology, particularly to guide AMF’s appointment as a relevant authority for asset management supervision.
- Need for a comprehensive regulatory framework with clearer integration of sectoral requirements for capital, governance, and risk management at the conglomerate level.
- Development of automated tools for monitoring risk profile indicators, processing RC (risk concentrations) and IGT (intragroup transactions) data, and integrating outcomes of capital adequacy calculations.
- ACPR’s means are limited where SSM/ECB is the designated coordinator for supplemental supervision.

### Resourcing, Governance, and Independence
- Ensure ACPR funding provides adequate resourcing while respecting financial autonomy via a thorough bottom-up review of resource sufficiency for future needs.
- Implement periodic benchmarking of supervisors’ salary levels against relevant industry peers; summary report to be discussed by ACPR General Secretariat and submitted to the Supervisory College.
- To avoid perceived conflicts of interest and facilitate operational independence, the government should recuse itself from all supervisory decision-making committees at the ACPR.

### Supervision of Less Significant Institutions (LSI)
- Prioritize targeted onsite examinations to enhance onsite supervision coverage and allocate limited resources efficiently.
- Ensure supervisory assessments consistently reflect LSIs’ diverse business models through sufficient flexibility supported by robust governance of the supervisory process.

### Recommendations (Table 1: France: Main Recommendations)
- Organization of Supervision
  - 1. To avoid any perception of a potential conflict of interest and facilitate operationally independent functioning, the government should recuse itself from all supervisory decision-making committees at the ACPR (¶ 20)
    - Addressee: ACPR, AMF, MoEF, H
    - Priority: H
    - Time-frame: MT
  - 2. Ensure that the funding of the ACPR provides adequate resourcing while respecting its financial autonomy based on a thorough review of the sufficiency of resources to meet future needs. (¶ 22)
    - Addressee: ACPR, AMF, MoEF
    - Priority: H
    - Time-frame: ST
  - 3. Implement the practice of a periodic benchmarking of supervisors’ salary levels against relevant peers in the financial industry; a summary report shall be discussed by the (APCR) General Secretariat and submitted to the Supervisory College for information. (¶ 24)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: ST
- Financial Conglomerates: Coordination of Supervision and Cooperation
  - 4. Promote with relevant European authorities the development of a standardized methodology to identify FICOD relevant competent authorities, in particular for supervising asset management companies, to guide the decision on the AMF’s appointment a relevant competent authority. (¶ 41)
    - Addressee: ACPR, AMF
    - Priority: M
    - Time-frame: ST
  - 5. Promote and contribute to further enhancements in opportunities for collaboration between relevant sectoral supervisors, including the SSM, by (i) sharing work program proposals in a timely manner to facilitate coordination; (ii) conducting joint thematic deep dives; (iii) performing other collaborative supervisory actions to promote a consistent and comprehensive approach to supervision; (iv) contributing to the development of tools to enable the secure sharing of confidential data among financial conglomerate college members, thereby enhancing preconditions for their collaborative activities. (¶ 46)
    - Addressee: ACPR
    - Priority: H
    - Time-frame: ST
- Financial Conglomerates: Supervisory Powers
  - 6. Work with relevant European authorities to develop a strengthened framework for effective execution of supervisory powers according to Article 16 of the FICOD, including in relation to Articles 6 and 9 of the FICOD, to address conglomerate-wide risks and availability of capital at the conglomerate level while also incorporating a mechanism for coordinating supervisory actions, and work towards its implementation. (¶ 62)
    - Addressee: ACPR
    - Priority: H
    - Time-frame: MT
- Financial Conglomerates: RC and IGT Monitoring
  - 7. Contribute to the development of automated tools for processing RC and IGT data to enhance supervisory analysis and ensure consistency, facilitating the integration with the outcomes of capital adequacy calculations to deliver a comprehensive and granular perspective on the risk profiles of financial conglomerates. (¶ 71)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: MT
- Less Significant Institutions: Supervisory Practice
  - 8. Further prioritize targeted onsite examinations to enhance onsite supervision coverage and allocate limited resources more efficiently. (¶ 80)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: I
  - 9. Ensure a consistent reflection of LSIs’ diverse business models in supervisory assessments through sufficient flexibility surrounded by a robust governance of the supervisory process. (¶ 82)
    - Addressee: ACPR
    - Priority: M
    - Time-frame: MT

### Scope and Methodology
- This technical note reviews supervision of financial conglomerates and less significant institutions using international standards as benchmarks (Revised Core Principles for Effective Banking Supervision; Joint Forum Principles for the Supervision of Financial Conglomerates, 2012).
- The review is part of the France 2025 FSAP and is based on the regulatory framework in place and supervisory practices employed as of November 2024.
- The note is based on a review of regulations, market analyses, and meetings with French and EU authorities, in particular ACPR and ECB, and consultations with EBA and the ESAs’ Joint Committee, senior management of large financial conglomerates, LSIs, and external auditors.

*This Technical Note was prepared by David Lukáš Rozumek, Monetary and Capital Markets Department, in the context of the 2024 France Financial Sector Assessment Program.*

### 2.      Financial conglomerates dominate the financial landscape in France and are a critical

### 2.      Financial conglomerates dominate the financial landscape in France and are a critical element of the financial system

### Market Landscape — Banking Sector: key findings and metrics
- Banking sector total assets: approximately €9.1 trillion, roughly 3.23 times the GDP as of December 2023.
- Market concentration:
  - Market share of systemically important institutions (SI): around 90 percent.
  - Market share of the top four banks: approximately 74 percent.
- Number of banks in the LSI population: 101 banks; LSI market share in total assets: around 10 percent.
- Nonperforming loan (NPL) ratios:
  - SI NPL ratio: approximately 2.39 percent.
  - LSI NPL ratio: 1.8 percent.
- Deposit funding:
  - Customer deposits comprise approximately 55 percent of total balance sheet of French banks.
  - Regulated (Livret A) savings represent approximately 25 percent of household deposits, which reached €780 billion in early 2023, reflecting a year-on-year increase of approximately 6.4 percent.
  - Deposit guarantee scheme coverage: up to €100,000 per depositor.
- Income composition and profitability:
  - Fees and commissions: approximately 30 percent of total income, on average.
  - SI average RoE dynamics: around 8.00 percent in 2018, peaking at 8.35 percent in 2021, declining to 6.01 percent in 2023.
  - LSI average RoE trend: 4.63 percent in 2018 rising to 5.80 percent in 2023.
- Liquidity coverage (as of March 2023, SIs):
  - Average weighted LCR ratio: 157 percent.
  - Average weighted NSFR ratio: 134 percent.
- Robustness of capital and liquidity positions: capital and liquidity consistently above minimum regulatory requirements.

### Banks: table of key financial indicators (selected series, in percent)
- Return on equity (RoE)
  - SI: 2019 7.90; 2020 4.24; 2021 7.16; 2022 5.99; 2023 6.01
  - LSI: 2019 5.40; 2020 2.70; 2021 4.50; 2022 5.00; 2023 5.80
- Return on assets (RoA)
  - SI: 2019 0.40; 2020 0.20; 2021 0.38; 2022 0.42; 2023 0.39
  - LSI: 2019 0.60; 2020 0.25; 2021 0.35; 2022 0.40; 2023 0.63
- Net interest margin
  - SI: 2019 1.18; 2020 1.15; 2021 1.09; 2022 1.12; 2023 1.34
  - LSI: 2019 1.05; 2020 1.00; 2021 0.96; 2022 1.05; 2023 1.08
- Cost-to-income ratio
  - SI: 2019 52.00; 2020 48.00; 2021 50.00; 2022 48.30; 2023 49.12
  - LSI: 2019 53.00; 2020 60.00; 2021 50.00; 2022 52.00; 2023 52.41
- CET1 to RWA
  - SI: 2019 15.80; 2020 16.00; 2021 15.60; 2022 15.80; 2023 16.18
  - LSI: 2019 21.50; 2020 20.00; 2021 19.00; 2022 20.50; 2023 23.35
- Leverage ratio
  - SI: 2019 5.40; 2020 5.20; 2021 5.80; 2022 5.60; 2023 5.80
  - LSI: 2019 9.50; 2020 9.00; 2021 10.00; 2022 9.80; 2023 9.18
- NPL ratio
  - SI: 2019 1.45; 2020 1.80; 2021 1.75; 2022 1.70; 2023 2.39
  - LSI: 2019 1.50; 2020 1.90; 2021 1.95; 2022 1.80; 2023 1.80
- RWA density
  - SI: 2019 31.50; 2020 30.00; 2021 29.00; 2022 30.50; 2023 33.23
  - LSI: 2019 45.00; 2020 39.00; 2021 38.00; 2022 40.00; 2023 40.16
- Loan to deposit ratio
  - SI: 2019 106.00; 2020 104.00; 2021 103.00; 2022 105.00; 2023 108.04
  - LSI: 2019 96.00; 2020 94.00; 2021 93.00; 2022 95.00; 2023 95.04
- Source of table data: ACPR.

