A credit institution is a financial institution that conducts banking operations as a regular occupation.
Credit institutions (subject to the Banking Act of 1984 and, especially, the frequently revised provisions of the Monetary and Financial Code or COMOFI) are the first of the three categories of institutions that make up the French banking and financial landscape, which also includes UCITS ( Undertakings for Collective Investment in Transferable Securities ) and investment firms.
The major financial, banking, economic and social crisis that has been taking place since 2008 is bringing major changes to these credit institutions, as well as intense reflection on their role in the economy, their governance and their control by society.
Legal definition, in France
A credit institution is a legal person performing as usual banking business 1 : banking operations include the receipt of funds from the public, credit transactions, and the making available to the customers or the management of means of payment 2 .
These establishments may also carry out operations related to their activities:
- foreign exchange transactions ;
- transactions in gold, precious metals and coins;
- the placement, subscription, purchase, management, custody and sale of securities and any financial products ;
- wealth management advice and assistance;
- financial management consultancy and assistance, financial engineering and, in general, all services intended to facilitate the creation and development of enterprises, subject to the legislative provisions relating to the unlawful practice of certain professions ;
- Leasing operations of movable or immovable property for institutions authorized to carry out leasing operations 3 .
Categories of credit institutions
Credit institutions include the 1 st January 2005, 911 establishments classified into 5 categories of establishments. These figures have varied widely since 2005.
In number, half of credit institutions are banks .
The banks have a credit activity is only part of their activities. Some companies (consumer loan companies, etc.) are specialized in consumer credit .
Banks in corporations
Commercial banks that can collect deposits and grant credits with no time limit. Still on 1 st January 2005 are 327 and 10 693 bank branches operate. They collect 41% of the deposits and grant 47% of the credits. Banks in capital companies (SA, SAS, etc.) practice the governance principles laid down for these companies, in particular those in force in joint stock companies.
Co-operative banks (sometimes called, erroneously “mutualist”) have the same rights, from the point of view of the banking activity. They were 126 in 2005 (in 5 regional networks) and had 15,613 branches. They collect 57% of the deposits and grant 38% of the credits. Their governance, that of cooperative societies, based on a form of democracy – in theory – did not especially enable them to deal effectively with the difficulties arising from the crisis. According to some authors, this is due either to the bad application, in practice, of the cooperative principles posed in theory, or to the inadequacy of these principles to the present requirements of the banking profession 4 , 5 , 6 .
Municipal credit unions
Municipal credit unions (public institutions). Their banking activity is weak since they only collect 0.1% of deposits and only give 0.2% of loans.
Financial corporations that are authorized to carry out banking operations with the exception of the collection of resources to less than 2 years which is prohibited to them. Most are subsidiaries of banking groups.
Specialized Financial Institutions
Specialized financial institutions that are bodies created by the state and have public missions. There are now three of them. The French Development Agency, the Social Housing Rental Guarantee Fund and Euronext Paris SA
The Payment Services Directive , transposed since 2009, aims to deregulate payment services and authorizes the establishment of payment institutions . The aim is to create a more harmonized European market for payments services, the Single Euro Payments Area (SEPA).
The regulation of credit institutions
The approval of credit institutions
Control of credit institutions
They are subject to the approval of the ACPR (Prudential Control and Regulation Authority) 7 .
Marketing of the services of credit institutions
The joint developments in Banking and Financial Regulation, on the one hand, and the considerable differences in distribution channels, on the other, lead to the view that credit institutions are both “producers” of financial services ( as such, they are mainly the risk managers) and the “distributors” of these financial products and services. But credit institutions lose, little by little ground in the delivery of financial services, while they remain in a monopoly in the production and management of financial risks 8 .
This movement of dissociation between production and distribution is one of the most notable of contemporary finance. It is sometimes denied, in any case, controversial. It is poorly measured statistically (the share of IOBSPs in the distribution of new home loans to individuals, for example, would be around a quarter of the total distributed in 2011).
Distribution, or commercialization, has two characteristics: the diversification of sales channels and the development of new professionals in the bank, banking intermediaries, independent of credit institutions.
The distribution channels are diversified: agencies, but also internet, landline, mobile phone, mail … and all the overlaps and possibilities crossed between these sales channels (which are, moreover, channels of contact with the establishments of credit).
Banking intermediaries are strengthening and developing: Financial Investment Advisors (CIF) or Asset Management Advisors , for savings and asset management; or Intermediary in banking and payment services ( iobsp ) for credit, banking and payments. These intermediaries help clients, prepare files, promote understanding of the banking offer, negotiate rates, practice independent selection of products and contribute to the choice of products adapted to different customer profiles.
A distribution that is more independent of the production / management of financial risks, provides, for some, benefits in terms of efficiency of choice and independence of consumers (in particular, it certainly favors banking mobility of customers, a strong challenge for fluid competition). But it basically turns the issue of consumer protection, to which the action of intermediaries and the role of distribution channels must adapt 9 .
Since 2016 (Order 2016-351 of March 25, 2016), the marketing of loans to individuals is based on common and shared principles, regardless of the credit sellers. France has chosen to defer their application between 1 st July 2016 and 21 March 2019.
Notes and references
- ↑ article L511-1 [ archive ] of the monetary and financial code
- ↑ article L311-1 [ archive ]
- ↑ article L311-2 [ archive ]
- ↑ cooperative banks http://www.revue-banque.fr/banque-detail-assurance/article/avenir-des-banques-mutualistes-cooperatives [ archive ]
- ↑ Small trader knew too much https://www.humanite.fr/histoire-du-petit-trader-qui-en-savait-trop-552875 [ archive ]
- ↑ http://deontofi.com/a-vaillant-petit-trader-demonte-les-actions-bancaires-dopant-the-bonus-dirigeants/ [ archive ]
- ↑ article L341-6 [ archive ]
- ↑ Laurent Denis, ” Banking Distribution Law “, Book , ( read online [ archive ] )
- ↑ Law of the Banking Distribution http://www.hervecausse.info/Law-distribution-distribution-by-Laurent-DENIS_a923.html [ archive ]