HSBC 2002 Annual Report Download - page 35

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French regulation and supervision
French banking law (the ‘Banking Law’ ) sets forth
the conditions under which credit institutions,
including banks, may operate in France and vests
related supervisory and regulatory powers in certain
administrative authorities: the National Credit and
Securities Council, the Banking and Financial
Regulatory Committee, the Credit Institutions and
Investment Firms Committee and the Banking
Commission.
The Banking Commission, which is chaired by
the Governor of the Bank of France, is responsible
for the supervision of credit institutions and certain
investment firms and the enforcement of laws and
regulations applicable to them. Banks are required to
submit periodic (either monthly or quarterly)
accounting reports to the Banking Commission
concerning the principal areas of their activity. The
Banking Commission may also request additional
information which it deems necessary and may carry
out on-site inspections. The reports permit close
monitoring of the condition of each bank and also
facilitate computation of the total deposits of all
banks and their use. Where regulations have been
violated, the Banking Commission may act as an
administrative court and impose sanctions which
may include deregistration of a bank, resulting in
closure. The Banking Commission also has the
power to appoint a temporary administrator to
manage provisionally a bank which it deems to be
mismanaged.
The principal regulations applicable to deposit
banks such as CCF are minimum capital ratio
requirements, equity and permanent resources
(certain long-term assets denominated in euros)
ratios, risk diversification and liquidity, as well as
monetary policy, restrictions on equity investments
and reporting requirements.
CCF’s commercial banking operations in France
are also significantly affected by monetary policies
established from time to time by the European
Central Bank in coordination with the Bank of
France. French credit institutions are required to
maintain on deposit with the Bank of France a
percentage, fixed by the European Central Bank and
calculated monthly, of various categories of demand
and short-term deposits and are prohibited from
paying interest on certain demand deposits and on
deposits with a maturity of less than one month.
Credit institutions must make periodic reports to
the Banking Commission summarising their
activities during the relevant period with detailed
breakdowns by category, including an income
statement, and certain additional data relating to
operations such as the number of employees, client
accounts and branches.
All credit institutions operating in France are
required by law to operate a deposit guarantee
mechanism for customers of commercial banks,
except branches of European Economic Area banks
which are covered by their home country’s guarantee
system. The contribution of each credit institution is
calculated on the basis of the aggregate deposits and
one-third of the gross customer loans held by such
credit institution. This contribution is weighted by
solvency criteria. In the event of the insolvency of an
authorised institution, the limit on compensation for
each depositor is €70,000.
French credit institutions are required to
establish appropriate internal control systems,
including with respect to risk management and the
creation of appropriate audit trails. The institution
must prepare an annual report for review by the
institution’s board of directors and the Banking
Commission regarding the institution’ s internal
procedures and the measurement and monitoring of
the institution’s exposure.