### Market Landscape — Financial Conglomerates
- Bancassurance model: long-established in France; conglomerates cross-sell products and use shared distribution channels.
- Share of banking assets held by FCs: approximately 91 percent to 92 percent of banking assets over the last ten years.
- Number of financial conglomerates (FCs) operating in France: 13 FCs.
- Governance of FC supervision:
  - ACPR acts as coordinator for 3 FCs: MNH, Milleis Banque, and AXA.
  - ACPR serves as the relevant competent authority for the other ten.
  - Coordinators for two FCs are located abroad: Allianz Europe BV and Generali.
- All FCs operating in France are led by a regulated entity except one, which is managed by a Mixed Financial Holding Company.

- Table excerpt (top 6 groups, selected items):
  - 1st Largest group: Groupe BNPP — Home supervisor: ECB/ACPR — Leading firm or bank: BNPP — B/S share of banking business: 91% — B/S share of insurance business: 9%
  - 2nd Largest group: Groupe Société Générale — Home supervisor: ECB/ACPR — Leading firm or bank: Société Générale — B/S share of banking business: 90% — B/S share of insurance business: 10%
  - 3rd Largest group: Groupe Crédit Agricole — Home supervisor: ECB/ACPR — Leading firm or bank: Crédit Agricole — B/S share of banking business: 85% — B/S share of insurance business: 15%
  - 4th Largest group: Groupe BPCE — Home supervisor: ECB/ACPR — Leading firm or bank: BPCE — B/S share of banking business: 83% — B/S share of insurance business: 7%
  - 5th Largest group: Groupe Credit Mutuel — Home supervisor: ECB/ACPR — Leading firm or bank: Credit Mutuel — B/S share of banking business: 89% — B/S share of insurance business: 11%
  - 6th Largest group: Groupe La Banque Postale — Home supervisor: ECB/ACPR — Leading firm or bank: La Banque Postale — B/S share of banking business: 44% — B/S share of insurance business: 56%
- Source of figure data: ACPR.

### Institutional Setting — roles, responsibilities, and supervisory architecture
- EU-level framework and oversight:
  - French financial conglomerates headquartered in France operate and are regulated internationally under the EU rulebook and SSM standards.
  - Delegated EU regulatory acts and EU-level application guidance increasingly define the regulatory landscape.
  - Most systemically important French banks (supervised by the SSM) head conglomerates for which the SSM is the coordinating (lead) supervisor.
  - EU regulation and supervision play a pivotal role in identifying and addressing risks associated with FCs in France.
- Supervisory responsibilities:
  - SSM mandates supervisory responsibilities for significant institutions (SIs).
  - As of September 1, 2024, the ECB is responsible for the direct supervision of 113 SIs, which includes 12 French SIs.
  - The ACPR supervises 101 LSIs.
  - ACPR is the primary supervisory authority for insurance companies and prudential supervisor of financial service providers (excluding repayable public funds).
  - SSM is the lead supervisory authority for FCs headed by SIs; French specificities (e.g., FICOD transposition, national quantitative disclosure thresholds, limits on concentration and intragroup operations) influence the supervisory approach.

### Operational independence and resources of the ACPR — findings and assessment
- Legal and governance framework:
  - ACPR mission anchored in the French Monetary and Financial Code (CMF): prudential supervision, financial stability, consumer protection, transparency.
  - Governance: Ministry of Economics and Finance (MoEF) participation in ACPR decision-making bodies is a specific feature; MoEF participation has not been shown to compromise ACPR independence so far.
  - Supervisory Board determines initiation of enforcement or sanctioning proceedings; some enforcement initiation powers are delegated to the Secretary General or the President (formal notices delegated to the President).
  - Sanctions Committee is separate from the Supervisory Board and handles disciplinary proceedings; decisions by the Supervisory Board can be contested before the French Administrative Court.
- Political representation and risk of interference:
  - Government representatives (e.g., Director-General of the Treasury, Director of Social Security) may attend ACPR Supervisory College meetings in a non-voting capacity and can request a second deliberation (not used in practice).
  - Improvements since previous FSAP: Government representatives de facto no longer attend the ACPR Sanctions Committee; expected legal codification forthcoming.
  - Assessment: no political interference identified in practice; conflicts of interest appear effectively managed. However, current arrangements would not meet the requirement that boards operate free from the risk of political interference.
- Recommendation #1:
  - To avoid any perception of a potential conflict of interest and facilitate operationally independent functioning, the government should recuse itself from all supervisory decision-making committees at the ACPR.
- Funding, budget, and staffing:
  - Funding structure: budgetary autonomy constrained by allocations from the Banque de France (BdF) under Article L.612-18 of the FMFC.
  - Main revenue: levies on supervised entities; insurance companies’ levy fixed at 0.23 percent for 2023 by the MoEF within a legislative range of 0.15 to 0.25 percent (Article L.612-20 of the FMFC).
  - Levies remitted to BdF and allocated to ACPR subject to annual parliamentary cap; any excess directed to the State budget.
  - 2023 financials:
    - Total levies: EUR 231 million.
    - Transfers to State budget due to cap: EUR 31 million.
    - ACPR expenditures exceeded total income after the cap by EUR 22 million, leading to depletion of most of the reserve held at the BdF.
  - 2024 developments: parliamentary cap increased for 2024; spending constraints in place; ACPR anticipates ongoing deficits and complete exhaustion of the BdF reserve by 2026.
  - Headcount cap: previously subject to a cap which was eliminated by Parliament in the 2024 Budget Act, though headcount remains under BdF oversight.
- Recommendation #2:
  - Ensure that the funding of the ACPR provides adequate resourcing while respecting its financial autonomy based on a thorough review of the sufficiency of resources to meet future needs.
- Human resources and remuneration:
  - ACPR sets salary levels based on BdF salary grades and has limited autonomy in determining salary levels.
  - Need to assess competitiveness of ACPR salaries against comparable supervisory roles in the financial industry; only positions requiring the same level of supervisory expertise should be used as benchmarks.
  - Retention and attraction of specialized staff depend on overall compensation package competitiveness.

*Source: IMF staff report (chapter content provided).*

### 24.      Recommendation #3: Implement the practice of a periodic benchmarking of supervisors’

### Recommendation #3: Implement the practice of a periodic benchmarking of supervisors’ salary levels against relevant peers in the financial industry; a summary report shall be discussed by the General Secretariat and submitted to the Supervisory College for information.

### Financial Conglomerate Supervision — Overview and Key Findings
- The EU rulebook largely determines the extent financial stability risks arising from financial conglomerates can be managed and mitigated in France.
- The EU capital adequacy regulation for banks regulates capital ratios at the consolidated level of a banking group; the financial conglomerate regulation provides a supplemental requirement reflecting group-level risk and capital levels.
- The regulatory framework aims to ensure risks are accurately measured across a conglomerate and that sufficient capital is available at the appropriate entity level to cover these risks, but:
  - Definitions within the regulation must be robust and clear, and approaches well-calibrated.
  - Given the complexity of underlying sectoral regulations and heterogeneity of conglomerates, establishing precise and sufficiently comprehensive definitions is a substantial challenge.
  - The regulatory toolbox cannot rely on a single tool; it rather needs to consist of a set of interrelated regulatory tools that complement and reinforce one another (for instance, the monitoring of risk concentrations in addition to the capital ratio).
- The overwhelming majority of relevant rules and approaches are set at the EU and SSM level with a critical impact on France.

