Memoranda of understanding - France

 

1. In view of the fact that a number of banks and financial organisations incorporated in the Czech Republic or France have operations in both jurisdictions, the Commission bancaire (hereafter the "CB") and the Czech National Bank (hereafter the "CNB") hereby agree to the provisions set out in this Agreement in order to establish an arrangement for the collection and sharing of information, in particular through on-site inspections, whose aim is to facilitate the performance of their tasks, meet the highest international standards for effective banking supervision and promote the safe and sound functioning of banks and financial organisations in their jurisdictions.
2. The Basel Committee on Banking Supervision has issued Core Principles for Effective Banking Supervision (hereafter the "Core Principles" or "CP").
3. Core Principle 23 states that "Banking supervisors must practise global consolidated supervision over their internationally active banking organizations, adequately monitoring and applying appropriate prudential norms to all aspects of the business conducted by these banking organizations worldwide, primarily at their foreign branches, joint ventures and subsidiaries".
4. Core Principle 24 states that "A key component of consolidated supervision is establishing contact and information exchange with the various other supervisors involved, primarily host country supervisory authorities".
5. Core Principle 25 states that "Banking supervisors must require the local operations of foreign banks to be conducted to the same high standards as are required of domestic institutions and must have powers to share information needed by the home country supervisors of those banks for the purpose of carrying out consolidated supervision".
6. The overall aim of the present Agreement is to improve the strength of the financial systems of the Authorities' jurisdictions in accordance with the above mentioned Core Principles, thereby helping to maintain stability and confidence in the domestic and international financial systems and reducing any risk of loss to depositors and creditors.

Article I. Legislation and Competent Authorities

1. The relevant French Law for the purposes of this Agreement is the "Code monétaire et financier" (Code monétaire et financier, annexe a l'ordonnance n°2000-1223 du 14 décembre 2000, hereafter referred to as the "Monetary and Financial Code"), as amended, in particular Article L.613-13.
2. The relevant Czech law for the purposes of this Agreement is the "zákon č. 6/1993 Sb., o České národní bance", as amended, (Act No. 6/1993 Coll., on the Czech National Bank, hereafter referred to as the "CNB Act"), and "zákon č. 21/1992 Sb., o bankách", as amended, (Act No. 21/1992 Coll., on Banks, hereafter referred to as the "Czech Act on Banks").
3. The CB has been vested by the Monetary and Financial Code with the task of supervising credit institutions, investment firms (except portfolio management firms) and some other financial undertakings located within the jurisdiction of the French Republic (hereafter "France"), including French overseas territories.
4. In the Czech Republic, in accordance with the CNB Act and the Czech Act on Banks, the CNB supervises the activities of banks, foreign bank branches and consolidated entities that contain a bank having its registered office in the Czech Republic; the CNB also sees to the sound operation and purposeful development of the banking system in the Czech Republic.

Article II. Definitions

For the purposes of this Agreement:

1. "Authority" means the CB or the CNB;
2. "laws" mean those set out in Article I, paragraphs 1 and 2;
3. "credit institution" means a legal entity with its registered office in France which has been granted an authorisation pursuant to the Monetary and Financial Code;
4. "bank" means a legal entity founded as a joint-stock company with its registered office in the Czech Republic which has been granted a banking licence pursuant to the Czech Act on Banks;
5. "branch" means an organisational unit of a credit institution or a bank (head office) incorporated in France (the Czech Republic) which has been granted a banking licence (an authorisation) in the Czech Republic (France);
6. "subsidiary" means a bank (credit institution) incorporated in the Czech Republic (France) which is controlled by a (parent) credit institution (bank) incorporated in France (the Czech Republic);
7. "cross-border establishment" means an establishment of a branch or a subsidiary of a credit institution (bank) incorporated in France (the Czech Republic) which has been granted a banking licence (an authorisation) in the Czech Republic (France);
8. "supervised institution" means a credit institution (bank) or any other institution subject to the supervision or control of the CB (CNB) pursuant to the relevant laws;
9. "Home Authority" means the Authority located in France (the Czech Republic) responsible for the supervision on a consolidated basis of a credit institution or other supervised institution;
10. "Host Authority" means the Authority located in the Czech Republic (France) in which a credit institution or other supervised institution has a branch or subsidiary.

Article III. Mutual Assistance Concerning Sharing of Supervisory Information between the Authorities

1. The CB and the CNB hereby recognise that closer co-operation during the authorisation process of a cross-border establishment as well as sharing of information on an ongoing basis would be mutually advantageous to the Authorities for effective consolidated supervision of credit institutions and other supervised institutions.
2. A request for information pursuant to this Article shall be made in writing and addressed to the relevant contact person (Article VI, paragraph 11) of the disclosing Authority. A request shall specify the following:
   1. the information sought by the requesting Authority;
   2. a general description of the matter which is the subject of the request and the purpose for which the information is sought; and
   3. the desired time period for reply and, where appropriate, the urgency thereof.
   The Authority receiving a request shall immediately acknowledge receipt, by fax or e-mail, and, to the extent possible, specify the intended time period for a written reply.

