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Country Profile: France 1 Last Updated: September 2008

FRANCE Country Background

This section provides background information on the country, including key facts, recent economic performance, and information on its government.

Key Facts Capital other major cities Paris Marseille, Lille Lyon, Toulouse, Nice, Strasbourg Area 547,030 km2 (metropolitan France) Languages French Currency EUR (Euro) Country telephone code +33 National / Bank holidays 2008 — 1, 11 Nov; 25-26 Dec

2009 — 1 Jan; 13 Apr; 1, 8, 21 May; 1 Jun; 14 Jul; 15 Aug; 1, 11 Nov; 25-26 Dec

Business / banking hours 09:00–18:00 / 09:00–17:00 (Mon–Fri) Stock exchange Euronext Paris Leading share index CAC 40 Internet top-level domain .fr

Economic Performance 2002 2003 2004 2005 2006 2007

Exchange rate – EUR/USD1 1.0626 0.8860 0.8054 0.8041 0.7973 0.7296 Money market rate (Euribor 1m) (%)1 3.306 2.346 2.081 2.143 2.940 4.08 Consumer inflation (%)2 1.9 2.2 2.3 1.9 2.0 1.9 Unemployment rate (%)3 8.7 9.5 9.6 9.6 9.0 8.5 GDP volume growth (%)2 1.1 1.1 2.0 1.2 2.4 2.3 GDP (EUR bn)4 1,550.1 1,596.2 1,656.7 1,707.2 1,781.7 1,854.5 GDP (USD bn)5 1,458.7 1,801.6 2,056.9 2,123.1 2,234.7 2,541.8 Population (mil)6 61.53 61.93 62.32 62.7 63.03 63.363 GDP per capita (USD) 23,792 29,145 33,048 33,918 35,336 40,115 Current account (% of GDP)7 1.0 0.4 -0.3 -1.6 -1.7 -1.7

1: Period average 2: Annual percentage change 3: Harmonized definition ILO (International Labour Organization) 4: GDP at market prices. Production-based approach. 5: Per exchange rate 6: End of period, recent figures may be IMF projections 7: Trade balance of goods and services + net income + net transfers

Sources: IMF, ECB

Government » Legislature regime: presidential republic with a bicameral parliament.

– National Assembly – 577 members directly elected via simple-majority voting for five-year terms. – Senate – 331 members elected for nine-year terms; one-third are indirectly elected every three years by an

electoral college within each department. » France is a highly centralised state, with the regions and the departments as second and third echelons

respectively of the country’s political structure. » Political Leader: François Fillon, PM since 17 May 2007. Head of a centre-right government. » Head of State: Nicolas Sarkozy, president since 6 May 2007. The president is elected directly every five years. » Member of the European Union: founding member of EU (European Economic Community in 1957)


Legal and Regulatory Issues

This section provides information on the country’s legal and regulatory issues, including legislation, resident and non-resident status, account ownership, cash pooling regulations, account types and charges, FX controls, central bank reporting requirements, anti-money laundering, and electronic transactions.

Legislat ion » French financial market legislation is heavily influenced by EU Directives. As such the market for financial

transactions is deregulated.

Resident and Non-resident Status » There is no legal distinction between resident and non-resident companies in French law. » Banks will draw a distinction between resident and non-resident companies for the purposes of reporting

requirements and lifting fees. » Resident companies are usually defined as those performing real economic activity in France, most of the

overseas departments and territories or Monaco.

Account Ownership » Any type of account can be owned by a resident as well as a non-resident company.

Cash Pool ing Regulat ions » The legal status of notional pooling is uncertain. Cross guarantees, providing the legal right of set-off, are difficult

to obtain under French law. » Cash concentration arrangements are only allowed under the specific circumstances: » The agreement and cash pool structure must be authorised by a special deliberation of the board (Conseil

d’Administration). » It is recommended that the agreement is submitted to the relevant auditors before presenting it to the board. » Cross-border merging of interest statements is not permitted.

Account Types and Charges » Current accounts can be held in all exchangeable currencies and are offered with or without overdraft limits. » EUR accounts are convertible into foreign currency. » Interest rates can either be fixed using the bank’s basic rate or based on a market rate (e.g. Euribor) less a

spread. » Since March 2005, banks have been permitted to offer interest-bearing current accounts. Previously, they had

been prevented from paying interest on local currency deposits with a maturity of less than one month. » Account maintenance fees will normally apply but are negotiable. » A flat fee will be charged for domestic as well as foreign payments. » In accordance with EU rules (Regulation 2560/2001) on cross-border payments in euro, payments/transfers with

the EU and certain EFTA countries cost the same as their domestic equivalent. – EU standard transfers can only be undertaken exclusively in euro – The maximum amount of EUR 50,000 should not be exceeded – The payment must be credited to an account maintained in a EU state (or certain EFTA countries) – The IBAN and the BIC of the recipient must be correctly indicated – Transfer fees shall be divided between the sender and the recipient (each pays the fees incurred in her/his

corresponding country). – Note: orders not fulfilling these requirements will be carried out as foreign transfers and charged

accordingly. » IBAN has been implemented.