### Sectoral Perimeters and Capital Measurement
- Under EU rules, insurance activities are not consolidated in the banking regulatory perimeter and are subject to their own rules and supervision specifically designed to address insurance sector risks.
- A specific example from France indicates that a consolidated CET1 ratio of 18.3percent for La Banque Postale (LBP) may overstate solvency due to the “Danish compromise,” which allows inclusion of equity stakes in insurance subsidiaries in risk-weighted assets with a risk-weight of 100percent instead of deducting them from regulatory capital—leading to potential double-counting of capital.
- The Danish compromise effect is amplified at LBP because of the materially higher weight of insurance relative to its banking operations and because LBP calculates RWAs under the standardized approach (stakes 100percent risk-weighted), whereas peers under the A-IRB may apply up to 370percent risk weight.

### Policy and Supervisory Powers — Findings
- Comprehensive and effective supplementary conglomerate frameworks are critically important to:
  - Eliminate intra-group creation of own funds.
  - Address capital adequacy at the conglomerate level with accurate information on risk concentrations and capital availability across the conglomerate.
- Supervisors should be equipped with a range of powers to implement additional measures in risk management and governance, addressing financial risks in a forward-looking manner.
- Given the systemic nature of these challenges, supervisors must possess a legally strong position to enforce measures that integrate both French-specific and EU-level requirements and apply them across EU member states where conglomerates are active.

### A. Regulatory Landscape
- The Joint Forum (JF) issued “Principles for the supervision of financial conglomerates” in 2012, updating prior principles and drawing on global financial crisis experience.
- The 2012 Principles provided guidance on powers, resources and authority for effective group-wide supervision of FCs and on corporate governance, capital adequacy and liquidity and risk management.
- The JF is an international benchmark for supervising complex FC groups, analogous to Basel Committee principles for banking supervision.

### B. European Union — The “Supplementary” Principle (FICOD)
- The FICOD’s central concept is supplementary supervision intended to add a layer of oversight complementary to sectoral regulations, addressing five areas: Own Funds Adequacy, Intragroup Transactions, Risk Concentration, Internal Control Mechanisms and Risk Management Processes and Stress-Tests.
- The FICOD was last amended in 2023 (Directive 2023/2864/EU).
- Directly applicable delegated regulations (DR) and implementing technical standards further limit member states’ room to maneuver:
  - DR on capital required at the level of the financial conglomerate: No 342/2014.
  - DR on risk concentration and intra-group transactions: 2015/2303.
  - Implementing technical standards on supervisory reporting of risk concentrations and intra-group transactions: 2022/2454.
  - Technical standards on uniform capital reporting are expected to be introduced soon.
- European Supervisory Authorities (ESA) guidance aims for convergence of supervisory practices covering mapping procedures, cooperation structure and coordination, information exchange, supervisory planning and coordination in both going-concern and emergency situations, supervisory assessment of FCs and decision-making processes.

Box: Main Precepts of FICOD
- Capital—To avoid double gearing a FC must have adequate capital at the level of the conglomerate; supervisors must check capital adequacy and calculation methods set out in the directive.
- Governance and risk management—FCs must have sound risk management and internal control mechanisms; sound reporting and accounting procedures and submission of legal structure and governance information to the competent authority.
- Intra-group transactions and risk concentrations—FCs must report significant intra-group transactions and risk concentrations on a six-monthly basis; supervisory authorities may set quantitative limits but are not obliged to.
- Supervision—Supervisory coordination and cooperation is set out in FICOD; criteria exist for identifying the "coordinator" responsible for exercising supplementary supervision and tasks to be performed by the coordinator.

### Implementation Challenges and Review
- A 2017 European Commission Staff Working Document summarized weaknesses in FICOD when compared to more recent standards:
  - Challenges in maintaining coherence across sectoral legislation, including given its changes.
  - Lack of detailed articulation for calculation of capital.
  - Enforcement powers—missing at conglomerate level.
  - Recovery and resolution—missing both at conglomerate level and for the insurance sector.
- While supervisory and regulatory harmonization has progressed, no legislative follow-up actions have been taken to comprehensively modernize FICOD to prevent interpretation challenges.
- Solvency II revisions propose an assessment of the need to review FICOD by December 31, 2027, concerning specific items, including cross-sectoral participation ownerships, consistent application of capital adequacy rules (including Commission Delegated Regulation (EU) No 342/2014), clarity and harmonization of supervisory processes and mandates, and level-playing field issues where a responsible undertaking for compliance is not clearly identified.
- Because certain FICOD components require national transposition, EU member states have limited options to address fundamental flaws at the national level; unilateral national actions risk fragmentation of the EU framework.

### C. Legal Definition of Financial Conglomerates — Identification and Thresholds
- The FICOD is well-suited to address the bancassurance model prevalent in France; FCs headed by a regulated entity provide a clear “point of supervisory intervention.”
- Identification of a financial conglomerate involves:
  - Authorization review at acquisition of a qualified holding to determine whether the parent qualifies as a Financial Holding Company, Insurance Holding Company, or Mixed Financial Holding Company.
  - Annual reassessments for groups with both banking and insurance activities to ensure they meet the FC definition, assessing significance of each activity according to criteria and waivers (articles 1 to 3 of the Arrêté du 3 novembre 2014 transpose the FICOD and establish quantitative elements).
- Box: Identification criteria and quantitative thresholds
  - A group is classified as a financial conglomerate if:
    - At least one regulated entity is the head of the group or one entity in the group is regulated; if the head is not a regulated entity, the group’s activities must primarily occur in the financial sector.
    - At least one entity in the group or subgroup must belong to the insurance sector, while another must be in the banking or investment services sector.
    - Consolidated or aggregated activities within both sectors must be significant, meeting quantitative thresholds:
      - Financial sector threshold (> 40%); applicable if the head is not a regulated entity. For the purposes of Article 2(14)(b)(i) FICOD, the ratio of the balance sheet total of regulated and non-regulated financial sector entities in the group to the balance sheet total of the group as a whole should exceed 40 %.
      - Relative threshold (>10%).
    - Asset management companies shall be added to the sector to which they belong within the group.
    - Absolute threshold for the smallest sector > 6 billion EUR.
  - Supervisors retain discretion to recognize a group as an FC even if not all thresholds are met, or to refrain from recognition due to limited supervisory relevance; supervisors can identify subgroups within larger financial structures.

### D. Coordination of Supervision and Cooperation
- Supervision of FCs in the EU is based on cooperating supervisors; a single coordinator is appointed to ensure adequate supplementary supervision.
- Cooperating ‘relevant competent authorities’ are assigned specific roles; some FC entities are supervised by the SSM (ECB) while others fall under national authorities (insurance and securities regulators).
- The FICOD requires designation of a coordinating authority for each FC; the coordinator’s tasks include:
  - Gathering and disseminating information between relevant competent authorities.
  - Overseeing and assessing the financial situation of the FC.
  - Assessing compliance with rules on capital adequacy, risk concentration and intra-group transactions.
  - Planning and coordinating supervisory activities with other authorities.
- For financial conglomerates supervised by the SSM, the ECB considers the FC dimension in its continuous Supervisory Review and Evaluation Process (SREP).
- For major French financial conglomerates, the coordinator task is transferred to the ECB/SSM; the ECB is a coordinating authority for all French financial conglomerates.

*Source: 1fraea2025005 - 24.      Recommendation #3: Implement the practice of a periodic benchmarking of supervisors’*

### 38.      The first task, in practice, is the decision to identify a FC taken by the ACPR

### The first task, in practice, is the decision to identify a FC taken by the ACPR

### Identification of Financial Conglomerates (FC) and competent authority designation
- Determination for groups headed by a significant credit institution is based on an assessment performed by the Joint Supervisory Team (JST) in conjunction with the insurance supervisor and the Legal department of the ACPR.
- A yearly reassessment is carried out by the authorization Division/JSTs of the ACPR/ECB to update the list of FCs.
- The list of identified FCs is discussed with all national competent authorities (NCA)/ national central banks (NCB) prior to publication by the Joint Committee.19
- The ECB, as coordinating supervisor for major French financial conglomerates, entered cooperation agreements with relevant supervisors for these groups; designation of competent authorities is governed by the FICOD and its national implementation.
- The status of "relevant competent authority" provides greater legal clarity regarding roles and responsibilities than a cooperation agreement alone.
- The AMF currently serves as a counterpart in cooperation but is not recognized as a relevant competent authority for certain financial conglomerates, despite significant oversight-relevant activities.

