Commission Decision
of 24 May 2011
on State aid C 88/97 implemented by France in favour of Crédit Mutuel
(notified under document C(2011) 3436)
(Only the French text is authentic)
(Text with EEA relevance)
(2011/747/EU)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article 108(2), first subparagraph, thereof,
Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,
Whereas:
On 25 January 1991 the Association française des banques (AFB), the Chambre syndicale des banques populaires and Crédit Agricole lodged a complaint alleging that France had granted State aid to Crédit Mutuel.
The Commission first requested information concerning the Livret bleu in a letter dated 27 May 1991.
On 8 April 1998 the French authorities replied to the questions raised by the Commission in its opening Decision.
Crédit Mutuel sent a letter to the Commission on 18 June 1998 setting out arguments to reject the description of the measures covered by the opening Decision as State aid, together with a cost account files concerning the Livret bleu. A number of interested parties also submitted their comments to the Commission (see Sections 3 and 4, recitals 48 to 59), which forwarded them to the French authorities on 3 September 1998.
The complainants sent four additional written statements to the Commission by letters dated 29 October 1999, 16 May 2000, 16 October 2000 and 19 January 2001, which the Commission forwarded to the French authorities on 21 February 2000 and 3 November 2000.
On 5 February 2001, the Commission forwarded to France the documents received from the AFB.
On 11 April 2000, the European Banking Federation (EBF) lodged a complaint with the Commission against the aid granted by the French State to Crédit Mutuel in the form of exclusive rights to distribute the Livret bleu.
In April 2001 the Commission asked its consultant to identify the differences between its report and that of Arthur Andersen and to determine the changes to data or methodology that could, if necessary, be included in its previous report. A new final report from the Commission consultant was handed over on 23 July 2001. It evaluates the result of the Livret bleu cost accounts at a cumulated non-capitalised profit of FRF 1,074 billion (EUR 163,7 million). The report was sent to the French authorities on the same day. At a meeting on 26 July 2001 between the Commission, the French authorities, Crédit Mutuel and Arthur Andersen, Crédit Mutuel and Arthur Andersen announced that they disagreed with the final conclusions of the Commission’s consultant. Arthur Andersen defended its earlier conclusions in a document dated 13 September 2001, forwarded as an annex to a memo by the French authorities dated 15 September 2001. The French authorities sent the Commission a new memo on 26 October 2001 containing a legal analysis of the Livret bleu from the perspective of Community competition law, as well as a memo of 7 January 2002 concerning the cost of the public-service task, reiterating the figures already presented by Crédit Mutuel without providing any new information.
The memo sent to the Commission by the French authorities on 26 October 2001 explained why, according to them, (i) the Livret bleu scheme did not constitute State aid; (ii) if the Commission did classify the scheme as aid, it could only be existing aid, and (iii) in any event it was compatible aid.
The Commission did not appeal against the judgment. In accordance with Article 266(1) TFEU, the Commission is required to take the necessary measures to comply with the judgment. With regard to State aid, this means that, following the annulment of the Decision, the procedure is returned to the formal investigation stage.
France submitted its comments on the extension Decision to the Commission by letters dated 1 September 2006 and 7 September 2006.
On 19 September 2006 the Commission received a complaint from the Association des Victimes du Crédit Mutuel (Association of Victims of Crédit Mutuel).
The Commission received the comments of Crédit Mutuel by letter dated 13 October 2006.
By letter dated 31 October 2006, the Commission forwarded the observations by Crédit Mutuel to the French authorities.
Following two requests for further information from the Commission dated 22 September 2006 and 28 November 2006, France submitted additional comments by letters dated 8 November 2006 and 28 February 2007.
The Commission met the French authorities on 19 December 2006 and Crédit Mutuel on 15 January 2007.
Since France did not put an end to the special rights for the distribution of the Livret A and Livret bleu within the nine-month deadline set by the Decision of 10 May 2007, the Commission opened infringement proceedings pursuant to Article 226 of the EC Treaty (now Article 258 TFEU) by sending France on 5 June 2008 a letter of formal notice for not complying with the Decision.
