Section 7: Prudential provisions

I.-The Autorité de contrôle prudentiel et de résolution may order a person referred to in 1°, 4°, 9° and 10° of A of I of Article L. 612-2, a class 1 bis investment firm or, with the exception of firms referred to in 2° of I of Article L. 613-34 which are not Class 1a investment firms, to a person mentioned in I and, where applicable, II of this Article to take, within a specified period, any measures intended to restore or strengthen its financial or liquidity situation, to improve its management methods or to ensure that its organisation is suited to its activities or development objectives, or, where the information received or requested by the AMF for the purposes of the supervision is such as to establish that the person is likely to fail, within a period of twelve months, to comply with the obligations laid down in Regulation (EU) No 575/2013 by a provision of this Title and Title III of this Book or of a regulation adopted for its implementation or by any other legislative or regulatory provision, non-compliance with which entails non-compliance with the aforementioned provisions.

II. - The Autorité de contrôle prudentiel et de résolution may also impose on the undertaking an additional capital requirement in excess of the minimum amount provided for by the applicable regulations and require the application to the assets of a specific provisioning policy or a specific treatment with regard to capital requirements.

The AMF shall impose the additional capital requirement provided for in the preceding paragraph in any of the following cases:

1° The undertaking does not have appropriate processes in place to maintain at all times the amount, type and distribution of internal capital that it considers appropriate, nor effective processes for identifying, managing and monitoring its risks;

2° Risks or elements of risks are not covered or are insufficiently covered by the capital requirements laid down by Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and by Chapter 2 of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 ;

3° The Authority considers that the implementation of other measures would not be likely to sufficiently improve the arrangements, mechanisms and strategy of the undertaking within an appropriate period of time;

3°a The value adjustments made in accordance with Article 105 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 for positions in the trading book are insufficient to enable the firm to sell or hedge its positions quickly without exposing itself to significant losses under normal market conditions ;

4° It appears from the supervision and assessment of the prudential position of the undertaking that failure to comply with the requirements governing the use of internal approaches to risk assessment, as provided for in Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, is likely to result in inadequate capital requirements ;

5° On several occasions, the level of own funds of the undertaking has not made it possible to comply with the recommendations communicated in accordance with III ;

6° Other situations specific to the institution are considered by the competent authority as likely to give rise to significant supervisory concerns.

An additional capital requirement may only be imposed by the Autorité de contrôle prudentiel et de résolution in order to cover risks or elements of risks arising from the activities carried out by the undertaking, including risks or elements of risks arising from certain economic and market developments which have an impact on the risk profile of the undertaking.

IIa. - On the basis of its assessments and controls carried out in accordance with the provisions of the first paragraph of Article L. 511-41-1-C, the Autorité de contrôle prudentiel et de résolution determines the overall level of own funds that it deems appropriate for each undertaking and on the basis of which it draws up its recommendations on additional own funds.

Its recommendations, communicated to each undertaking, result from the difference between, on the one hand, the overall level of own funds mentioned in the first paragraph and, on the other hand, the amount of own funds required under Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, Chapter 2 of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, II of this Article and, as the case may be, I of Article L. 511-41-1-A or Article 92(1a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, as applicable.

Failure to comply with these recommendations shall not result in the implementation of the restrictions referred to in X of Article L. 511-41-1-A where the undertaking meets the capital requirements of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and Chapter 2 of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, the applicable additional capital requirement set in accordance with II and, where applicable, the overall capital cushion requirement referred to in I of Article L. 511-41-1-1 or the leverage ratio buffer requirement mentioned in Article 92(1a) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013.

IIb. - The requirement referred to in II and the recommendations referred to in IIa are notified to the members of the resolution college.

III. - When the soundness of the financial position of a credit institution, a class 1 bis investment firm or a finance company is compromised or likely to be compromised, the Autorité de contrôle prudentiel et de résolution may require the firm in question to:

1° Allocate all or part of its net profits to strengthening its capital base;

2° Limit variable remuneration as a percentage of total net income;

3° Publish additional information.

IV. - The Autorité de contrôle prudentiel et de résolution may also order a credit institution, a class 1 bis investment firm or a finance company to comply with a specific liquidity requirement, including restrictions relating to maturity mismatches between assets and liabilities. The Autorité de contrôle prudentiel et de résolution shall determine the specific liquidity requirement it imposes having regard in particular to:

1° The extent and characteristics of the liquidity risks to which this person is exposed given its particular business model;

2° the systems, processes and mechanisms implemented by that person, relating in particular to liquidity risk; and

3° The results of the control and assessment of its prudential situation.

V. - The Autorité de contrôle prudentiel et de résolution shall take the measures provided for in this Article, taking into account, where applicable, the provisions of the fourth and fifth paragraphs ofArticle L. 511-41-1 C.