FX Control » The Euro flows freely but the European Central Bank can intervene or coordinate an intervention with the other

Central Banks in the euro area in order to stabilise the exchange rate. » There are no exchange controls.

Central Bank Report ing (CBR) Requirements » EU Regulation 2560/2001 eliminated systematic reporting for cross-border transfers below €12,500, otherwise

reporting regulations require all transactions between residents and non-residents to be reported on a monthly basis to the Banque de France. Data must be submitted within ten days of the month end.

» In September 2005, the European Central Bank asked the European Commission to raise the threshold for balance of payments reporting (cross-border payments in euro) to EUR 50,000 as of 2008 since from 1 January 2006 the threshold for domestic charges on cross-border euro payments was raised to €50,000, whereas the threshold for CBR was not raised at the same time and maintain the current threshold of €12,500 in the meantime.

» The same reporting regulations apply to a zero-balanced cash pool between residents and non-residents. » While banks usually under the reporting of transactions between resident and non-residents on behalf of their

corporate clients, the resident company is ultimately responsible for ensuring the accuracy and prompt delivery of all information reported to the central bank (Banque de France).

Anti -Money Laundering » France has implemented the EC Money Laundering Directive (Council Directive 91/308/EEC of 10 June 1991 as

amended by directive 2001/97/EC of 4 December 2001). » The “Third Directive” replaces existing EU legislation and incorporates into EU law the June 2003 revision of the

FATF-40 standards. EU Member States have agreed to implement the Directive by 2007. » As a Financial Action Task Force (FATF) member, it observes most of the FATF-40 standards. » It is also a member of the Caribbean Financial Action Task Force (CFATF) as a Co-operating and Supporting

Nation. » Money laundering and terrorism financing are criminalized by law in France. Additional regulations serve a

preventative purpose. » Financial institutions are required to record and report suspicious transactions to the Treatment of Intelligence

and Action Against Clandestine Financial Networks Unit (TRACFIN), which is a member of The Egmont Group. » A report must be filed with TRACFIN when the identity of the principal or beneficiary remains doubtful despite due

diligence. A report must also be filed where transactions are carried out on behalf of a third party by financial entity acting in the form, or on behalf, of a trust or an asset management instrument when legal or beneficial owners are not known.

» Account opening procedures require formal identification. Individuals require an official document bearing a photograph of the account holder.

» Legal entities must be verified by extracts from an official commercial register. » Where the transaction is performed on behalf of a third party, their identity must be ascertained unless the third

party is a financial institution itself. » All banks, credit and financial institutions have to identify ‘occasional’ clients for transactions exceeding EUR

8,000 or rental of a safe deposit box; they must also monitor clients for transactions over EUR 150,000 which have unusually complex conditions and no apparent economic justification.

» There is no legal requirement for financial institutions to include originator information in either payment or message forms accompanying wire transfers. However, the rules of the Centrale des Règlements Interbancaires and conduct standards issued by the Association Française des Banques require banks to include certain originator data (such as name, address, and identifying code of the originator where the originator is a business entity)

» Records must be kept for a period of at least five years.

Electronic Transact ions » France has implemented Directive 1999/93/EC of the European Parliament and of the Council on a Community

framework for electronic signatures. Electronic signatures are accepted as legally binding [Loi n° 2000-230 du


mars 13, 2000]. Two other decrees (décret n° 2001-272 du mars 30, 2001 and décret n°2002-535 du avril 18, 2002) supplement the aforementioned law.

» Article 289 of the French Tax Code allows companies which are established in France to issue and receive invoices by electronic transmission.

The Banking Environment

This section includes an overview of the banking market, market dominant banks and background information regarding the central bank and it's tasks.

Overview » Twenty years ago, the French banking industry was still extremely regulated and divided; the French State was

still very much in control. » The banking law of 1984 placed all banks – whatever their status – under the same set of rules, which effectively

abolished credit specialisation and led to the deregulation of the banking system. As of 1999, the savings banks (Caisse d'épargne) assumed the status of co-operative banks, now on a par with Crédit Agricole, and in 2002, mutual banks became members of the French Banking Association (Fédération bancaire française or FBF). As a consequence of credit liberalisation, all these institutions entered into competition on their domestic market, under equal terms, with practically no restrictions.