On 19 September 2009 the Commission asked France for more information, which was provided on 13 October 2009.
Over the course of 2010 the Commission sent e-mails with several questions to Crédit Mutuel, to which e-mailed replies were received.
Crédit Mutuel is a decentralised banking and insurance group consisting of a national network of branches with the status of cooperative companies with open-ended capital. Crédit Mutuel is governed by the law of 10 September 1947, which laid down the principles of cooperation. It is organised on three levels: local, regional and national.
The Crédit Mutuel group, under the group’s two trade names (Crédit Mutuel and Crédit Industriel et Commercial (hereinafter: ‘CIC’)), has almost 6 000 outlets and more than 72 000 employees. Crédit Mutuel’s local branches are attached to 18 regional federations that are members of Crédit Mutuel’s national confederation, the central body of the network. The CIC federates 6 regional banks and specialised subsidiaries in France and abroad.
Crédit Mutuel is a group with a single management that pursues a global policy. It maintains internal financial solidarity at the level of the confederation, which ensures the liquidity of the regional federations. The group has the features of a single undertaking from the perspective of competition law because is has a single decision-making body at central level.
The Livret bleu was a savings product regulated by the State and distributed exclusively by Crédit Mutuel.
The Livret bleu’s features — immediate availability of funds, minimum initial deposit authorised from EUR 15, no costs (in particular on opening the account), etc. — led to great liquidity. In addition, it was possible to set up direct debits from the Livret bleu account to the national exchequer or public companies such as EDF or France Télécom. The Livret bleu, which was a savings product aimed at the general public, was therefore similar in some respects to a current account.
The obligations associated with the use of the funds collected through the Livret bleu changed over time.
FRF billion and % | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 |
|---|---|---|---|---|---|---|---|---|---|
Annual average deposits | 85,5 | 83 | 80,2 | 83,4 | 88,7 | 91,5 | 92,7 | 98,1 | 98,7 |
Centralised allocation CDC | 1 % | 7 % | 12 % | 24 % | 39 % | 46 % | 51 % | 69 % | 100 % |
General-interest uses | 67 % | 54 % | 46 % | 35 % | 27 % | 20 % | 15 % | 10 % | 0 % |
Non-earmarked uses | 32 % | 39 % | 42 % | 41 % | 35 % | 34 % | 34 % | 21 % | 0 % |
Source: Littlejohn Frazer. | |||||||||
On 1 January 2009 a reform of the Livret A and Livret bleu came into force that granted all banking institutions the right to distribute Livret A accounts and ended the distinction between the Livret A and Livret bleu accounts. Since 1 January 2009, the Crédit Mutuel Livret bleu has simply been a Livret A marketed under a different name. On that date the Livret bleu ceased to exist, and so did the exclusive right of distribution by the Crédit Mutuel.
In its extension Decision, the Commission took the view that the fourth condition under the Altmark case-law might not be satisfied where the State did not assign this public-service task of collecting deposits intended for social rented housing to the highest bidder in a tendering procedure, but entrusted it directly through negotiations with Crédit Mutuel, which does not allow for any guarantee, by deduction, that the remuneration awarded to Crédit Mutuel is not higher than the amount required by a well-run undertaking. The Commission also took the view that the French authorities had not demonstrated that the level of compensation had been determined by reference to the costs of a typical, well-run undertaking in the banking sector. It is not enough for the French authorities to highlight that Crédit Mutuel is a well-run undertaking to establish that the level of compensation has been determined on the basis of an analysis of the costs which a typical undertaking, within the meaning of the Altmark case-law, would have incurred.
The Commission’s view is that the brokerage commission was a state resource that could constitute a selective advantage likely to distort competition and affect trade between Member States, which had not been notified. The brokerage commission could therefore contain elements of unlawful aid.
In its extension Decision, the Commission thought it possible that the measure was not compatible with Article 86(2) of the EC Treaty (now Article 106(2) TFEU) and took the view that none of the exceptions referred to in Article 87(2) and (3) of the EC Treaty (now Article 107(2) and (3) TFEU) seemed to apply.
