FRANKFURT (Reuters) – French banks won a landmark court victory contrary to the European Central Bank on Friday, providing them with an exemption from holding capital against customer deposits parked which includes a state-owned fund.
The European Union's top court annulled an ECB decision demanding that your six banks reserved capital against special deposits they may have with state investment institution Caisse des Dp?ts et Consignations (CDC).
The ruling marks the initial high-profile success for banks inside of a case brought up against the ECB since the central bank was crowned industry's main supervisor in 2019 beneath lead of France's own former chief regulator, Daniele Nouy.
"The ECB has erred in law and committed manifest errors of assessment," legal court said
The ruling will lower capital requirements for BNP Paribas (PA:BNPP), Societe Generale (PA:SOGN), Credit Agricole (PA:CAGR), Credit Mutuel, Groupe BPCE and La Banque Postale by millions of euros in complete.
French tax-free savings accounts, for example the Livret A, were worth some 386 billion euro at the conclusion of May but their popularity is waning as a consequence of preferential rate they pay.
Banks can deposit around 60 % of that money with the Caisse des Dp?ts et Consignation, which uses the funds to buy public housing and various projects.
La Banque Postale and BPCE, which long a monopoly on French regulated savings accounts, were likely the leading beneficiaries with the verdict.
Under EU rules, banks must hold capital worth at least Three percent in their total assets. By stripping out the deposits with the CDC, banks would get yourself a higher leverage ratio for your given quantity of capital.
La Banque Postale said rolling around in its annual report it had capital worth 4.5 percent of that assets by the end of 2019 but that ratio achievable in at even healthier 5.3 percent if it is deposits with all the CDC ended up excluded.
As the bank's assets were worth 205 billion following during the past year, in line with its annual report, that 0.8 percent difference may be valued at 1.64 billion euros ($1.91 billion).
BPCE and Credit Agricole SA knocked 30 and 15 basis points respectively off their leverage ratios in 2019 to look at account of their total deposits when using the CDC.
The court accepted that these deposits be eligible for a an exemption as they are "deposits the fact that institution is legally obliged to transfer to (a) public sector entity … for that reasons for funding general interest investments".
In 2019, before moving towards ECB, Daniele Nouy herself said that French banks would be "strongly impacted" by new liquidity rules customer happiness experience with regulated savings accounts, among other reasons.
The ECB is facing quite a few lawsuits from banks that disagree featuring a decisions, including BNP Paribas.