» In 1987, under the Chirac government, several major banks were privatised including Société Générale, Crédit Commercial de France, Paribas and Suez; a year later Caisse Nationale de Crédit Agricole became a mutual bank. After a pause, the privatisation process resumed in 1993 with the privatisation of BNP, and of Crédit Lyonnais in 1999. This denationalisation process came to an end with the privatisation of Banque Hervet in 2001, and with the sale of the State's 10% share in Crédit Lyonnais in 2002.

» The globalisation of financial services throughout the world and within Europe in the 1990s exposed France’s newly privatised banks to foreign competition, which resulted in substantial changes in the industry, all the more so since overdue reforms had also been delayed as a consequence of state-control. Large-scale domestic acquisitions and takeovers took place, concluding in a full-scale reorganisation of the banking sector in France.

» The French banking sector has consequently consolidated quickly over the last decade. In 1984, there were 1556 banks in France, a 50% decrease in the number of banking institutions operating at the turn of the century. In 1999, the number stood at 1000.

» As of April 2007 there are less than 450 banks left, of which some 230 are commercial banks. » French credit institutions still maintain dense countrywide branch networks, a legacy of 1970s,. There are some

40,000 branches spread across the country, including 12,700 branches of the French postal service, La Banque Postale, which also provides a wide range of retail services.

» There were over 160 foreign banks, including all the international cash management banks, in Paris. » Several foreign banks have acquired substantial footholds in the French market, the most prominent include:

HSBC, Citigroup, Deutsche, ING, Fortis, Intesa BCI and San Paolo IMI. » The Basel II framework, based on EU directives adopted in June 2006 and numerous interpretation guidelines

issued by the Committee of European Banking Supervisors, entered into force in 2007. However, the framework will not be adopted simultaneously in all banks, as individual banks may choose not to introduce the new rules until the beginning of 2008.

» Société Générale lost €4.9 billion, or $7.2 billion, in January 24, 2008 from a rouge trader – the loargest such loss in history of banking. The bank said the trades were unauthorized and exposed it to risk of nearly €50 billion, or $78 billion. A report published in Februrary by a panel of independent Société Générale board members concluded that lapses in the bank's internal procedures for monitoring traders had made it possible for the rouge trader’s fake trades to go undetected for nearly two years.

Marke t Dominant Banks » Market dominant banks in France are BNP Paribas, Crédit Agricole, Société Générale, Caisse Nationale des

Caisses d’Epargne (CNCE), Clayon (Crédit Agricole and Crédit Mutuel).


» Banque Nationale de Paris (BNP) and Paribas, and the friendly takeover of Crédit Lyonnais by Crédit Agricole, which created one of the world’s largest institutions.

» In 2004, France’s savings banking group, Caisses d’Epargne, and the state-owned Caisse des Dépôts et des Consignations (CDC) merged to form Caisse Nationale des Caisses d’Epargne (CNCE). CDC was the strategic shareholder with 65%.

» The major domestic cash management banks are BNP Paribas, Crédit Agricole, Société Générale, Crédit Mutuel and HSBC. In addition, all the major international cash management banks have a presence in France.

The Central Bank » The Banque de France exercises its functions in accordance with the 2001 Monetary and Financial Code and

its amendments independently of the state, guaranteed by the Act of 4 August 1993. » As a member of the European System of Central Banks (ESCB), responsibility for implementing the single

monetary policy, whose primary objective is price stability, is shared between the European Central Bank, the Banque de France and other ESCB central banks.

» As a national central bank, Banque de France performs other tasks under the supervision of its General Council: – Issuance and maintenance of banknotes and coin – Foreign exchange policy and international relations – Monitors financial markets and oversees payment systems – Ensures financial stability at the national level

Financial Authorities

This section includes supervision powers, key financial authorities and the country’s banking association and federation.

Supervision » The Banque de France provides operational resources for three financial authorities/regulatory bodies (CCLRF,

CECEI and CB) to guarantee both the Committee's independence and the relevance of their decisions. These bodies governing boards are quite diverse and operate collegially.

» In 2000, the banking profession (AFB) decided to create a new professional bank organization (FBF) to represent and defend the positions of all banking houses present in France, whatever their statute. Consequently, some tasks once performed solely by AFB were transferred to FBF.

Advisory Committee on Financial Legislat ion and Regulat ion (CCLRF)

» The power to regulate the banking and financial sector is devoted to the Minister of Finance, assisted by the CCLRF (Comité Consultatif de la Législation et de la Réglementation Financières) whose advisory missions cover all regulation and legislation applying to the financial sector.