It seemed possible to the Commission, on the basis of the calculations by its consultant, that the amount of the compensation had exceeded what was necessary to cover the costs incurred in discharging the public service obligations (the collection of deposits intended for social rented housing), taking into account the related income and a reasonable profit for discharging that obligation. The Commission, having reiterated that the amount of the compensation had to include all the advantages granted by the State or through state resources in any form whatsoever, took account in the calculation of the compensation not only of the net cost of collecting the deposits centralised with the CDC, but also of the net result (cost or profit) of the general-interest uses and non-earmarked uses. The report by the Commission’s consultant revealed over-compensation to Crédit Mutuel for the years 1991, 1992, 1993 and 1998.
The complainants’ arguments were presented by the Commission in its Decision of 6 February 1998 on the initiation of proceedings pursuant to Article 88(2) of the EC Treaty (now Article 108(2) TFEU). The additional written statements submitted since then contain the following new arguments.
A paper (updated at the end of February 1999 and communicated to the Commission in October 1999) on the pull effect of the Livret bleu assessed the net banking income generated by this effect at FRF 17 billion (EUR 2,6 billion), assuming that the increase in Crédit Mutuel’s market shares in every segment over the period 1986 to 1997 was exclusively the result of distributing the Livret bleu.
A study conducted by Caisse Nationale du Crédit Agricole, submitted in May 2000, analysed developments in the number of Crédit Mutuel branches. It emerges that the overall number of permanent branches fell between 1991 and 1994, and then increased gradually to reach, in 1998, the same level as in 1990. This trend differed according to the regions: the number of permanent, and subsequently non-permanent, branches of Crédit Mutuel dropped in the regions in which Crédit Mutuel was traditionally very strong (Loire Region, Brittany and Alsace), while the number of branches in other regions grew. It is therefore likely that Crédit Mutuel reduced its establishments in rural areas in order to concentrate on urban areas. These figures appear to refute Crédit Mutuel’s allegations that it was obliged to maintain a large number of branches in rural areas in the 1990s. They also tend to show that Crédit Mutuel is capable of maintaining an exceptionally dense network of branches even after the removal of all controls by the authorities.
On 4 June 1998 the AFB sent the Commission a letter stating that the commission of 1,3 % on Livret bleu deposits centralised with the CDC was excessive given that, at the same time, the Caisses d’Épargne and la Poste received 1,2 % and 1,5 % respectively on Livret A savings, which were also held centrally by the CDC. The AFB pointed out in this letter that it proposed to the French authorities in 1997 that it would ensure the collection of Livret bleu deposits for a charge of only 1 %, but that the Government had not replied to this offer. The AFB underlined in particular that the April 1998 report by Mr Douyère, a member of parliament, on the modernisation of the Caisses d’épargne indicated that the cost of collecting savings for an average Caisse d’épargne such as that of Burgundy was 0,96 % of its total funds, and that there was no reason why Crédit Mutuel’s management costs should be higher.
A memorandum produced by the Glais consultancy dated August 2000, submitted at the request of the AFB, contains statistics concerning the competitive advantage thought to be enjoyed by Crédit Mutuel as a result of the exclusive rights to distribute the Livret bleu. An examination of time-series data shows the total amount of Livret bleu deposits and the total amount of other deposits increased considerably until a turning point in 1985 to 1987. The growth in loans to households continues after that date and remains stronger for Crédit Mutuel than for its main competitors. The Glais consultancy expert deduced that ‘the Livret bleu effect therefore seems to have worked by attracting customers and, from the mid-1980s, the positive effect seems to have continued without an increase in deposits. Thus the customers who remained loyal appear to have been the ones who financed Crédit Mutuel’s expansionist strategy from that period on’. The expert concluded that Crédit Mutuel’s (essentially credit) activities appear to have been unrelated to average developments in the banking market, notably on the basis of an indicator of the persistence of random economic shocks on activity variables and by creating a model based on a simple credit-demand equation. The expert explains this phenomenon by the fact that Crédit Mutuel’s customers remain much more loyal than those of other banking networks, for example because of the Livret bleu.
