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Banking Regulation in Monaco: A Closer Look

In recent years, Monaco has emerged as a major financial hub, attracting investors and institutions from around the world. As part of its efforts to maintain stability and transparency, the Principality has implemented strict regulations governing the banking sector. In this article, we will delve into the key aspects of banking regulation in Monaco.

Insolvency Proceedings

It’s worth noting that certain insolvency proceedings cannot be opened against a credit institution without prior notice and approval from the Autorité de Contrôle Prudentiel et de Résolution (ACPR). This ensures that any actions taken are in line with regulatory requirements and do not compromise the stability of the financial system.

Single Bankruptcy Proceeding

As a result of the revised Monetary Agreement between the European Union and Monaco, Directive 2001/24/EC on the reorganisation and winding up of credit institutions is applicable under Monegasque law through French transposition acts. This means that when a bank with branches in several EU member states becomes insolvent, a single bankruptcy proceeding can be initiated.

FGDR Funds Intervention

In the event of insolvency, the FGDR Funds may intervene upon request from the ACPR to compensate depositors, subject to certain conditions.

Capital Adequacy Guidelines

There are no expected changes to capital adequacy guidelines in the near future. However, negotiations are underway at the EU level to develop a new generation of CRD and regulation, which could lead to changes in the future.

Ownership Restrictions

  • There is no specific definition of “control” under Monegasque law.
  • Any project to acquire more than 10% of a Monegasque bank must be notified to the ACPR.
  • The ACPR has the power to veto an acquisition if it does not meet certain conditions.

Foreign Ownership

  • While there are no formal restrictions on foreign ownership, any acquisition of a bank must be de facto authorized by the ACPR.

Implications and Responsibilities

  • Entities that control banks may face indirect obstacles when selling their shares, as prior notice is required from the ACPR. This could affect the liquidity of the shares.
  • Controlling entities may also be required to disclose information concerning their activity and governance.
  • In the event of insolvency, controlling entities may be solicited by the ACPR to financially support the defaulting bank. Resolution measures can also affect the rights of shareholders on insolvent credit institutions.

Changes in Control

  • Acquiring control of a Monegasque bank requires several types of approvals, including notification to the Comité de Coordination des Autorités Financières (CCAF) and prior notice to the ACPR if more than 10% of the equity capital is acquired.
  • The ACPR has the right to veto an acquisition under certain circumstances.

Foreign Acquirers

  • Monegasque regulatory authorities are receptive to foreign acquirers, and the acquisitions process for a foreign investor is similar to that applicable to local investors.

Conclusion

Monaco’s banking regulation framework provides a robust framework for ensuring stability and transparency in the financial sector. While there may be some restrictions on ownership and control, the regulatory authorities are generally receptive to foreign investment and offer a favorable environment for investors.