After the banks classified shares as Common Equity Tier 1 (CET1) capital without the ECB’s prior approval, the ECB imposed administrative penalties of €4.275 million on Crédit Agricole S.A. (CASA), €300,000 on its subsidiary Crédit Agricole Corporate and Investment Bank (CACIB), and €190,000 on its subsidiary Crédit Agricole Consumer Finance (CACF).
Despite the ECB reminding the bank of its requirements, CASA categorised freshly issued shares as CET1 capital for five consecutive quarters in the 2015–16 fiscal year without requesting the ECB’s approval. This indicates that the bank prevented the ECB from promptly determining whether the instruments qualified as CET1 capital, the greatest quality of capital as specified under banking law. To ensure that banks can sustain losses, this earlier control is essential. A similar strategy was used by the subsidiaries CACIB and CACF for three straight quarters.
For this violation, the ECB had penalised the banks in 2018. The banks then appealed the ECB’s rulings to the Court of Justice of the European Union, which upheld the banks’ responsibility for the violations but overturned the financial penalties because the ECB had not adequately clarified how it arrived at the sums. Now that the ECB has corrected that procedural flaw, the banks are subject to the same fines.
The ECB uses its Guide on the Method of Setting Administrative Pecuniary Penalties when determining the size of the fine to be levied on a bank. In this instance, the ECB rated the breach as small for the two subsidiaries CACIB and CACF and moderately severe for the parent bank CASA. The supervisory sanctions webpage has more information on sanctions.
The judgments of the ECB are subject to dispute by the banks before the European Union Court of Justice.
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