The proposed French banking resolution rules and their impact on derivatives

Within the context of the international and European proposals on the resolution of banking crises, the French government published a draft banking law on 19 December 2012 proposing to ring-fence certain speculative banking activities and to introduce a number of measures for the prevention and resolution of banking crises under French law.

After a first round of debates and amendments, the draft banking law will be further examined by the lower house of the French Parliament. At this stage, the impact of the proposed banking resolution rules on derivative transactions entered into with French banks and investment firms can be summarised as follows.

The banking resolution rules will apply to French credit institutions and investment firms whose balance sheet exceeds a threshold to be set out in a decree. The French Autorité de contrôle prudentiel (ACP, ie the banking regulator) will become the Autorité de contrôle prudentiel et de résolution (ACPR) and will be in charge of supervising and implementing the measures for the prevention and resolution of banking crises.

French banks and investment firms subject to the banking resolution rules will be required to submit to the ACPR, and to update, on a yearly basis, a resolution plan detailing a number of proposed measures for their recovery in case of substantial deterioration in their financial situation.

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