FRANCE Law and Practice Contributed by: Damien Luqué, Martin Jarrige de la Sizeranne and Sacha Tartarin, Lacourte Raquin Tatar
“payment failure situation” ( cessation des paie- ments ). Under common French insolvency law, a company is in a payment failure situation if it finds itself unable to meet its current liabilities out of its disposable assets. Whereas, regard - ing credit institutions, a payment failure situation results from the inability of the credit institution of immediately (or soon) pay its debts – this is the situation where credit institutions cannot refund depositors’ funds. The opening of an insolvency proceeding for a credit institution is also subject to a prior approv - al of the ACPR and, unlike in common insolven - cy proceedings, the judicial administrator or the liquidator must be appointed by the ACPR. Recovery In addition to the insolvency proceedings rules, the French Monetary and Financial Code pro - vides for crisis prevention and management measures. These rules come from the imple - mentation in French law of the BRRD. In order to prevent and manage crisis situations, credit institutions must draw up and maintain a recovery plan providing for measures to be taken following a significant deterioration of its finan - cial situation. The recovery plan must be submitted to the competent resolution authority for assessment, and must include the following provisions: • various recovery measures to deal with a significant deterioration of the institution’s financial situation; • several scenarios of major macroeconomic and financial crises; and • identification of indicators used to decide on the implementation of recovery measures.
The competent resolution authorities can also take early actions to avoid the deterioration of a credit institution’s financial situation, such as the suspension of any payment, delivery, and use of termination rights by its co-contractor. The French national resolution authority is the ACPR. However, for credit institutions under the ECB’s direct supervision, the competent reso - lution authority is the Single Resolution Board (SRB). Resolution The banking resolution regime is designed to ensure the continuity of credit institution’s criti - cal functions, while protecting financial stability and public funds. The competent resolution authority can place the credit institution under a resolution proceed - ing where the following conditions are met: • the credit institution is failing or likely to fail; • there is no reasonable measure that would prevent its failure within a reasonable time - frame other than by implementing a resolution plan; and • a resolution plan is deemed necessary in view of the objectives of the resolution and a judi - cial liquidation proceeding would not enable these objectives to be achieved to the same extent. A credit institution is deemed failing or likely to fail if one of the following conditions are met or are likely to be met in a near future: • it no longer complies with the requirements for its licence; • it is unable to pay its debts or other liabilities as they fall due;
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