Crédit Agricole Wins Court Challenge on ECB Fines

Published On July 10, 2020

In a rare legal loss, Europe’s second-highest court ruled that the European Central Bank (ECB) failed to provide adequate justification for a 4.8 million-euro ($5.4 million) fine imposed on Crédit Agricole (CAGR.PA) and several subsidiaries in 2018. The French bank filed separate challenges in the European Union court against penalties of €4.3 million, €300,000, and €200,000, for regulatory fines imposed by the ECB two years ago. 

The ECB fined the bank along with Crédit Agricole Corporate and Investment Bank and CA Consumer Finance for violating procedures in classifying instruments as Common Equity Tier 1 (CET1). The EU General Court said the ECB was right to sanction Crédit Agricole for failing to gain approval before classifying capital instruments as CET1 but gave “inadequate reasons” for how it determined the penalty. “The contested decisions do not provide details of the methodology applied by the ECB in determining the amount of the penalties imposed,” the Court said, arguing that the bank had a right to receive a statement of reasons for the decision. 

However, the Court made it clear that Crédit Agricole deserved the bulk of the blame for ignoring its obligation to obtain permission from its supervisor before classifying its capital instruments as CET1. The French bank should have understood this legal provision, and in neglecting it, committed negligence. In challenging the fine, Crédit Agricole argued that the ECB did not have to give prior approval to its move to classify ordinary shares as Tier 1 capital but even if it did, its error was so minor that the fine was disproportionate. 

The General Court dismissed these appeals, “The Court finds that the applicants have not demonstrated that the ECB’s decisions were unlawful.” Although many ECB decisions get challenged in court, the euro zone’s central bank wins most of them, just not this time.