» The CCLRF replaces the Comité de la Réglementation Bancaire et Financière (CRBF) and the Commission de la Réglementation du Conseil National des Assurances (National Insurance Board Regulatory Commission).

» On a referral from the Minister of Finance, the CCLRF issues opinions on all normative texts of general scope in the banking, financial and insurance sectors (laws, orders, decrees, decisions).

» The consultative competences of the CCLRF also cover draft proposals for European regulations and directives before they are finally adopted.

» As regards draft decrees and orders, the Minister must seek a new deliberation if he does not wish to follow the CCLRF's opinion.


Credit Inst i tut ions and Investment Firms Committee (CECEI)

» Within the French system for banking and financial regulation and supervision, CECEI (Comité des Établissements de Crédit et des Entreprises d'Investissement) is responsible for the conditions of access to the banking and investment services professions.

» As such, it is responsible for authorising new operators, authorising takeovers and other changes in the share ownership structure of existing institutions, ensuring that new senior managers are suitably qualified, managing procedures for the right of establishment and freedom to provide services within the European Economic Area, and in general issuing the individual authorisations provided for in the prevailing laws and regulations.

» In carrying out its duties, the Committee monitors compliance with the criteria set forth in the Banking Act of 24 January 1984 and the Financial Activity Modernisation Act of 2 July 1996, which in turn take up the principles contained in European directives relating to credit institutions and investment firms.

» The Committee's role consists mainly in guaranteeing that the banking and financial services professions are open to suitably qualified new players, while ensuring a satisfactory level of safety for customers by ensuring that the banking and financial system works smoothly.

Banking Commission (CB) » The CB (Commission bancaire) is the supervisory body for credit institutions. » The Banking Commission has a wide range of investigatory and enforcement powers to ensure that credit

institutions and investment firms observe the applicable laws and regulations. » The Banking Commission has the power to impose administrative penalties or financial sanctions to offenders

(article L613-1, Monetary and financial code). » The Commission’s mission is to protect depositors as well as to act as watchdog over the French banking and

financial system to ensure its profitability and financial stability. » All banks operating in France are regulated on an equal basis.

Autori té des Marchés Financie rs (AMF) » The Autorité des marchés financiers (AMF), established by the Financial Security Act of 1 August 2003, was

formed from the merger of the Commission des opérations de bourse (COB), the Conseil des marchés financiers (CMF) and the Conseil de discipline de la gestion financière (CDGF). The objective in amalgamating these bodies was to improve the efficiency of France’s financial regulatory system and to give it greater visibility.

» The AMF is an independent public body with legal personality and financial autonomy. Its remit is to: – safeguard investments in financial instruments and in all other savings and investment vehicles – ensure that investors receive material information – maintain orderly financial markets

» The AMF has four kinds of responsibilities: regulation, authorization, supervision and enforcement. » It has jurisdiction over:

– disclosures and corporate finance – collective investment products – exchanges and market infrastructure – professionals (credit institutions authorised to provide investment services, investment firms, investment

management companies, financial investment advisers, direct marketers) – supervision of financial investment advisers – oversight of rating agencies – The AMF shares with other authorities the responsibility for supervising direct marketers. – The AMF may also conduct inspections and investigations; and, when practices are found to contravene

its General Regulation or professional obligations, its Enforcement Committee may impose sanctions or penalties.

– The AMF is empowered to adjudicate any complaint relating to financial instruments or financial markets. Its ombudsman may propose settlements to resolve disputes brought to his attention.


French Bankers ’ Associat ion (AFB) » The AFB is today, essentially, the employers' federation for negotiation with the trade-union organizations

(collective agreement, wages, uses, working time, retirements, formation, etc.) » Its activities cover three fields:

– the collective management of members’ common positions (e.g. for use at the FBF), – providing relevant services to members, and – the representation of the profession, in particular on the levels interprofessional and European.

French Banking Federat ion (FBF) » The French Banking Federation (FBF) is the professional body representing all 450 commercial, cooperative and

mutual banks operating in France and includes both French and foreign-based organisations. » Its mission covers three areas:

– Research, analysis and proposals on any issues concerning the profession, at national and international levels

– Member information service – Public relations to enhance public perception of banks and the part they play in the economy

Clearing Systems

This section provides an overview of the different clearing systems in operation and includes information about each system such as transaction types, operating hours and clearing cycle details.