### Findings on cross-sectoral designation and need for guidance
- French implementation of the FICOD utilizes provided flexibility for designating relevant competent authorities, which can limit clarity.
- Further guidance on identifying relevant competent authorities would be beneficial, potentially across the EU, given the pan-European nature of financial conglomerates.20
- The AMF could be appointed as a relevant competent authority for conglomerates with significant activities in capital markets.

- Recommendation #4:
  - Promote with relevant European authorities the development of a standardized methodology to identify FICOD relevant competent authorities, in particular for supervising asset management companies, to guide the decision about the AMF’s appointment as a relevant competent authority.

### Supervisory cooperation: colleges and coordination
- Supervisory cooperation for France-headquartered conglomerates concentrates in financial conglomerate "colleges", conceived to exchange supervisory views and coordinate actions.
- The institute of supervisory college is not recognized by the FICOD; colleges lack a solid and comprehensive legal foundation21 and a primary task,22 although they are viewed as a vital concept.
- From the coordinator's (ECB) perspective, main objectives of colleges are:
  - promote supplementary supervision from a horizontal standpoint;
  - enhance coordination with relevant authorities;
  - develop capacity building on FC-related issues.
- Colleges are in early stages and may develop organically into effective tools for cooperation; EU-level workshops and policy meetings are organized to harmonize practices.
- For French conglomerates, AMF and ACPR/SSM have collaborative arrangements at various levels but not specifically focused on conglomerate issues.

### Enhancing joint supervisory arrangements and sequencing
- Establishing specific arrangements for concrete joint supervisory activities between ACPR/SSM and the AMF would:
  - enhance supervisory efforts regarding financial conglomerates;
  - improve efficiency of processing available information;
  - enable coordinated actions toward financial institutions.
- Suggested sequenced approach to develop arrangements:
  - timely sharing of work program proposals to facilitate coordination;
  - conducting joint thematic deep dives;
  - potentially engaging in other collaborative supervisory activities.
- Recommendation #5:
  - Contribute to further enhancements in opportunities for collaboration between relevant sectoral supervisors, including the SSM, by:
    - (i) sharing work program proposals in a timely manner to facilitate coordination;
    - (ii) conducting joint thematic deep dives;
    - (iii) performing other collaborative supervisory actions to promote a consistent and comprehensive approach to supervision;
    - (iv) contributing to the development of tools to enable the secure sharing of confidential data among financial conglomerate college members, thereby enhancing preconditions for their collaborative activities.

### Information gathering, reporting, and data harmonization
- The FICOD, as transposed into French law, provides a robust framework for information gathering:
  - Regulated entities within an FC must provide ACPR/SSM consolidated details of legal structure, governance, organizational structure including all regulated entities, subsidiaries, unregulated entities and significant branches.
  - Regulated entities must publish annually, at the FC level, a description of legal structure, governance system and organizational structure.
- For major FCs, disclosure documents are substantial and benefit from the EBA’s Guidelines on disclosure requirements.
- Regulatory reporting framework is solid with opportunities for enhancements:
  - Unified frameworks for capital adequacy reporting remain under discussion (Section K).
  - Frameworks for collecting comparable data on intragroup transactions and risk concentrations have shown opportunities to enhance analytical tools for conglomerate supervision (Section L).
  - Initial reporting experiences indicate potential for further harmonization of methodologies to refine granularity and scope of data reported to supervisors.
  - Next step: define reporting formats (likely in XBRL) to enable automated analytical tools and further integration with other supervisory analyses.
  - Effective secure data-sharing tools among conglomerate supervisors are a precondition for improved cooperation and coordination.

### Supervisory tools and the SREP extension for conglomerates
- Supervisory tools for major French financial conglomerates headed by significant banking groups are grounded in the SREP methodology and extended for supplemental supervision through operational guidance dedicated to financial conglomerates.23
- The SREP annual assessment (from the banking group perspective) is meant to:
  - assess the risk profile of a credit institution under CRD/CRR provisions;
  - consider potential impact of non-banking activities and cover supplementary supervision across each SREP element (business model, internal governance, capital and liquidity).1
- Overlaps between SREP and supplementary supervision should be avoided; conglomerate-specific risks require focused analysis beyond standard SREP.
- Additional supervisory analyses aim to ensure:
  - transferability and availability of own funds across legal entities within conglomerates;
  - prevention of regulatory arbitrage and circumvention of sectoral rules;
  - effective analysis of intragroup transactions to detect bypass attempts and understand additional risk exposures;
  - evaluation of risk concentrations (assets, liabilities, counterparties) to assess overall risk profile and systemic threats.
- These analyses should be organized into a compact supervisory tool at the supplemental conglomerate supervision level to support enforcement at the ACPR/ECB level (Section K).

### Engagement with management and communication of conglomerate-specific risks
- Supervisors engage frequently with French banks’ management, but there is room to deliver more explicit messages on specific conglomerate risks.
- Awareness of conglomerate-specific requirements among bank management is comparatively low, indicating need for more assertive and explicit communication from ACPR/ECB supervisors.

### Governance and risk management requirements
- The FICOD outlines a foundational framework for governance and risk management implemented by French regulation and aligned with requirements applied to banking or insurance groups.
- Key components required at the financial conglomerate level include:
  - effective risk management processes and internal control mechanisms;
  - sound administrative and accounting procedures;
  - regular review of strategies by governing bodies;
  - capital adequacy policies assessing business impacts on risk profiles;
  - well-integrated risk monitoring systems across supervised undertakings;
  - internal controls to identify and measure material risks relative to capital, with reporting procedures to manage intragroup transactions and risk concentrations.
- French regulations (Mostly Ordonnance n° 2014-158) impose specific governance and risk management requirements, including maintaining adequate capital buffers and supervisory reporting and disclosure obligations; conglomerate-level governance requirements follow banking regulation.
- Regulatory requirements are complementary to sectoral regulations but create complexities; further clarification at the EU level is desired and anticipated by the FICOD.
- A technical standard anticipated by the FICOD could clarify governance and risk management interplay.

Boxed regulatory point (Article 49.1 of CRR)
- Article 49.1 of the CRR enables banking groups—under specific conditions—to mitigate capital requirements when investing in insurance undertakings if supplementary supervision applies.
- Conditions include a “satisfying level of integrated management, risk management and internal control” to be supervised on a continuous basis.
- After meeting conditions, holdings in insurance undertakings may be risk-weighted as equity exposures, with risk weights varying from 100percent to 250percent, depending on standard or internal rating-based approach.
- The actual impact on capital adequacy ratios is generally limited to several basis points at the banking group level; the shortfall is typically compensated at the conglomerate level.
- This preferred treatment underscores the need for clear and transparent regulatory requirements on integrated risk management.
- OJ reference: REGULATION (EU) No 575/2013.

### Supervisory practice on governance and RAF/RAS
- Supervisors for French FCs use SSM Operational Guidance as primary internal guidance and apply it in practice.
- Supervisory assessments elaborate requirements for the risk appetite framework (RAF) and risk appetite statement (RAS):
  - RAF must articulate clear policies and controls integrated into decision-making and aligned with strategy, supported by robust IT and reporting systems;
  - Supervisors assess whether the RAS identifies material risks under normal and stressed conditions, specifies actionable mitigation measures, and incorporates quantitative metrics for various business lines.
- Internal guidance and implementation appear solid; enhancing external communication of supervisory expectations could strengthen supervision effectiveness and enforcement.

*Source: 1fraea2025005 - 38.*

### 53.      The FICOD

### 53.      The FICOD

### Overview and purpose
- Outlines foundations for capital adequacy requirements for financial conglomerates establishing complex calculation methods, including for France based conglomerates, and delegates authority for directly applicable EU technical standards, to ensure regulatory consistency.
- The level 1 text aims to ensure adequate capital adequacy by regulated entities within a financial conglomerate, which should be regularly assessed by supervisors.
- The own funds at the conglomerate level should meet or exceed the calculated capital adequacy requirements as outlined by the FICOD.

