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FRANKFURT (Reuters) – French banks won a judicial victory against the European Central Bank (ECB) on Friday, which exempts them from raising capital reserves for savings collected through Livret A and sustainable development (LDD).
The Court of Justice of the European Union annulled a decision of the ECB requiring the six French banks concerned to reserve their own funds for the savings they collected through the Livret A or the LDD and they then transferred to the Caisse des dépôts (CDC).
This is the first major victory for banks in a case against the ECB since the central bank became the main supervisory body of the banking sector in 2014, which is responsible Danièle Nouy, former Secretary General of the ACPR (Prudential Supervisory Authority and resolution) in France.
"The ECB erred in law and made manifest errors of badysis", said the European Court.
This decision will reduce the capital requirements of BNP Paribas, Societe Generale, Credit Agricole, BPCE , Crédit Mutuel and Banque postale
The total amount outstanding of Livret A and the Sustainable Development Guide (LDD), all windows combined, reached 386 billion euros at the end of May. Banks can invest 60% of this savings with the CDC, which uses these funds to invest in social housing and other projects.
La Banque Postale and BPCE, which have long had a monopoly on regulated savings in France, should be the main beneficiaries of this decision.
According to the European regulation, banks must meet as early as 2018 a minimum leverage ratio of 3% of their badets. By not taking into account the savings placed at the CDC, their capital ratio will be increased.
La Banque Postale indicated in its annual report that its capital ratio was 4.5% at the end 2017, but it would be even better at 5.3% excluding deposits at the CDC.
BPCE and Crédit Agricole withdrew respectively 30 and 15 basis points from their leverage ratio in 2016 to take into account deposits with the CDC.
The European Court has agreed to exempt these deposits because they are "deposits that the institution is legally obliged to transfer to a public sector entity (…) to finance investments of general interest".
The ECB faces numerous challenges from banks challenging its decisions, including BNP Paribas
(Juliette Rouillon for the French service, edited by Jean-Michel Bélot)
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