Mission of the FGDR
Contribute to the stability and financial security of the French banking system
The Fonds de Garantie des Dépôts et de Résolution (FGDR) is an entity whose mission is to serve the public interest and protect bank customers in the event that their bank fails. By securing customers' assets, the Fonds de Garantie des Dépôts et de Résolution helps to ensure the stability of the French banking system.
Protection of the depositor and the investor by compensation in the event of a bank failure
Created by Law 99-532 of 25 June 1999 relating to savings and financial security, the FGDR intervenes when a bank fails. It is responsible for compensating depositors within 7 working days, in an amount up to €100,000 per person, per institution, if the institution where their assets are held is no longer able to meet its commitments.
The FGDR is also charged with compensating investors, in an amount up to €70,000 per person, per institution, for securities (stocks, bonds, units of UCITS) and other financial instruments which their investment services provider is unable to return to them in case of bankruptcy, as well as the associated cash.
The FGDR takes the place of a failed bank or financing company when it is no longer able to honour, vis-à-vis the public, performance bonds (mandatory guarantees delivered by a bank) issued by it in favour of business professionals who are required by law to provide a guarantee to their customers.
What is a bank failure?
A bank has failed when it is no longer able to repay its customers' deposits and, more generally, meet its commitments. This situation generally results in suspension of payments and liquidation. Without action by the FGDR, customers would recover their holdings as the bank's assets are liquidated, which is generally a very lengthy process and results in losses for them.
Compensation by the FGDR allows depositors to recover their deposits very quickly – in 7 working days in an amount up to €100,000.
This type of safety net also plays a role in terms of financial stability: it prevents customers from giving into panic and rushing to the bank to withdraw their money, thereby accelerating the phenomenon and potentially causing a chain of failures.
What are the laws and regulations to which reference is made?
The FGDR manages three guarantee mechanisms, all of which are established by way of legislative action: bank deposit guarantee, investor compensation and guarantee of mandatory guarantees delivered by a bank.
The provisions of the French Monetary and Financial Code (Code Monétaire et Financier) are as follows:
- Articles L. 312-4 to L. 312-18 for the bank deposit guarantee scheme: this which protects banks' depositors (individuals, businesses, associations, etc.) with respect to their deposits, savings and other accounts denominated in euros or currencies of the European Economic Area;
- Articles L. 322-1 to L. 322-4 for the securities guarantee, also called "investor compensation": this protects investors in case of loss of their securities, financial instruments or associated cash, i.e. when the institution to which they were entrusted has failed and is unable to return them;
- Articles L. 313-50 and L. 313-51 for the guarantee of performance bonds (which are mandatory guarantees delivered by a bank or a financing company): this protects beneficiaries of a mandatory performance bond issued by an institution which is incapable of honouring it due to its failure.
At the regulatory level:
- the deposit guarantee scheme is subject to the following five decrees of 27 October 2015:
- decree relating to the implementation of the deposit guarantee scheme, the coverage level and the rules for the application of Article L.312-4-1 of the Monetary and Financial Code;
- decree relating to the notification of depositors regarding the deposit guarantee scheme;
- decree implementing para. 4 of Article L. 312-16 of the French Monetary and Financial Code;
- decree relating to the financial resources of the Fonds de Garantie des Dépôts et de Résolution;
- decree implementing para. 6 of Article L. 312-16 of the Monetary and Financial Code (concerning the French government guarantee).
- CRBF Regulation 99-06 of 9 July 1999, which establishes the resources and operation of the FGDR for this guarantee subject to Title I, which has been repealed;
- the investor compensation scheme is governed by CRBF Regulations 99-14 and 99-15;
- the guarantee of performance bonds is governed by CRBF Regulations 99-12 and 2000-06.
An internal regulation approved by ministerial decree supplements the provision relating to the operation of the FGDR.
Intervene on a preventative basis
The FGDR can also intervene on a preventative basis to allow the orderly discontinuation or restructuring of a troubled institution before it fails. When the situation allows, the FGDR may take action before suspension of payments occurs, thereby preventing an interruption in customer services and compensation, which would prove disruptive for customers and is often more costlier.
In an effort to prevent a banking crisis, the FGDR finances asset restructuring or transfer measures aimed at protecting the public's deposits.
Contribute to bank crisis resolution
Law 2013-672 of 26 July 2013 on the separation and regulation of banking activities initiated and anticipated the "resolution" scheme for bank crises and conferred upon the FGDR broad powers with respect to the financing of recovery ("resolution") tools for troubled banks and the handling of so-called systemic crises, as the Chairman of the Management Board of the FGDR is one of the six members of the new Resolution College within the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which is responsible for developing and implementing measures aimed at preventing and resolving bank crises.
For this reason, the former Fonds de Garantie des Dépôts (FGD) became the Fonds de Garantie des Dépôts et de Résolution (FGDR), in cooperation with the Collège de Résolution, created as part of the new Autorité de Contrôle Prudentiel et de Résolution (ACPR), the French prudential supervision and resolution authority.
Order 2015/24 of 20 August 2015 on various provisions for adapting legislation to European Union financial law supplements the initial 2013 provision by introducing a law in France that complies with the European banking union regulations. Through the Monetary and Financial Code and a series of decrees adopted in September 2015 by the Council of State, French law now contains a set of measures that cover two areas:
- prevention -> entities must provide recovery plans to respond to a significant deterioration in their financial situation and, for its part, the European or French resolution authority (depending on the entity) must develop so-called resolution plans to determine the measures that it must implement, where relevant;
- Crisis management -> from the initiation of the resolution procedure to the implementation of a series of measures (tools).
The provisions specific to the FGDR are contained in Book VI of the Monetary and Financial Code (Title 1, chapter III, section 4 Bank crisis prevention measures) and in the decree of 11 September 2015 specifying the terms of intervention of the FGDR with respect to resolution.
A concerted effort to ensure the security of the banking system
The aim of the FGDR, in conjunction with the Banque de France, the French Ministry of Economy and Finance and the ACPR, is to strengthen the public's confidence in the soundness and stability of the French banking system.
|Fonds de Garantie des Dépôts et de Résolution
|Banque de France||Ministère de l'Économie et des Finances||Autorité de Contrôle Prudentiel et de Résolution ACPR||Autorité des Marchés Financiers AMF|
The French banking sector in figures
443 credit institutions, 183 financing companies and 131 investment firms were authorised in France as of 31 December 2016 (source ACPR – 2016 French banking and insurance market figures, page 21);
The French banking system has a total of €7.927 trillion in assets on a consolidated basis (source ACPR – 2016 French banking and insurance market figures, page 3);
The total outstanding net resources collected by banks from customers (households and non-financial companies) rose from €2.569 trillion to €2.723 trillion (+6%) (page 3);
The total outstanding amount of €2.723 trillion consists mainly of €1 trillion in ordinary accounts with a credit balance (current accounts), €949 billion in savings accounts with French government guarantee (including Plan d’Epargne Logement (PEL) home savings plans, Compte d’Epargne Logement (CEL) home savings plans, Livret Type 'A’ savings accounts, Livret Type 'LDD' savings accounts, etc.) and €442 billion in term accounts (pages 5 and 6).
Facts and Figures of the banking sector in France (source Fédération Bancaire Française: September 2017)
99% of French people have a bank account (Observatoire de la micro-finance);
4 French banks rank among the top 9 in Europe;
There are 37,260 branches and 58,480 ATMs across the country (source ECB);
82 million payment cards are in circulation in France;
The banking sector employs 370,300 people, which represents 2.3% of private employment.