### Capital adequacy calculation methods (FICOD)
- Building on sectoral regulation for banks and insurance businesses, the FICOD specifies three methods for calculating capital adequacy to avoid the multiple use of capital and ensure sufficient capital against financial risks:
  - Method 1: Accounting consolidation method, based on consolidated accounts.
  - Method 2: Deduction and aggregation approach, where individual capital requirements are summed and adjusted.
  - Method 3: Combination method, which allows for a combination of the first two methods.
- The implementation of the FICOD in France prescribes to bank-led financial conglomerates the application of Method 1.
- Because the FICOD capital calculation aggregates the sectoral solvency standards, it necessarily induces complexity and interpretative issues that should be tackled by the Commission’s technical standards on capital adequacy.
- Article 21a, paragraph 1 (d) mandates the development of technical standards to “ensure a uniform format (with instructions)” of capital adequacy.

### Implementation challenges and supervisory responses
- Delegated regulation under the FICOD provides additional details but practical application has uncovered further technical challenges in establishing a cohesive group level approach aggregating sectoral approaches.
- A 2017 Commission survey revealed supervisory authorities noted a lack of clarity and insufficient detail necessary to promote harmonization of approaches, including:
  - Absence of harmonized templates for capital calculation reporting and disclosure, hampering comparability across the EU and decreasing credibility of frameworks at national level.
  - Deficiencies that can lead to conflicting regulatory expectations and complicate conglomerates’ ability to navigate obligations and supervisors’ enforcement.
- EU supervisors implement supervisory guidelines to close legal gaps and ensure greater consistency in calculations while maintaining transparency and legal certainty.
- Outstanding interpretative differences include:
  - Treatment of minority interest.
  - Application of sectoral own funds recognition limits on specific items at the financial conglomerate level.
  - Determination of surplus own funds.
- Supervisors are actively assessing implications and working to harmonize approaches across the EU, drawing on expertise built in France; however, supervisory guidance cannot fully substitute for legislative and regulatory clarity.

### Deeper risk assessment and supervisory tools
- The FICOD calculation method could be further refined and standardized to better reflect solvency positions and enhance comparability.
- Additional in-depth assessments are necessary to fully understand conglomerate risk profiles; essential information includes intra-conglomerate transactions and risk concentrations, situated within business models, strategies, conglomerate structures and external conditions.
- Planned exercises: Bottom-up and top-down system-wide stress tests on banks, insurance companies, and funds, engaging several bancassurance groups (planned by the ACPR and the BdF) to explore interrelationships within financial conglomerates.
- The SSM rulebook and the SREP (with a significant French footprint) are tools to assess and determine capital requirements for banks and banking groups, proportionately applied for both SIs and LSIs.
  - SREP evaluates banks’ Internal Capital Adequacy Assessment Process (ICAAPs) which incorporate insurance risk by examining severity of stress events and diversification benefits between banking and insurance sectors.

### Recommendation
- Recommendation #6:
  - Work with relevant European authorities to develop a strengthened framework for effective execution of supervisory powers according to Article 16 of the FICOD, including in relation to Articles 6 and 9 of the FICOD, to address conglomerate-wide risks and availability of capital at the conglomerate level while also incorporating a mechanism for coordinating supervisory actions, and work towards its implementation.

### Liquidity risks in French financial conglomerates
- Liquidity risks are multifaceted, driven by:
  - The nature of insurance products (notably the ‘Euro Funds’ life insurance product).
  - Reputational linkage between banking and insurance subsidiaries.
  - In some cases, the use of deposit products of the parent bank by insurance subsidiaries.
- Characteristics of the ‘Euro Funds’ product:
  - The product is theoretically highly liquid but subject to tax incentives that undermine liquidity because tax incentives require the funds to remain with the life insurer for at least 8 years to access those tax benefits.
  - Policyholders can demand withdrawal of their ‘Euro funds’ product immediately or at most with a 1 to 2-day delay, with the only possible consequence being loss of tax incentives.
- Interconnectedness and contagion:
  - Banking and insurance products of FCs are linked through brand and reputation; liquidity stress in a bank is highly likely to impact insurance products of the FC.
  - Banks consider ‘Euro Funds’ within their deposit stock; intragroup liquidity transactions are monitored under the intragroup transaction framework and supplementary supervision.
  - No significant scheme of transferring banking deposits to insurance subsidiaries has been identified in practice.
- ACPR’s power:
  - ACPR can order a suspension of benefit withdrawals for an insurer (mirroring power to limit bank deposit withdrawals); such power must be exercised with great caution because of close ties within an FC and contagion effects across the banking sector.

### Intra-group transactions and concentration risk
- The FICOD anchors monitoring and reporting of intra-group transactions and risk concentrations to ensure robust risk management and adherence to capital adequacy requirements.
  - Requires supervisory authorities to oversee intra-group transactions to prevent conflicts of interest and ensure they do not compromise capital adequacy or risk management.
  - Mandates reporting of significant intra-group transactions to relevant authorities and reporting of concentration risks to ensure conglomerate-level capital adequacy assessment.
  - Emphasizes transparency, proper valuation, and cooperation among supervisory authorities across sectors.
- Regulatory developments and guidance:
  - COMMISSION DELEGATED REGULATION (EU) 2015/2303 and COMMISSION IMPLEMENTING REGULATION (EU) 2022/2454 provide definitions and standardized reporting requirements for significant intra-group transactions and risk concentrations.
  - Joint Committee Q&As and the ECB guide establish supervisory positions and harmonization practices, especially where SSM acts as coordinator.
- ECB Guide highlights and reporting thresholds (as presented in the Box):
  - For significant risk concentrations (RC):
    - Counterparty risk exposures that exceed 10percent of own funds or €300 million must be reported.
    - Country and currency concentrations surpassing 5percent of own funds must be reported.
    - Sectoral exposures must be reported without defined thresholds.
  - For intragroup transactions (IGT):
    - Transactions involving equity or debt transfers that exceed 5percent of capital adequacy or €300 million must be reported.
    - Same thresholds apply to derivatives, off-balance sheet liabilities, insurance and reinsurance, and profit and loss transactions surpassing 5percent of total revenues.
    - Two or more transactions between group entities that contribute to the same risk, serve the same purpose, or are temporally connected in a plan will be regarded as a single economic operation.
    - Requires detailed reporting on governance structures managing these transactions.
- Implementation experience:
  - In 2024, French banks and their EU peers reported RC and IGT for the first time through a newly harmonized EU format.
  - ECB’s initial analysis highlighted the need for further consistency checks and possibly additional guidance, particularly regarding reporting granularity.
  - The type of transactions to be reported and thresholds for significance could be revisited in the medium term after gaining sufficient experience.

*Source: Chapter 53 — The FICOD.*

### 70.      Going forward, the establishment of automated processing of RC and IGT data is

### Going forward, the establishment of automated processing of RC and IGT data is

### Automated processing of RC and IGT data: purpose and next steps
- Establishment of automated processing of RC and IGT data is essential.
- Initial phases of reporting can effectively enhance methodology and data quality.
- Next steps involve:
  - standardizing the reporting format;
  - developing automated tools to support supervisory analysis;
  - integrating automated outputs into the overall assessment framework.
- Objective: complement capital adequacy requirements’ outcomes by a nuanced and granular perspective on conglomerate-level risks.

### Recommendation #7
- Contribute to the development of automated tools for processing RC and IGT data to:
  - enhance supervisory analysis;
  - ensure consistency;
  - facilitate integration with the outcomes of capital adequacy calculations (in a next step);
  - deliver a comprehensive and granular perspective on the risk profiles of financial conglomerates.

### Supervision of Less Significant Institutions (LSIs): institutional context
- LSI supervision in France is integrated into the EU regulatory and supervisory system.
- The ACPR adheres to the EU regulatory framework outlined in the EU Single Rulebook and the SSM regulation for banking supervision.
- The ACPR combines the EU framework with its own methodologies, drawing on experience supervising large, internationally active banks.
- The ACPR actively participates in the SSM and EBA structures as a key contributor.
- Evidence gathered: common SSM methodologies, processes, and procedures are effectively applied and enhanced by proprietary frameworks aligned with SSM best practices.