Overview » There are two main interbank payment systems used in France — TARGET2 and SIT. » France’s national RTGS system, TBF, was replaced by the pan- European TARGET2 RTGS system on 18

February 2008. PNS, the realtime net settlement system for high-value interbank payments also closed France‘s migration to TARGET2.

» The Banque de France developed and operates TARGET2’s SSP (Single Shared Platform) alongside Germany’s Bundesbank and the Banca d’Italia.

» The retail payment system, SIT, is a multilateral net settlement system.

High Value Clear ing TARGET2 » The current pan-European RTGS system, TARGET, migrated to a single shared platform (SSP) called TARGET2

making the 16 decentralised RTGS systems of individual Eurosystem countries and the ECB’s payment mechanism (EPM) obsolete.

» The changeover took place in three migration waves, starting 19 November 2007 and ending 19 May 2008 (15 September 2008 is reserved for contingency needs).

» France migrated in the second country window on 18 February 2008 along with Belgium, Finland, Ireland, Netherlands, Portugal and Spain.

» The Swedish Central Bank and the Bank of England will not migrate to TARGET2. » Participation: options include direct and indirect participation, “addressable BICs” and “multi-addressee access” to

the system, also known as “technical BIC access”. Direct participation criteria for TARGET2 is the same as for the current TARGET system. Only supervised credit institutions established within the EEA can become indirect participants.

» Transaction types: focus on large-value payments related to inter-bank operations » Price indication: between €0.125 and €0.80 depending on type of participation. » Operating hours: the operational day in TARGET2 will be longer than that of the current TARGET system.

TARGET2 will start the new business day on the evening of the previous day. The night-time window will be available from 19:30 to 6:45 the next day, with a technical maintenance period of three hours between 22:00–


01:00. Daytime hours for customer payments 07:00–17:00 CET with the day ending at 18:00 + 30 minutes for the use of standing facilities on the last day of a minimum reserve period.

» Transaction details: – Direct participation: For the exchange of payments information, TARGET2 will use the SWIFTNet FIN

service, while the SWIFTNet services “InterAct”, “Browse” and “FileAct” will be used for information and control services.

Low Value Clear ing S IT » SIT (Système Interbancaire de Télécompensation) is an multilateral clearing system which provides direct,

bilateral links between participants.. Managed by the French Interbank Clearing Consortium (Groupement pour un Système Interbancaire de Télécompensatino, GSIT).

» SIT was set up in 1992 for the exchange, clearing and settlement of dematerialised payment instruments. » In July 2002, SIT became the sole system in France for the exchange of retail payments. » It is Europe's largest retail payment system in volume and value terms. » Participants: approximately 12 direct, including the Banque de France, and 562 indirect as of August 2007. » Transaction types: all low-value transactions equal to and below EUR 800,000, including electronic transfers,

TIPs, LCRs, direct debits, credit card payments and withdrawals, as well as the bulk of all cheque payments which have been truncated and cleared by SIT since the dematerialisation of the cheque in 2002 with EIC.

» Price indication: based on fixed fees according to the type of membership (direct or indirect) and the number of gateways and stations; variable fees set according to the number of operations exchanged (number of operations and groups of operations).

» Operating hours: open 24 hours a day, Monday to Saturday. » Clearing cycle details: transactions are cleared on a same-day settlement cycle (at 15:00 CET every day).

– Allows for a continuous exchange of payment orders directly between direct participants computer centres.

– The exchange between the direct participants is bilateral. – Each participant has one or several access points to the system. – Ensures the multilateral clearing of exchanges and routing of operations to the different system

participants. – The cut-off time for same-day settlement (credit transfers and credit card payments) is 13:30 CET. – Value dating rules depends on presentation format; ranges from same-day settlement to D+5

» Cheque clearing via SIT: – The bulk of all cheque payments are truncated and processed by SIT via image technology or EIC

(échange d’images cheques). – Since the migration cheque clearing to image took place at the end of 2001 (in order to coincide with the

introduction of the EUR as legal tender on 1 January 2002), all bank institutions in France, Monaco and overseas territories must now submit and receive cheque payments by image technology.

– However, cheques exceeding EUR 5,000 or irregular cheques are still required to be transferred physically to the drawn banks.

– These ‘circular’ cheques (cheques circulaires) are exchanged electronically; with the physical cheque exchange coordinated by the new Paris-based Centre d’Échanges physiques de Cheques (CEPC)

» In 2007, 12.4 billions operations have been exchanged on the SIT, amounting to more than 5,000 billions Euros.

Payments, Collection Methods and Instruments

This section provides an overview of the payment methods employed in the country, including statistics and more detailed qualitative information about such methods.

