Overall supervision of the French financial markets is exercised by the Minister of the Economy, Finance and Foreign Trade, who prepares new laws and approves the investment services rules devised by the financial regulation authorities. Regulation and surveillance of the markets and supervision of intermediaries is in the hands of different organisations.
The law of 2 July 1996 on the modernisation of financial activities radically changed the general framework of the French financial markets. It transposed the Community directive on securities investment services, which established a single market and common rules for all European investment service providers. It allowed the French market to contribute to the completion of the European investment services market and to help pave the way for the Economic and Monetary Union. It laid the groundwork for unification of the capital markets by creating a single mechanism for all operators and simplifying their status.
• Today there are only two types of investment service providers: credit institutions authorised to provide investment services and investment firms (former brokerage firms, agents on the interbank market, portfolio managers and securities houses opting for the new status).
• All regulated financial markets, including the fixed-income, equity, spot and futures markets, are now governed by a unified body of rules.
• The new powers of market surveillance, management and inspection authorities reflect services instead of operator status.
The new framework of the French financial market is geared to professional needs and expectations, designed to permit the simultaneous development of new financial regulations and market techniques, and maintained by regulation authorities appointed to guarantee prudential safety and operator compliance.
Regulation and surveillance
Regulation and surveillance of the French financial markets are exercised by two authorities: the Banque de France and the Autorité des Marchés Financiers (financial markets authority).
Banque de France
The Banque of France has been an integral part of the European System of Central Banks since 1 January 1999, when its new status took effect (under the law of 12 May 1998). Its independence has been guaranteed by law since 1993. The Banque de France helps carry out the missions and achieve the objectives assigned to the ESCB under the Maastricht Treaty, particularly maintaining price stability. Its monetary policy powers were transferred to the European Central Bank (ECB) with the introduction of the single currency.
Like other national central banks in the euro zone, it implements the monetary policy decisions adopted by the ECB's Board of Governors. In accordance with the ECB's guidelines and instructions, the Monetary Policy Council of the Banque de France defines the " terms and conditions under which the Banque de France may purchase or sell ouright or under repurchase or resale agreements, lend or borrow, discount or take as collateral any debt instruments, and issue interest-bearing bills as well as the nature and scope of the security to be attached to the loans granted by the Bank". As a member of the ESCB, the Banque de France oversees the money market and sees to the smooth operation and safety of payment systems. It keeps the Treasury account and organises government securities auctions on behalf of the Treasury.
Comité de la Réglementation Bancaire et Financière (Banking and Financial Regulatory Committee - CRBF)
Chaired by the Minister of the Economy, Finance and Foreign Trade, the CRBF is charged with the general regulations applicable to investment service providers. Its authority extends to the following areas:
- the general conditions for conducting banking business;
- the types of operations handled by credit institutions;
- accounting standards and management rules, particularly the prudential ratios of investment service providers other than portfolio managers;
- credit policy instruments.
Comité des Etablissements de Crédit et des Entreprises d'Investissement (Credit Institutions and Investment Firms Committee - CECEI)
The CECEI approves credit institutions and investment firms authorised to operate in France, except for portfolio management companies. Chaired by the governor of the Banque de France, its legal mission is to grant authorisations under the applicable laws and regulations, to review plans by French undertakings and institutions to set up branches in other EU Member States and to receive notification of plans to carry on free-service activities. It is further charged with establishing procedures for credit institutions from other Member States wishing to operate in France.
Commission Bancaire (Banking Commission)
Chaired by the governor of the Banque de France, the Commission Bancaire is responsible for prudential oversight of investment service providers other than portfolio managers. Under the law of 24 January 1984, the CB verifies compliance with the applicable laws and regulations by credit institutions established in France. It monitors the impact of prudential regulations on banking business conditions and verifies prudential compliance. The Commission Bancaire has precisely defined prerogatives allowing it to obtain the information it needs. It may recommend or impose correction measures to improve the financial situation of any credit institution. Lastly, it has the power to apply discipline when institutions do not comply with orders or violate regulations.
Autorité des Marchés Financiers (Financial Markets Authority)
Established by law no. 2003-706 on financial security of 2 August 2003, the Autorité des Marchés Financiers was formed from the merger of the Commission des Opérations de Bourse (COB), the Conseil des Marchés Financiers (CMF) and Conseil de Discipline de la Gestion Financière (CDGF). The AMF is an independent public body with legal personality and financial autonomy. Its task is to safeguard investments in financial instruments and all other savings and investment vehicles. It also ensures that investors receive material information and maintains orderly financial markets.
A regulation, surveillance and disciplinary body, the Autorité des Marchés Financiers has four main responsibilities:
· securities and financial disclosure: the AMF sets rules for and monitors transactions in the securities of publicly traded companies (initial public offerings, capital increases, mergers, etc.) and ensures that tender offers are made in an orderly fashion. It also monitors companies to ensure that they provide complete, relevant information on a timely basis and in an equitable manner to all market participants.
· investment service providers: the AMF lays down the rules of good conduct and the obligations incumbent upon professionals authorised to provide investment services or advice.
· collective investment products: it approves new management companies and evaluates the competence and probity of their managers and the adequacy of their resources. It also sets securities custody and administration rules. It authorises the creation of mutual funds and unit trusts (SICAVs and FCPs) and reviews the information given in the simplified prospectus for each product. It makes sure the features of complex products are explained clearly to investors. Lastly, it supervises financial investment advisers.
· markets and market infrastructures: it lays down the organisation and operating principles of market executive authorities and delivery-versus-payment systems, approves clearing house rules and sets membership conditions. It monitors the markets and their transactions.
Every year, the AMF publishes a report on the role of rating agencies, their rules of conduct, the transparency of their methods and the impact of their activity on issuers and the financial markets.