### A. Organization of Supervision — findings
- ACPR has established a clear and robust organizational structure and governance framework for LSI supervision.
- Responsibilities are precisely delineated across specific units with a logical hierarchy complying with SSM separation requirements for significant institution supervision.
- Annual process: collect proposals for supervisory priorities through collaboration among organizational units; priorities reviewed and established by relevant committees relying on comprehensive risk analyses.
- Approach blends top-down and bottom-up inputs and incorporates strategic priorities presented at the ECB level for the SSM.
- ACPR publishes objectives, outcomes, actions undertaken, and resources utilized in its annual report, communicated to the President of the Republic, Parliament, and made available on its website.

### B. Regulatory Framework — findings
- French regulation is aligned with EU regulatory frameworks; majority of standards embedded in directly applicable EU laws.
- Since 2017, EU laws aimed at elevating prudential standards and implementing Basel III have been introduced, with the CRDVI/CRRIII package highlighted.
- ACPR applies EU framework uniformly to all LSIs in France, incorporating the proportionality principle.
- EU delegated acts and EBA guidelines have profoundly impacted France’s regulatory framework; ACPR transposes these guidelines without substantial modifications.
- ECB plays a limited role in day-to-day supervision of LSIs; its guidance informs ACPR practices.
- ACPR actively participates in EU regulatory initiatives to tailor the framework to French needs while enhancing supervisory effectiveness through collaboration and knowledge exchange.
- Minister of Economics and Finance: pivotal role in establishing regulatory framework; regulatory power exercised via orders with support from the Advisory Committee on Financial Legislation and Regulation (CCLRF).
- ACPR authority: publish legally binding instructions (list, template, frequency, deadlines for periodic submission of documents); other ACPR guidelines are non-binding (interpretative texts, notices, guidelines, positions, rules of conduct, best practices).
- ACPR’s normative powers are generally residual or confined to delegated technical regulatory powers.

### ACPR regulatory powers (structure presented)
- ACPR
  - Regulations
    - Legally Binding
      - Technical Regulatory Acts
    - Not Legally Binding
      - Notices, Guidelines, Positions
      - Rules of Conducts and Best Practices

### Regulatory initiatives and ESG/climate-related tools
- 2020: ACPR released a guide on governance and climate risk management for licensed French banks.
- Banque de France (BdF) initiative: incorporate climate risk into company ratings; BdF provides ratings for over 300,000 companies.
- Box 6 (BdF: Transition Progress Indicator): BdF developed an in-house climate indicator assessing firms’ planned GHG emissions versus sectoral target, exposure to severe weather events where operating, and maturity of transition and adaptation strategies; results communicated to the company for free.

### C. Supervisory Practice — general approach
- ACPR employs a proportionate, risk-based approach to supervising LSIs, monitoring them continuously throughout the year.
- Following the EBA’s guidelines on SREP, ACPR defines frequency of supervisory activities based on entity classification, allowing adjustments in supervision intensity.
- Supervisory program considers classification and risk profile; assessments conducted as part of the SREP process in accordance with the SSM SREP methodology.
- Assessment inputs: prudential reports, internal audits, thematic reviews; outcomes can result in additional requirements for solvency, leverage, or liquidity ratios communicated via formal notification.

### Planning and execution of supervisory activities
- Planned supervisory activities captured in the Supervisory Examination Program (SEP) with details on mission timing, scope, priority, and staffing.
- Annually, off-site supervisors draft planned on-site inspections reviewed with on-site units and considering ECB requests.
- Senior management meeting chaired by the Deputy General Director for supervision finalizes proposed inspection program; approved by ACPR General Secretary.
- Off-site activities guided by Minimum Engagement Levels, considering institution size (proportionality) and prudential risks reflected in the RAS score from SSM methodology.
- Finalized SEP submitted to the ECB; monitoring through dedicated dashboards to coordinate off-site and on-site efforts.

### Onsite activities: coverage and targeting
- Each year, the ACPR conducts around 5 to 6 on-site examinations of LSIs.
- On-site inspections encompass credit risk, operational risk, governance, and internal control.
- Inspections include review of credit file samples, AML compliance, and emerging areas such as climate risk and IT risk.
- Remedial actions for deficiencies may be required via follow-up letter, formal notice, or disciplinary procedures.
- ACPR acknowledges value of targeted examinations and has initiated pilot programs.
- Two targeted onsite inspections were undertaken in 2024; several targeted onsite examinations are planned in 2025.
- Enhanced risk-based supervision under development will include a principle imposing targeted onsite examinations every year.

### Recommendation #8
- Further prioritize targeted onsite examinations to enhance onsite supervision coverage and allocate limited resources more efficiently.

### SREP process: strengths and limitations
- SREP adheres closely to EU and SSM frameworks with qualitative and quantitative assessments sufficient to verify LSI governance and risk management.
- Final SREP results communicated to senior management in written and oral format.
- SREP builds on a wide variety of inputs and leverages supervisory judgment and SSM framework flexibility to accommodate diverse LSI business models (retail banks, wholesale lenders, asset managers).
- Limitations: common methodology may be too rigid for heterogeneous LSI sector; lack of flexibility can affect capital requirements related to business model analysis or mislead supervisors in focus areas.
- Enhanced embedded flexibility, surrounded by robust governance, would improve effectiveness of SREP.

### Recommendation #9
- Ensure a consistent reflection of LSIs’ diverse business models in supervisory assessments through sufficient flexibility surrounded by a robust governance of the supervisory process.

### Risk-specific supervisory practices
- Credit risk:
  - Framework requires internal systems to detect, manage, monitor, and report credit risk, including internal control systems.
  - Credit decisions must be based on precise, formalized criteria reflecting client characteristics and credit operation nature.
  - Regulations establish classification criteria for exposures: (a) problem exposures, (b) non-performing exposures (characterized by unlikely full repayment or being 90 days past due), (c) performing exposures, (d) forborne exposures.
- Interest Rate Risk in the Banking Book (IRRBB):
  - LSIs must implement robust internal control systems to monitor and evaluate exposure to interest rate fluctuations.
  - Supervisors review annual internal control report and reflect outcomes in SREP score.
- Liquidity risk:
  - Framework entails identifying, measuring, managing, and monitoring funding positions consistent with international standards and good practices.
  - Institutions must assess liquidity regularly, considering cash flows, potential reputational risks, and impacts of other risks on liquidity strategies.
- Operational risk:
  - Institutions required to develop comprehensive business continuity and disaster recovery plans covering critical functions, including outsourced ones.
  - Supervisors evaluate plans through off-site and on-site assessments; plans must be tested and updated.
  - Assessment of operational risk integrated into SREP, using proportionality and inputs from internal control reports and supervisory interactions.

*Source: 1fraea2025005 - 70. Going forward, the establishment of automated processing of RC and IGT data is*

### 87.      The integration of climate-related financial risks into banking supervision highlights

### The integration of climate-related financial risks into banking supervision highlights

### Climate-related financial risks and supervisory integration
- The ACPR integrates climate-related financial risks into the Pillar 2 approach as mandated by CRR3/CRD6.
- The ACPR collaborates with the EBA to define regulatory requirements for transition plans and will oversee their implementation in next steps.
- In 2023, the ACPR conducted a thematic review of approximately sixty institutions to assess integration of climate-related risks into governance and risk management.
- The ACPR and AMF produce annual joint reports to evaluate trends and commitments in climate change control, including financial institutions' exposure to fossil fuels.