Overview » France is distinguished by the popularity of cashless payment instruments and correspondingly low numbers of

cash payments, attributed to the fact that 99% of French people make use of banking facilities.


» In common with other EU countries, in value terms electronic credit transfers are the predominant payment method.

» France also stands out because of the continuous importance of cheques. For example in 2004, cheque usage in France accounted for 29.4% of all cheques exchanged within the euro area.

» Banks in France have been implementing SEPA (Single Euro Payments Area) standards for EUR-denominated payments. The country’s banks now only issue SEPA-compliant debit cards (since 1 January 2008) and also now offer pan-European SEPA credit transfers (since 28 January 2008).

» SEPA direct debits however will not be available until 2009 at the earliest (the launch date depends on the implementation of the harmonising EU Payment Services Directive in each member state).

» It is not yet known how long the transition period will last for national payment products to be fully replaced by SEPA payments. However it is hoped the Single Euro Payments Area (SEPA), an initiative of the European Payments Council, will be fully operative by around 2013. It will consist of all EEA member states plus Switzerland. Final transition dates and a completion date are expected to be decided in mid- to late 2009.

Transaction Volumes, mil. Transaction Values, EUR bn.

2004 2005 2006 % change 2004 2005 2006 % change Cards payments 4,650.00 5,243.83 5,615.36 7.09% 219.60 260.22 282.86 8.70% Card based e-money 16.00 17.03 20.06 17.79% 52.90 42.88 39.74 -7.32% Credit transfers 2,599.23 2,408.44 2,617.09 8.66% 107,544 134,633 177,176 31.60% Direct debits 2,542.73 2,512.76 2,736.80 8.92% 782.46 906.68 980.73 8.17% Cheques 4,133.81 3,916.26 2,826.97 -27.81% 2,048.21 2,175.68 2,207.69 1.47% Other instruments 129.20 125.74 120.04 -4.53% 509.79 475.17 493.76 3.91% Total 14,071.0 14,279.6 13,936.3 -2.40% 111,104 117,280 181,181 54.49% Note: Figures are rounded. Percentage change calculated from 2005-2006

Sources: ECB Statistical Data Warehouse

Card Payments » The bank card is now the most commonly used cashless payment instrument in France. » At year-end 2007 there were 48,000 ATMs and approximately 1.25 million POS terminals. » The issuance and acceptance of CB bank cards is organised and supervised by the Bank Card Consortium

(Groupement des Cartes Bancaires, CB), comprised nearly 150 banks and finance institutions. » Many cardholders have bankcards co-branded with Visa or MasterCard. » At year-end 2007, the latest year for which there are CB statistics, there were:

– 55.7 million CB cards (+ 4% compared to 2006) and 5.85 billion CB card payments – €283.3 billion worth of payments and €98.5 billion worth of cash withdrawals, a total of €381,8 billion for

CB bankcards » The electronic purse scheme, Moneo, has been integrated into France’s payment cards, although it only plays a

marginal role in the payment system as can be seen above. » The fact that the CB card has now gained a major share of on-line payments is an indication that confidence in its

use on the internet has materialised. More than three quarters of spending on the internet was paid for by card in 2007, which represents 10.2 billion Euros and an increase of nearly 38% over the preceding year.

» CB intends to replace all existing cards with a new smart card (including an e-purse functionality) based on the international EMV standard and to ensure all ATMs and POS terminals are EMV-compliant. EMV standard smart cards currently account for nearly all bank cards issued.

Credit Transfe rs » Credit transfers are the most popular method of payment for wages, pensions and social security benefits. In

addition, credit transfers are increasingly used to pay suppliers and taxes. » Electronic credit transfer types include:

– virement de gros montant (VGM) – high-value/urgent payment made through TBF and PNS; – virement d’origine extérieure (VOE) – a credit transfer issued by a bank located outside France to a bank

located in France. The latter is responsible for transmitting all information in its possession; particularly on the currency conversion effected and charges thereon, to the beneficiary's bank, via SIT;


– virement échange de données informatiques (VEDI) – electronic credit transfer using EDIFACT format; – virement référencé (VR) – credit transfer for which the payer's banker guarantees that the particulars

contained in the labelled zones are correct and that it is transmitted only to creditors registered as being concerned by the service thus rendered.

– virement spécifique orienté trésorerie (VSOT) – a special inter-bank transfer for treasury management operations;

– virement commercial (VCOM) – irrevocable deferred electronic payment order (for settlement within a period of up to 120 days of issuance), accompanied with commercial data (invoice details) which the remitters bank forwards to the beneficiary when issued; there are two types:

– finançable (discountable), and – non finançable (non-discountable). Creditors can obtain immediate value (less interest charges) by

discounting the payment with the bank on which the transfer is issued.

