General Court of the EU: the same person may not occupy the post of chairman of the board and being effective director in credit institutions subject to supervision
The General Court of the European Union has just declared that the same person may not occupy at the same time the post of chairman of the board of directors and that of ‘effective director’ in credit institutions subject to prudential supervision (Cases T-133/16 to T-136/16 Caisses régionales de crédit agricole mutuel Alpes Provence, Nord MidiPyrénées, Charente-Maritime et Brie Picardie v European Central Bank. Judgment of today, April 24).
Crédit Agricole is a non-centralised French banking group which is comprised, inter alia, of regional agricultural credit union branches. Four of those regional branches wished to appoint the same
person to the post of chairman of the board of directors and that of ‘effective director’.
The European Central Bank (ECB), which is responsible for the prudential supervision of Crédit Agricole, approved the appointment of the persons concerned as chairmen of the board of directors but objected to them carrying out at the same time the function of ‘effective director’.
The ECB considered that the functions enabling a person to obtain approval as ‘effective director’, in accordance with French and EU law, were executive functions (such as those of the chief executive officer), distinct from the functions entrusted to the chairman of the board of directors. In principle, according to the ECB, there has to be a separation of the exercise of executive and nonexecutive functions within a management body.
The four regional branches brought proceedings before the General Court for the annulment of the ECB’s decisions. In essence, they argue that the ECB did not correctly interpret the concept of ‘effective director’ by limiting it to members of the senior management with executive functions.
In today’s judgment, the General Court rejects the actions of the four regional branches and confirms the approach taken by the ECB.
The General Court analyses the concept of ‘effective director’ of a credit institution in the light of Article 13 of Directive 2013/36/EU. On the basis of a textual, historical, teleological and contextual interpretation, it concludes that that concept refers to the members of the management body who are part of the senior management of the credit institution.
In particular, the General Court refers to the objective pursued by the EU legislature concerning good governance. That objective involves effective oversight of the senior management by the non-executive members of the management body, necessitating checks and balances within the management body. The effectiveness of such supervision may be jeopardised if the chairman of the board of directors in its supervisory function, while not formally occupying the role of chief executive officer, was also responsible for the effective direction of the business of the credit institution.
The General Court considers that, as the ECB correctly interpreted the concept of ‘effective director’, it also correctly applied Article 88 of Directive 2013/36/EU, which provides that the
chairman of the management body in its supervisory function of a credit institution (such as the chairman of the board of directors) may not exercise at the same time, unless by express authorisation of the competent authorities, the function of chief executive officer in the same institution.
Lastly, the General Court observes that the ECB also correctly applied the provisions of the code monétaire et financier français (French monetary and financial code), as interpreted by Conseil d’État (Council of State, France).
Click here to access the judgment.