### Authorizations and Fit & Proper Assessments
- Authorization activities are conducted by the ACPR in conjunction with the ECB, with the ECB ultimately adopting any final decision.
- When assessing a banking license application, the ACPR and the ECB focus on:
  - applicants’ capital/liquidity levels;
  - the program of operations, with a special focus on the first 3 years of operations and consideration of an adverse scenario;
  - the structural organization relative to the business to be carried out;
  - suitability of managers and relevant shareholders;
  - money laundering or terrorist financing risk.
- Approval of qualifying holdings requires prior authorization by the ECB/ACPR, which assesses:
  - (i) the reputation of the proposed acquirer's shareholder(s);
  - (ii) the reputation, knowledge, skills and experience of any manager to be appointed in the target;
  - (iii) the financial soundness of the proposed acquirer;
  - (iv) whether the target will be able to comply and continue to comply with the prudential requirements; and
  - (v) whether there is an increase in AML risk.
- Grounds for license withdrawal include:
  - obtaining authorization through false declarations;
  - failure to meet prudential requirements or capital requirements;
  - failure to fulfill commitments or inactivity within specified timeframes that jeopardizes depositor funds and obligations to creditors.
- The ACPR assesses suitability of management and key function holders using established ECB guidelines and requires comprehensive self-assessments and documentation.
- The ACPR evaluates suitability for all members of the management body and key function holders in relation to qualifying holdings, new license applications, or ex-post for existing entities.
- The ACPR utilizes the ECB Fit and Proper Handbook for Supervisors and the ECB Guide to Fit and Proper Assessments, which outline criteria including:
  - the nature of any charges or accusations;
  - the time elapsed since alleged misconduct;
  - personal involvement; and
  - the appointee’s conduct following the incident.
- Appointees must submit a self-assessment regarding facts and implications for fitness and propriety, to be reviewed and endorsed by the relevant governance committee (e.g., the nomination committee).
- The ACPR may request all legal and internal documentation to support assessments and, on a case-by-case basis, conduct fit and proper interviews in collaboration with the ECB per the SSM Methodology for Fit and Proper Interviews.

### Enforcement framework and tools
- The ACPR, led by the Secretary General, uses a flexible framework of enforcement tools and escalating measures to enforce compliance and deter misconduct, including forward-looking actions.
- Supervisory actions are conducted under the authority of the Secretary General, who oversees both on-site and off-site supervision.
- The Supervisory College may delegate decision-making authority to its chairman or the Secretary General as per relevant articles of the CMF, and may implement temporary enforcement measures in emergency situations.
- The ACPR’s framework enables effective, proportionate, and deterrent sanctions and is designed to encourage early corrective actions by banks.
- Enforcement measures (Box 7) available when a potential breach is detected include:
  - Injunctions to restore financial or liquidity stability under Article L. 511-41-3 of the CMF.
  - Warnings to cease practices jeopardizing client interests under Article L. 612-30 of the CMF.
  - Formal notices (mise en demeure) ordering compliance within a specified timeframe under Article L. 612-31 of the CMF.
  - Recovery program requirements to improve financial conditions under Article L. 612-32 of the CMF.
  - Protective measures if solvency is at risk, such as placing the entity under special supervision or limiting transaction execution under Article L. 612-33 of the CMF.
  - Appointment of provisional or temporary administrators to oversee management under Article L. 612-34 of the CMF.
  - Initiation of disciplinary proceedings, with cases referred to the Sanctions Committee for further action.
- Post-inspection follow-up actions taken based on seriousness of findings:
  - A follow-up letter, signed by the Secretary General, outlining required corrective measures.
  - A formal notice (mise en demeure) issued by the President of the ACPR demanding swift rectification of identified material shortcomings.
  - Initiation of a disciplinary procedure by the Supervisory College in cases of severe violations that warrant sanctions.
- Protective measures that the ACPR can adopt include:
  - suspension of senior executives or appointment of temporary administrators;
  - requiring directors to consult or seek approval for certain decisions;
  - compelling organizational restructuring or divestment of business units when rapid deterioration poses regulatory breach risks;
  - temporarily restricting a bank's activities when solvency or liquidity is compromised or likely to breach regulatory obligations.
- The Sanction Committee can withdraw a bank's license with ECB approval as outlined in the CMF.
- Compliance verification tools include additional on-site visits or requests for internal audit missions; continuous monitoring assesses effectiveness and adherence to stipulated timelines for compliance.
- The ACPR’s escalation strategy does not adhere to any formal or internal policy thresholds or triggers; in cases of serious violations, punitive powers may be exercised directly.

### SSM Supervisory Review Process (SREP) overview
- The SREP process is fundamental to supervisory activities and adheres closely to EU and SSM frameworks, with qualitative and quantitative assessments sufficient to verify robustness of LSIs’ governance and risk management while accommodating diverse business models.
- The SREP methodology relies on quantitative and qualitative assessments, overlaid with supervisors’ expert judgement, to derive SREP decisions tailored to a bank’s specific risk profile.
- The methodology is built on four elements, which can be tailored for each institution:
  - Business model assessment – including an assessment of business model viability and sustainability.
  - Internal governance and risk management assessment – assesses group structure, internal governance framework, risk management framework, internal control environment and risk infrastructure.
  - Capital assessment – includes a risk-by-risk assessment of risks to capital (credit risk, market risk, operational risk and Interest Rate Risk in Banking Book (IRRBB)); includes the Internal Capital Adequacy Assessment Process (ICAAP) outcome and its governance, capital planning, scenario design and stress testing, internal controls, independent reviews and ICAAP documentation, data and infrastructure, risk capture, management and aggregation.
  - Liquidity assessment – includes a risk-by-risk assessment of risks to liquidity and funding (short-term liquidity, long-term funding sustainability and Internal Liquidity Adequacy Assessment Process (ILAAP) reliability assessment); encompasses ILAAP governance, funding strategy and liquidity planning, scenario design, stress testing and contingency funding plan, internal controls, independent reviews and ILAAP documentation, data and infrastructure, risk capture, management and aggregation.
- Sector and economic developments that may impact longer-term risk profiles are considered via quarterly risk analysis packs, financial stability reviews, quarterly bulletins, internal ‘policy bites’, SSM priorities, and SSM horizontal assessments.
- Frequency of engagement with each LSI is based on the bank’s risk profile, business model changes, and the nature, scale, and complexity of the institution.

### Conglomerate capital regulation: challenges and supervisory responses
- The delegated regulation under the FICOD addresses some capital adequacy issues for French conglomerates but faces challenges in creating a unified group-level approach integrating various sectoral methods.
- Key clarifications and requirements in the delegated regulation:
  - own funds resulting directly or indirectly from intra-group transactions shall not be included in the calculation;
  - own funds must be fully transferable within a financial conglomerate to be considered for meeting capital adequacy requirements;
  - sector-specific own funds must adequately reflect distinct risks inherent in different financial activities.
- Outstanding regulatory issues to be further addressed:
  - coherence between sectoral legislation and the FICOD capital definitions, particularly treatment of capital add-ons, buffers, and tiering limits;
  - obstacles to transferability of capital surplus in the capital requirement at the financial conglomerate level;
  - absence of harmonized templates for capital calculation reporting and disclosure, including associated instructions;
  - treatment of non-regulated non-financial sector entities remains unanswered by the FICOD.
- EU supervisors are working to address legal gaps through supervisory guidelines to achieve greater consistency in calculations and ensure transparency and legal certainty.
- Trade-offs highlighted in supervisory analysis:
  - Full recognition of entities’ own funds at the conglomerate level promotes a comprehensive view of capital but may lead to overreliance on certain sectors' capital without adequately considering sectoral characteristics.
  - Sector-specific tiering limits ensure recognized capital is proportional to risks in each sector, promoting a more cautious approach to capital adequacy.
  - Determining surplus own funds by allocating total own funds to sectors based on solvency requirements gives a more accurate picture across sectors; an entity-level approach is less complex but may obscure some risks.