   Sharing of information during the process of authorisation

3. As regards the process of authorisation of a cross-border establishment, upon request from the Host Authority, the Home Authority undertakes to notify the Host Authority:
   1. of any details concerning any establishment of the supervised institution located within the jurisdiction of the Home Authority, in particular regarding its compliance with laws, degree of administrative control and ability to manage a cross-border establishment in an orderly manner; and
   2. about any aspect of its laws in response to any requests for information.
4. The Home Authority shall provide the Host Authority upon written request with the following information on the applying credit institution (bank):
   1. the amount of own funds and the solvency (capital adequacy) ratio (if applicable both on a solo and on a consolidated basis);
   2. the credit institution's (bank's) shareholder structure, including but not limited to shareholders with a significant participation of 10% or more in the share capital or the voting rights, as well as significant changes thereto which indicate a change in control thereafter;
   3. whether the credit institution (bank) is fully subject to and complies with the domestic banking regulations;
   4. whether the credit institution's (bank's) management is deemed to be fit and proper; and
   5. whether the legal entity or the natural person domiciled in France (the Czech Republic) applying for a licence to establish a bank (credit institution) or intending to acquire share capital in a bank (credit institution) in the other jurisdiction gives rise to doubts that the prospective owners of this bank (credit institution) are fit and proper.
   Any information on the applying credit institution (bank) other than that specified above shall be provided only where such information pertains to the usual areas of information available to the Authority.
5. The Authorities agree that when a credit institution (bank) within the jurisdiction of the CB (CNB) proposes to establish a local branch, the Host Authority shall seek the opinion of the Home Authority before the banking licence (authorisation) is granted.

   Sharing of information in the process of granting an approval for acquisition of a qualifying holding

6. If a natural person or legal entity with its domicile or registered office in France (the Czech Republic) applies to the Host Authority for approval to acquire, directly or indirectly, a qualifying holding in a credit institution (bank) in the jurisdiction of the Host Authority, the Host Authority shall consult with the Home Authority to the extent possible before the acquisition.
7. The Home Authority shall provide the Host Authority upon written request with the appropriate information pursuant to paragraph 4 of this Article on the applying natural person or legal entity stated in paragraph 6 of this Article, if available and applicable also to persons other than credit institutions, banks and supervised institutions.

   Sharing of information for consolidated supervision on an ongoing basis

8. Information should be shared in support of the objective to facilitate and meet the requirements for effective consolidated supervision of credit institutions (banks) and other supervised institutions operating in both jurisdictions, including the prevention of money laundering and the struggle against the financing of terrorism.
9. In accordance with paragraph 2 of this Article, in the event of:
   1. a written request by the CB as Home Authority responsible for carrying out the consolidated supervision of any particular credit institution, the CNB as Host Authority shall provide all relevant information it may have which is necessary for performance of the consolidated supervision regarding that credit institution, including any branch, subsidiary or other company belonging to the same group located within the jurisdiction of the Host Authority;
   2. a written request by the CNB as Home Authority responsible for carrying out the consolidated supervision of any particular bank, the CB as Host Authority shall provide all relevant information it may have regarding that bank, including any branch, subsidiary or other company belonging to the same group located within the jurisdiction of the Host Authority.
10. The Home Authority may request from the Host Authority copies of the reports by the external auditors of the bank or other supervised institution.

    Sharing of additional information at the initiative of either the Home or Host Authority

11. Without prejudice to the procedures laid down in the paragraphs above, each Authority will use its best effort to notify and consult with the other Authority if it becomes aware of any information which, in its judgement, may constitute a material supervisory concern that could materially and adversely affect, from the prudential viewpoint, the situation of a bank or other supervised institution subject to supervision by the other Authority.
12. The CB shall provide the CNB with any relevant information regarding any material supervisory concern it may have:
    1. as Host Authority in respect of any of the branches or subsidiaries in France of a Czech bank; and
    2. as Home Authority in respect of any French supervised institution having a subsidiary or branch in the Czech Republic.
13. The CNB shall provide the CB with any relevant information regarding any material supervisory concern it may have:
    1. as Host Authority in respect of any of the branches or subsidiaries in the Czech Republic of a French supervised institution; and
    2. as Home Authority in respect of any Czech bank having a subsidiary or branch in France.
14. When considering the obligation to provide information concerning supervised institutions or banks in accordance with the paragraphs above, the Host Authority will take into account all relevant factors, including:
    1. whether the activities of the branch or subsidiary are conducted in a manner which is safe and sound;
    2. whether the branch or subsidiary has complied with the relevant laws; any sanctions taken by the Host Authority (not by other authorities), whether or not such sanctions are being subject to an appeal (not merely evidence of a material violation of the law); enforcement of claims against the branch or subsidiary (e.g. for a default in payment of a periodic contribution to deposit guarantee schemes or similar mechanisms protecting depositors or investors);
    3. any transfer of significant ownership or controlling interests in an existing bank or supervised institution to another party.
15. Before consequential action is taken by one Authority on the sole basis of information received from the other Authority, the former will endeavour to consult the latter.

