The New Economic Regulations Act (loi sur les Nouvelles Régulations Economique, or NRE), which came into force in May 2001, has introduced a wide range of provisions to strengthen the legislative framework in the fields of competition law, company law and banking law.
From a banking and finance perspective, the NRE's aim is threefold: to increase the transparency and accountability of the financial services regulators and to widen their powers; to establish a limited global netting concept under French law; and to introduce new measures to step up the fight against money laundering.
Financial services regulators
The Comité des Etablissements de Crédit et des Entreprises d'Investissements (CECEI), one of the principal financial services regulators in France, is responsible for, inter alia, issuing authorizations to financial institutions and investment firms to enable them to carry on activities required to be regulated under French law.
The NRE has introduced a range of measures to allow the CECEI to play a greater role in maintaining stability in the banking sector in France. For instance, the CECEI now has the power to issue conditional authorizations to financial institutions and investment firms and to withdraw such authorizations should the conditions not be satisfied.
In order to achieve greater transparency in the financial regulators' decision making process, the NRE has imposed an obligation on the CECEI to adopt an internal set of rules, to be made publicly available.
The accountability of financial regulators and parliament's access to information were also key concerns of the legislators. The finance commissions of the Assemblée Nationale and the Sénat now have the power to call before them not only the president of the Banque de France and the Commission des Opérations de Bourse but also the president of the CECEI, the president of the Conseil des Marchés Financiers and the president of the Commission de Contrôle des Assurances.
The NRE has gone some way towards addressing the concerns voiced by practitioners in respect of the need for French law to recognize the concept of global netting, although the reforms are more conservative than expected. Previously, legislation was in place to allow netting arrangements in respect of transactions governed by a master agreement where at least one of the counterparties was a financial institution. However, the provisions varied according to the type of financial product in question, and netting was restricted to transactions governed by the same master agreement. The NRE seeks to rationalize the existing legislation and goes one step further by allowing netting arrangements to cut across all transactions entered into between two counterparties, subject to one qualification – each counterparty must be a credit institution, investment firm or financial, as defined in paragraph 1 of article 518-1 of the Code Monétaire et Financier.
The NRE incorporates new measures to deal with countries considered as uncooperative in the fight against money laundering. In so doing, France is the first EU member state to introduce legislation allowing it to prohibit certain financial transactions with uncooperative countries or restrict such transactions by authorizing them subject to certain conditions, on a case by case basis.