### Appendix I: Actions taken on 2018 recommendations (selected)
- Recommendation: Report intragroup exposures and transactions within conglomerates on a flow and stock basis at quarterly or regular frequency; develop guidance for direct/indirect and common exposures.
  - Action: Addressed. Conglomerates report on intragroup exposures and transactions on a flow and stock basis at regular frequency, i.e. semi-annual basis for the most significant conglomerates. An enhanced reporting developed by the European Joint Committee in Financial Conglomerate was formally adopted by the European Commission in December 2022.
- Recommendation: Develop with the ECB and other EU agencies liquidity risk management requirements and stress testing at the conglomerate level.
  - Action: Addressed. The FICOD, article 9 as transposed in France requires implementation of adequate risk management, including liquidity risk. SSM clarified expectations on liquidity monitoring and management through adoption of a dedicated annex to SREP methodology in 2020. ACPR is carrying out ad hoc research projects on liquidity analysis and stress testing at the conglomerate level, recently presented to the ACPR Scientific Committee.
- Recommendation: Strengthen conglomerate oversight and finalize common reporting templates and supervisory guidance.
  - Action: Largely Addressed. ACPR maintained high engagement; reporting templates for intra-group transactions and risk concentrations implemented; work on financial conglomerate capital adequacy resumed with harmonizing practices in capital adequacy calculation. ECB developed internal guidance for assessment of financial conglomerate issues (SREP).
- Recommendation: ACPR and AMF should have autonomy to determine resource levels based on forward-looking review of supervisory needs.
  - Action: Not Addressed. Current arrangement with a vote on a resource threshold guarantees stable funding of the NSAs.
- Recommendation: Government should recuse itself from all supervisory decision-making committees at the ACPR and AMF to avoid perception of conflict of interest.
  - Action: Not Addressed. The presence of the MoF as an observer at the NSAs’ board does not prevent decisions being taken independently.
- Recommendation: Reduce the spread between market interest rates and the return on regulated savings products; implement CDC governance reform and review regulated savings framework.
  - Action: Addressed. Two decisions in 2018 and 2023 reduced the spread: 2018 formula changed for Livret A and LDDS (removed “inflation floor” and replaced EONIA with €STR); under Loi PACTE, ACPR became CDC's supervisor in its own right.
- Recommendation: Enhance AML/CFT supervision of smaller banks rated as high-risk and provide systematic guidance on detecting potential terrorist financing activities.
  - Action: Addressed. Majority of high-risk banks inspected between 2015 and 2020. ACPR/TRACFIN joint Guidelines criteria, including weak signals, have been implemented. ACPR provides further guidance in the Sectoral Risk Assessment.

*Source: 1fraea2025005 - 87. The integration of climate-related financial risks into banking supervision highlights*

### Appendix IV. Overview of Key Regulations Adopted Since 2018

### Appendix IV. Overview of Key Regulations Adopted Since 2018

### EU Major Legislative Initiatives
- CRR III (2021/558): intends to finalize the implementation of Basel III; introduces a further incorporation of environmental, social, and governance (ESG) factors into risk assessments; the establishment of minimum requirements for the leverage ratio; and enhancements to the framework for addressing exposure to crypto assets.
- CRR II (2019/876): implements binding Net Stable Funding Ratio (NSFR) & Leverage Ratio, with changes linked to Basel fundamental review of the trading book (FRTB), Standardized Approach for Counterparty Credit Risk (SA CCR), total loss absorbing capacity (TLAC) and a revised Pillar 2.
- CRD VI (2021/338): introduces a new framework for the supervision of third-country firms, enhanced provisions for the treatment of non-performing loans, and adjustments to the remuneration policies to align with long-term risk and sustainability objectives.
- CRD V (2019/878): requirements in relation to IPU, financial holding companies, systemic risk buffer and Pillar 2 Requirements & Guidance.
- COVID-19 “quick fix” (2020/873): modified implementation timelines for certain aspects of CRR II, along with additional flexibilities (e.g., extended IFRS transitional arrangements).
- PSDII (2015/2366): aims to payments more secure in Europe, boost innovation and open up payment markets to new nonbank entrants.
- BRRD II (2019/879): further strengthens the recovery and resolution regime as regards the loss-absorbing and recapitalization capacity of credit institutions and investment firms.
- Securitization (2017/2401; 2017/2402): amended capital requirements for securitization exposures.
- Covered Bonds (Directive 2019/2162): sets our requirements for national covered bond frameworks and the credit institutions operating within same.
- NPL Backstop (2019/630): introduced new minimum loss coverage provisioning requirements for exposures, originated after the Regulation and which subsequently turn non-performing.

### EBA Major Regulations
- Guidelines on loan origination and monitoring which specify the internal governance arrangements for granting and monitoring of credit facilities throughout their lifecycle.
- Guidelines on the application of the definition of default prescribing additional criteria for the identification of non-performing and distressed credit, which includes aspects such as the days past due criterion for default identification or indications of unlikeliness to pay.
- Guidelines on management of non-performing and forborne exposures.
- Report on Management and Supervision of ESG Risks for Credit Institutions and Investment firms.
- Implementing Technical Standards on Prudential Disclosures on ESG risks which put forward tables, templates and associated instructions that specify the requirement to disclose prudential information on environmental, social and governance (ESG) risks, including transition and physical risk.

### ECB Relevant Guidance
- Guidance to banks on NPLs published in March 2017, whereby the ECB expects banks to set internal coverage thresholds for NPLs, depending on their risk profile.
- The Addendum to the ECB Guidance to banks on non-performing loans published in March 2018, which clarifies the ECB’s supervisory expectations for prudential provisioning of new NPEs (i.e., exposures classified as non-performing according to the EBA’s definition, from 1 April 2018 onwards). Where banks fell short of these expectations after a phase-in period the SSM could impose a deduction to CET1 capital under Pillar 2.
- Supervisory expectations for provisioning of NPE stock (i.e., exposures classified as NPE on 31 March 2018), with the starting point of 2/7 years vintage buckets for unsecured/secured NPEs, subject to supervisory coverage recommendations and phase-in paths.
- ECB Guide to Internal Models which aims of ensuring a common and consistent approach to matters related to internal models.
- ECB Guide on Climate-related and Environmental Risks outlining the ECB’s understanding of the safe and prudent management of climate-related and environmental risks under the current prudential framework; it describes how the ECB expects institutions to consider climate-related and environmental risks – as drivers of existing categories of risk – when formulating and implementing their business strategy and governance and risk management frameworks.
- ECB report on good practices for climate stress testing which provides banks with examples and suggestions on how to improve their climate stress testing capabilities.

### Regulatory documentation and expectations (selected)
- ECB expectations and EBA guidelines emphasize: internal governance arrangements for loan origination and monitoring; consistent application of the definition of default (including days past due and unlikeliness to pay); prudential provisioning standards for new NPEs (from 1 April 2018) and stock NPEs (with 2/7 years vintage buckets for unsecured/secured NPEs); disclosure requirements on ESG risks via ITS templates and instructions; and supervisory use of Pillar 2 tools, including potential CET1 deductions where provisioning expectations are not met.

### Appendix V. Regulated Savings

### Role and size
- Regulated savings constitute a vital part of the French financial system, representing approximately 25percent of household deposits as of 2023.
- By early 2023, regulated household savings reached €780 billion, reflecting a year-on-year increase of approximately 6.4percent.

### Purpose, structure, and channels
- Originating from a historical initiative to fund socially beneficial projects, these savings products are well-organized.
- These savings are directed by the state to fund social projects, particularly social housing, and are appealing to households due to favorable tax treatment and government guarantees.
- A variety of regulated savings products are accessible to the public in France, including Livret A, Livret de Développement Durable et Solidaire (LDDS), and Livret d’Epargne Populaire (LEP). These products come with specific conditions, such as maximum amounts and tax treatment, serving distinct purposes.
- A significant portion of these savings is centralized to the Caisse des Dépôts et Consignations (CDC), primarily to fund social housing projects.

### Caisse des Dépôts et Consignations (CDC)
- Established in 1816, the CDC is a public financial institution accountable to the legislature and plays a key role in managing regulated savings.
- CDC’s mandate includes funding social projects and managing public deposits.
- By the end of 2022, CDC’s consolidated assets reached €280 billion, supporting various public policies.
- Although it operates independently of EU banking regulations, upcoming reforms will enhance its prudential oversight, requiring it to align more closely with banking standards.
- The CDC is subject to oversight from the ACPR, ensuring regulatory compliance and effective crisis management.

### Centralization, investment uses, and prudential treatment
- While some regulated savings remain on commercial bank balance sheets, others, such as Livret A, LDDS, and LEP, must be partially centralized to the CDC.
- Regardless of centralization, savings are subject to investment conditions; centralized funds are primarily directed toward social housing projects, while non-centralized portions must finance SMEs and social initiatives.
- The prudential treatment of regulated savings is crucial, with banks required to centralize portions of these savings with the CDC if they choose to offer regulated accounts.
- The risks associated with these savings are mitigated by treating claims on the CDC as zero-risk weighted assets.
- Regulatory standards such as the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and the Leverage Ratio apply to these products, ensuring banks manage liquidity effectively.

*Source: Appendix IV and Appendix V, "Overview of Key Regulations Adopted Since 2018" and "Regulated Savings" (content unit: 1fraea2025005).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1fraea2025005.pdf_