D irect Debits » Direct debit (avis de prélèvement automatique) is a preauthorised debit on a payer’s bank account initiated by a

payee. » The advice is sent by the debtor’s financial institution for the automated transfer of funds from the debtor’s

account to the creditor’s account at the initiative of the creditor and based on the debtor’s authorisation. » The authorisation rarely indicates the amount to be debited or the dates for debiting.

Cheques » Until recently, cheques were the dominant cashless payment instrument in terms of both volume and value. » Although their usage in France is still significant, a clear downward trend is clear in recent years in favour of card

payments, direct debits and credit transfers. » Cheque usage is now mainly retail. » Virtually all cheques are truncated in France with the exception of so-called ‘circular’ cheques (cheques above

EUR 5,000 and cheques that cannot be truncated due to formal irregularities).

Other Payments » TEP (titre électronique de paiement) is an electronic payment order that allows remote payment for goods and

services via data links or telephone. This is designed as an alternative for customers reluctant to use direct debits owing to the tacit agreement to the amount debited that they imply. The creditor must receive the customer's agreement before issuing the TEP. In terms of interbank processing, the TEP works as a direct debit order (avis de prélèvement). Settlement takes four banking days on average.

» TIP (titre interbancaire de paiement) is a pre-formatted interbank payment order that allows remote payments. The creditor is able to retain the initiative in recovering claims and the payer is able to agree explicitly to each separate payment. When each debt falls due (or has fallen due), the creditor sends to the customer an bill or notice of instalment due, with an attached TIP, which the payer is required to sign, date and return within the time limit stipulated by the creditor. They are widely used for regular payments such as utility payments and tax instalments.

» LCR (lettre de change relevé) is an electronic commercial trade bill, the functionality of which resembles that of a future-dated cheque. It represents an order from one party (the drawer) to another (the drawee) to pay a specified sum on demand or on a specified date to the drawer or to a third party specified by the drawer. Widely used to finance trade and, when discounted with a financial institution, to obtain credit.

» BOR (billet à ordre relevé) is an electronically processed promissory note. » In theory, LCRs are issued by the creditor for acceptance by the debtor, while BORs are debtor-initiated

instruments. However, in practice, the majority of LCRs are issued by the debtor who accepts and sends the LCR to the creditor. Both instruments are truncated when cleared, and customers are notified about the value of the payment four days in advance through the use of an electronic or paper-based advice (relevé).


Electronic Banking

This section includes an overview of electronic banking in the country as well as information on security and certification, EDIFACT, e-payments and e-invoicing.

Overview » Electronic banking is widely available in France and it is offered by all banks, although the products are usually

provided by software houses rather than banks. » Although there are some proprietary systems, domestic services are usually based on three ETEBAC (Echange

TElematique BAnque-Clients) protocols, developed by the French Banking Organisation and Standardisation Committee (Comité Français d’Organisation et Normalisation Bancaires, CFONB).

– ETEBAC standards are a common set of security and technical standards used by electronic banking systems, covering over 20 types of data exchange.

– The latest protocol ETEBAC 5 can transmit a wide variety of formats, including EDIFACT and XML. » The majority of systems available allow corporate users to manage their bank accounts and payment

transactions. The services on offer generally include intra-day reporting, transaction initiation services and end-of-day sweeping arrangements, on both a domestic and international scale.

» Internet banking is offered by all the major banks, both on a domestic and international scale, but, for the moment, remains mainly retail-orientated. However, ASP software for electronic banking via the internet, previously only offered by independent software houses, is being integrated into many banks’ proprietary packages.

» 60% of Internet users consulted their bank’s website in 2007. This fi gure was 78% for the 25 to 34 age group. The on-line transactions they are most likely to carry out are downloading account statements and making transfers to and from accounts. A little over one half use the Internet to stop payment on a credit card or cheque and communicate with their account advisor.

Securi ty & Cert i f icat ion » In October 2004, the CFONB agreed to adopt the PRSI (Politique de Référencement Intersectorielle de Sécurité),

developed by the French administration, after consultation with the major players in the market, as the common rule for electronic certificates in the banking sector.

» For corporate customers of the banks, the adoption of the PRSI facilitates the acceptance of certificates provided by the banks for access to banking services as well as to the whole of electronic procedures currently available or envisaged by the administrative services.

EDIFACT / Host-to-Host Solut ions » Industry standard associations in France include EDIFRANCE. Specific to the finance sector is EDIFINANCE and

to the banks is EDIBANQUE. » Host-to-host solutions are provided via EDIFACT for domestic payments.