    Urgency or crisis situations

16. Each authority recognises the unique importance of full and open co-operation in the event of a serious supervisory concern that might lead to a crisis situation.
17. In addition to the procedures laid down in the paragraphs above, in the event that there exists a serious supervisory concern in the judgement of the Authority concerned, the CB will endeavour to notify the CNB and the CNB will endeavour to notify the CB before appropriate action is taken regarding the serious supervisory concern.
18. When there is a need for expedited action, requests for information under paragraph 2 may be initiated in any form, including orally, but shall be confirmed subsequently in writing. The Authorities will endeavour to provide information as quickly as possible in such circumstances.

Article IV. On-site Inspections in the Host Country

1. The CNB (CB) in its capacity as Host Authority shall allow the CB (CNB) to carry out an on-site inspection concerning any branch or subsidiary of a credit institution (bank) within its jurisdiction, subject to the fulfilment of the following formalities:
   1. notification is provided to the relevant contact person at the CNB (CB) by the Home Authority at least two months before the envisaged date of the visit, specifically regarding the purpose of the inspection, its expected duration, the institution(s) to be inspected and details of the persons performing the inspection;
   2. the visit is not rejected under the conditions set out in Article VI, paragraph 6 below.
2. Provided a request for an on-site inspection in accordance with the provisions above is not rejected, the Home Authority may carry out the inspection in the Czech Republic (France). The Host Supervisor has the right to have a representative accompany any such on-site inspection. The Secrétaire Général of the CB and the CNB shall appoint a representative to accompany the Home Authority's representatives in their inspection.
3. The CB (CNB) shall endeavour to exercise its statutory powers to ensure compliance with the requests for information issued by the CNB (CB) pursuant to this Agreement.
4. As agreed, the Host Authority shall be kept informed of the results of such an on-site inspection by the Home Authority to a reasonable extent and in a timely manner. The information on the results of the inspection may provide a basis for further action, including disciplinary proceedings, undertaken by the Authority which initiated the request for the on-site inspection. This shall be without prejudice to the right of the CB (CNB) to initiate a separate action, on the basis of the report of inspection, for an alleged infringement of French (Czech) laws.

Article V. Confidentiality of the Information Shared Between the Authorities / Professional Secrecy

1. Reports of examinations or inspections shall remain the property of the Authority providing such a document.
2. The Authorities consider that any information obtained in accordance with the provisions of this Agreement should remain confidential, except for the purposes determined in the paragraph below. In this regard it is recognised that members, employees and servants of the Authorities are bound by an obligation to hold confidential the information obtained in the course of their duties. No provision of this Agreement shall give rise to the right on the part of any person, entity or governmental authority other than the Authorities, directly or indirectly, to obtain any information or to challenge the execution of a request for information under this Agreement.
3. The Authority which makes a request may use the information furnished pursuant to this Agreement solely:
   1. for the purposes stated in the request, including ensuring compliance with, or enforcement of, any laws and regulations specified in such a request; or
   2. for purposes within the general framework of the use stated in the request, including conducting a civil or administrative enforcement proceeding, assisting in a proceeding whose purpose is to permit a subsequent criminal prosecution, or conducting any investigation related to any general charge applicable to the violation of the provision stated in the request.
4. In the event of a request issued by a competent official person in the course of a prosecution for any offence or of a winding-up of a bank, credit institution or supervised institution for disclosure by an Authority of information transmitted by the other Authority, the Authority to which the request has been addressed shall notify the Authority that originated the information of such a request and shall seek, to the extent permitted by the laws of the Authority to which the request has been addressed, prior approval before disclosing this information.
   
   If an Authority is forced to testify in a special parliamentary investigation to disclose confidential information received from the other Authority, it shall consult with the latter Authority before disclosing such confidential information. The Authority forced to testify shall advise the requesting body if the Authority that originated the information did not consent to sharing the information and that a forced disclosure could adversely affect the future transmission of confidential information by foreign supervisory authorities. It shall request that the information be kept confidential by the requesting body.
   
