ECB Penalizes Crédit Agricole SA for Breach of EU Law

Crédit Agricole SA and its two subsidiaries Crédit Agricole Corporate and Investment Bank and Crédit Agricole Consumer Finance had classified shares as Common Equity Tier 1 (CET1) capital without prior permission from ECB. For five consecutive quarters during 2015-16, the bank classified newly issued shares as CET1 capital without seeking the ECB permission to do so, despite ECB reminding the bank of its obligations. This means the bank did not allow ECB to timely assess whether those instruments were eligible as CET1 capital, which is the highest quality of capital as defined by banking law. This prior control is key to ensuring that banks can absorb losses. The bank's subsidiaries took a similar approach for three consecutive quarters. Thus, ECB has imposed administrative penalties of EUR 4.275 million on Crédit Agricole SA, EUR 300,000 on Crédit Agricole Corporate and Investment Bank, and EUR 190,000 on Crédit Agricole Consumer Finance.

ECB has already sanctioned the banks in 2018, for this breach. The banks subsequently challenged the ECB decisions before the Court of Justice of the European Union, which confirmed the banks’ liability for the breaches but annulled the pecuniary penalties considering that ECB had not sufficiently explained how it had determined the amounts. However, ECB has now addressed that procedural deficiency and re-imposed the penalties on banks. When deciding on the amount of the penalty to be imposed on a bank, ECB applies its guide to the method of setting administrative pecuniary penalties. In this case, ECB has classified the breach as moderately severe for the parent bank and as minor for the two subsidiaries. The banks may challenge these ECB decisions before the Court of Justice of the European Union.

Related Links

• Press Release
• Guide for Setting Penalties (PDF)

Keywords: Europe, EU, Banking, Basel, Regulatory Capital, Banking Supervision, Supervisory Penalties, Credit Agricole, ECB