E-payments » Online communication of card numbers, virtual card numbers, P2P, virtual purse etc. are all means of electronic

payment in France. » In general, micropayments are offered by regional and “global” players. Such solutions usually rest on two

important prerequisites: (1) prepayment and (2) settlement via debit or credit cards. » Atos Worldline provides Internet payment services throughout Europe and is the market leader for Internet

payments in France. » Other e-products in France include e-Carte Bleue, Neosurf, Paybox System, and w-HA.


E-invoice / EBPP » No industry wide electronic bill present and payment (EBPP) solutions exist on the market, although various

provides operate in France.

Cash Pooling Solutions

This section covers cash pooling solutions such as notional pooling, cash concentration, multicurrency and cross border pooling, and French central treasury units.

Notional Pool ing » The legal status of notional pooling is uncertain. » Cross guarantees, providing the legal right of set-off, are difficult to obtain under French law. » Without cross guarantees, notional cash pools are relatively expensive to arrange as banks cannot net balances

for regulatory capital purposes. » Despite this, some banks will offer notional pooling. Others will replicate notional pools by structuring a zero

balancing solution with mirrored accounts.

Cash Concentrat ion » Cash concentration is the more commonly used liquidity management technique in France. » These techniques are offered by both domestic and international banks. » Cash concentration arrangements are allowed under the following circumstances:

– The participating companies in the pool must be controlled by one of the participants. – The agreement must respect the corporate interest of each participant. – The operations must be at arm’s length. – Participants need to sign a treasury agreement detailing the extent and the conditions under which cash

pooling can take place. – The agreement and cash pool structure must be authorised by a special deliberation of the board (Conseil

d’Administration). – It is recommended that the agreement is submitted to the relevant auditors before presenting it to the

board.

Mult icurrency and Cross Border Pool ing » The same restrictions apply to cross-border sweeps as those set for domestic cash concentration. » Cross-border merging of interest statements is not permitted. » The removal in March 2005 of the restriction regarding interest-bearing resident accounts, has also resulted in

removing the obstacles in setting up pooling arrangements between resident and non-resident companies. » It will also be easier to include non-resident accounts in French cash concentration structures. In addition, banks

are moving from applying lifting fees to per item charges, reducing the cost of cross-border structures.

Central Treasury Units » The Central Treasury Unit is unique to France and benefits from a special fiscal status, which not only allows its

participants to avoid withholding taxes on interest paid to a non-resident sister or parent company but also to dispense with the interest deductibility ceiling:

– Elimination of withholding taxes on interest earned on balances in current accounts which are part of a company’s treasury management operation. This means that current account interest paid by a French-registered treasury management subsidiary to a foreign sister company or to the parent company is not taxable.

– Elimination of the interest deductibility ceilings which set a limit on tax deductible interest that could be paid by a subsidiary to its parent company. Intra-company financing, for example, will generate interest expenses which are fully tax-deductible, without limitation.


» There are five conditions which treasury operations must meet in order to benefit from this special tax status 1. Treasury operations (borrowings and loans) are to involve companies controlled directly or indirectly,

pursuant to the stipulations of the French Banking Act of 1984; 2. The group to which the companies belong must be defined as a multinational corporation, with registered

operations in at least three different countries (not limited to Europe alone); 3. Fiscally, the operations are to be of a normal managerial nature, and be the object of a treasury

management agreement signed by all of the group companies involved; 4. Movements of funds are to be recorded in specific accounts in order to be traceable with precision in each

company concerned; and 5. Transactions are to be the object of an annual declaration to the fiscal authorities (indicating the identities

of the beneficiaries, the nature of the revenues, and the details of taxable amounts).

Sources

The hyperlinks of various sources used throughout this country profile are provided below.

Banque de France www.banque-france.fr Ministry of the Economy, Finance and Industry www.finances.gouv.fr National Institute for Statistics and Economic Studies www.insee.fr Euronext Paris www.euronext.fr French Banking Organisation and Standardisation Committee www.cfonb.org French Bankers’ Association www.afb.fr French Banking Federation www.fbf.fr CFONB www.cfonb.org Autorité des Marchés Financiers www.amf-france.org Commission Bancaire www.commission-bancaire.org Centre for Interbank Funds Transfers www.cri.fr French Interbank Clearing Consortium (GSIT) www.gsit.fr ETEBAC www.etebac.com Bank Card Consortium www.cartes-bancaires.com Euroclear France www.euroclear.com French Association of Corporate Treasurers www.afte.com Chamber of Commerce and Industry of Paris www.ccip.fr Invest in France Agency www.afii.fr

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