French Monetary and Financial Code
In forceCredit institutions and finance companies shall put in place systems, strategies and procedures, which shall be subject to the regular internal control referred to in Article L. 511-55, enabling them to identify, measure and manage the risks to which they are or could be exposed as a result of their activities.
These risks include in particular credit and counterparty risk, including residual risk, concentration risk linked to exposures to counterparties, the risk generated by securitisation transactions, market risks, the risks of changes in interest rates and changes in credit spreads when these changes affect the economic value of own funds and net interest income from their non-trading book activities, operational risk, liquidity risk, excessive leverage risk, as well as risks highlighted in the context of regularly implemented stress tests.
Given their size, internal organisation and activities, credit institutions and finance companies shall develop an internal capacity to assess the risks in question. If authorised by the Autorité de contrôle prudentiel et de résolution, they shall use an internal approach to determine the capital requirements appropriate to their situation. For the purposes of identifying, measuring and managing interest rate risk, they shall use the Standardised Method or the Simplified Standardised Method referred to in Article 84 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013.
The arrangements, strategies and procedures referred to in the first paragraph may also be designed to enable credit institutions and finance companies to assess and maintain adequate internal capital amounts and structures to cover some of the risks to which they are or may be exposed. In particular, they must make it possible to absorb potential losses resulting from crisis scenarios, including those identified as part of the prudential stress tests implemented by the AMF in accordance with the provisions of Article L. 511-41-1-C.
Depending on the nature of the risks incurred, credit institutions and finance companies must draw up contingency and business continuity plans, maintain adequate liquidity buffers and have liquidity restoration plans.
The parent undertakings of groups subject to supervision on a consolidated basis pursuant to Article L. 613-20-1 shall ensure that the systems, strategies and procedures referred to in the first paragraph which are put in place by their subsidiaries are consistent with each other and well integrated.
The conditions for application of this article are set by order of the Minister for the Economy.