   In any other event of a request for disclosure by an Authority of information transmitted by the other Authority, in particular when the information relates to an individual client of a bank, credit institution or supervised institution, the Authority to which the request has been addressed shall seek and receive, to the extent permitted by the laws of the Authority that originated the information, prior approval before disclosing this information.
5. In the event of a breach of the conditions set out in Article V paragraph 4 above by an Authority, the other Authority may suspend the execution of co-operation under this Agreement with immediate effect. Such suspension shall affect neither the obligation of confidentiality nor the content of Article VI paragraph 14 of this Agreement.
6. Each Authority shall keep confidential requests made within the framework of this Agreement, the content of such requests, and any other matters arising during the operation of this Agreement, including consultation between the Authorities.

Article VI. General Provisions

1. Nothing in this Agreement shall affect the competence of the CNB under Czech law and supervisory practices or supersede, alter or create any arrangement between the CNB and other entities with respect to the sharing of information.
2. Nothing in this Agreement shall affect the competence of the CB under French or European Community law and supervisory practices or supersede, alter or create any arrangement between the CB and other entities with respect to the sharing of information.

   Mutual information on laws and regulations

3. For the purposes of this Agreement the Authorities shall use documents intended to inform each other of the laws (including, where applicable, regulations and procedures) governing the banks or supervised institutions in their jurisdictions published on their Internet websites. The CNB website address is http://www.cnb.cz/. Information on the French laws, regulations and procedures applicable within the jurisdiction of the CB is located on the website of the Banque de France http://www.banque-france.fr/.
4. The Authorities represent that they have informed each other of the laws, regulations and procedures governing the confidentiality of information to be shared pursuant to this Agreement.
5. The Authorities acknowledge that this Agreement has been executed in accordance with the applicable laws and regulations in France and the Czech Republic and is based on the representations made and supporting materials exchanged by the Authorities.

   Impossibility of providing information or assistance

6. The Authorities understand that the provision of information or assistance to a foreign Authority must be refused by an Authority when complying with the request is likely to result in a prejudice to sovereignty, security, economic interests or public policy, or where criminal proceedings have been initiated on the same facts against the same persons, or where a final decision to impose a sanction has been given against such persons for the same facts. Nothing in this Agreement shall affect this obligation.

   Implementation of the Agreement

7. The Secrétaire Général of the CB and the CNB may issue practical arrangements regarding the method of co-operation between the Authorities.
8. Representatives of the CB and the CNB will endeavour to meet annually to discuss general supervisory developments concerning credit institutions and/or other supervised institutions maintaining establishments in both the Czech Republic and France. Each party will make every effort to encourage continuous and informal contact between their staff, and particularly to provide the other Authority with information on legislative or regulatory provisions relevant to banks and supervised institutions.

   Miscellaneous

9. This Agreement shall enter into force and effect on the day of its signing by the CNB and CB.
10. For the purposes of this Agreement, the CB and the CNB shall use the lists of licensed banks, credit institutions and supervised institutions within their jurisdictions published on their Internet websites stated in paragraph 3 of this Article.
11. Within 30 days of the date this Agreement enters into force, the CNB and the CB shall exchange lists of the contact persons authorised to request and provide information on behalf of the CNB and on behalf of the CB pursuant to this Agreement. The list shall contain the following contact details: the first name and surname, position (function), e-mail address and telephone and fax numbers of the authorised persons. On behalf of the CNB and CB, persons other than those specified in the manner stated in the preceding clauses may request or provide information of a general nature or information that has been officially disclosed. The CNB and the CB shall inform each other of any modifications to the list of authorised persons without undue delay.
12. The Authorities shall consult each other in the event of any changes in their respective laws, or in the event of any other difficulty which may make it necessary to amend or interpret this Agreement.
    
    The original wording of this Agreement is in Czech, French and English versions which shall be equally authentic. In case of any doubt with regard to the interpretation of this Agreement due to differences between the language versions the matter in question will be treated by the CNB and the CB in such a manner as to fulfil the principles and objectives on which this Agreement is based.
13. The provisions of this Agreement may be amended by the mutual written agreement of the Authorities
14. The Agreement will remain in effect for an indefinite period. Should an Authority consider that it can no longer co-operate with the provisions of this Agreement, it will give notification to the other Authority as soon as possible. Where one Authority gives the other Authority notice of withdrawal from this Agreement, the Agreement shall terminate on the thirtieth day following receipt of the notice of withdrawal by the other Authority, save as where agreed otherwise. In any case, the duty of confidentiality referred to in Article V of this Agreement shall not terminate with respect to any information disclosed. Actions that have started under this Agreement prior to the notice of withdrawal shall continue up to its termination.

IN WITNESS WHEREOF, the Undersigned, being duly authorised, have signed this Agreement.

Done in 6 exemplars, two exemplars of the respective language version in French, Czech and English.

Prague 21/6/2002
For the Czech National Bank
Zdeněk Tůma
The Governor
Česká národní banka

Paris 14/6/2002
For the Commission Bancaire
Jean-Claude Trichet
The Governor of the Banque de France,
Chairman of the Commission Bancaire