Exclusive: Top French banks sue ECB to reduce capital demands

Tue Dec 20, 2016 7:39am EST
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By Francesco Canepa and Maya Nikolaeva

FRANKFURT/PARIS (Reuters) - France's top lenders are suing the European Central Bank to get an exemption from holding capital against deposits parked with a state-owned fund, the most high-profile challenge to supervision from Frankfurt to date.

As well as providing euro zone banks with funding, the ECB has been their main regulator for the past two years, tasked with ending cozy relationships between the industry and national authorities that contributed to the financial crisis.

The Frankfurt-based institution has been sued repeatedly over its bond-buying programs and by smaller banks seeking to escape its supervision.

But this is the first case brought by major banks in the euro zone and is a rare confrontation between France's financial elite and the ECB's supervisory board, led by the former head of France's own banking regulator, Daniele Nouy.

The lawsuits have been brought by BNP Paribas (BNPP.PA: Quote), Societe Generale (SOGN.PA: Quote), Credit Agricole (CAGR.PA: Quote), Credit Mutuel, Groupe BPCE and La Banque Postale over the past few weeks, filings with the European Court of Justice show.

Sources with direct knowledge of the cases told Reuters the banks are protesting the ECB's demand that they set aside capital against special deposits they have with state investment institution Caisse des Dépôts et Consignations (CDC).

The legal action comes amid heightened tension between banks and the ECB, which is inundating the financial sector with excess cash to try to stimulate growth while charging banks for depositing it with the central bank overnight.

"You are seeing banks more and more go to court to challenge the supervisor," a senior legal source said. "Years ago that was unthinkable."   Continued...

The European Central Bank (ECB) headquarters is pictured in Frankfurt, Germany, December 8, 2016.  REUTERS/Ralph Orlowski