In a second memorandum (December 2000), the Glais consultancy proposed a new econometric analysis of the degree of loyalty of each set of customers to each banking network. According to the expert, the figures corroborate the hypothesis that Crédit Mutuel and Caisses d’Épargne have much better means of retaining their customers’ loyalty than other banks. But it is impossible to determine whether the offer of a tax-free savings account or the use of a dense network of branches in different regions (two instruments shared by these networks) is the reason for the greater customer loyalty.
On a matter incidental to these proceedings, the Commission also received an additional statement from the complainants which stated that the purchase by Crédit Mutuel in April 1997 of Crédit Industriel et Commercial (CIC), when the latter was being privatised (it had previously been owned by the public insurance group GAN), had been possible because of the aid it had received for the Livret bleu, which increased its market share of savings from 2 % in 1969 to approximately 6,9 % in 1997. According to the complainants, the undertaking’s own funds had increased rapidly because of the aid in question, rising from FRF 650 million (EUR 99 million) in 1974 to FRF 47,3 billion (EUR 7,2 billion) in 1997.
Finally, the complaint by the Association of Victims of Crédit Mutuel dated 19 September 2006 contains a simple allegation of ‘diversion of public savings for private and commercial ends […] to the detriment of savers and of the French economy’, which is not backed up by any serious arguments or evidence relating to potential unlawful State aid.
Following the publication of the opening Decision of 6 February 1998, the Commission received comments from numerous third parties.
Banque Dupuy de Parseval
Banque Natexis
Banque de Picardie
Banque Populaire de Bourgogne
Banque Populaire Bretagne Atlantique
Banque Populaire du Centre
Banque Populaire Centre-Atlantique
Banque Populaire de Champagne
Banque Populaire de la Côte d’Azur
Banque Populaire du Dauphiné et des Alpes du Sud
Banque Populaire de Franche-Comté, du Maconnais et de l’Ain
Banque Populaire du Haut-Rhin
Banque Populaire de La Loire
Banque Populaire de Lorraine
Banque Populaire de Lyon
Banque Populaire du Midi
Banque Populaire du Massif Central
Banque Populaire de l’Ouest
Banque Populaire Provençale et Corse
Banque Populaire des Pyrénées Orientales, de l’Aude et de l’Ariège
Banque Populaire du Quercy et de l’Agenais
Banque Populaire Savoisienne
Banque Populaire de la Région Économique de Strasbourg
Banque Populaire du Sud-Ouest
Banque Populaire du Tarn et de l’Aveyron
B.P.ROP Banque Populaire
Banque de Savoie
Crédit Commercial de France
Crédit Commercial du Sud-Ouest
Crédit Lyonnais
Société Générale
Union des Banques à Paris.
M. Mr Bertholet, MP (Drôme Department)
Mr Blondel, Member of the General Council of the Nord Department
Mr Cabot, Director of the Regional Youth Information Centre of Toulouse
Mr Cormorèche, Mayor of Montluel
Mr Cornelis, Member of the General Council of the Nord Department
Mr Chavannes, Mayor of Angoulême
Mr Crépeau, MP (Charente Maritime Department)
Mr Debavelaere, Senator (Pas-de-Calais Department)
Mr Decool, Mayor of Brouckerque
Mr Delevoye, Senator (Pas-de-Calais Department)
Mr Delnatte, MP (Nord Department)
M. Mr Dolez, MP (Nord Department)
M. Mr Ewald, Regional Delegate of the Association pour le Droit à l’Initiative Economique
Mr Fronton, Union Départementale des Associations Familiales de Haute-Garonne
Mr Foy, Senator (Nord Department)
Mr Galiègue, President of the Solesmes Caisse de Crédit Mutuel
Ms Gournay, Mayor of Caëstre
Ms Armelle Guinebertière, Member of the European Parliament
Mr Hervé, Mayor of Rennes
Mr Humez, President of the Pas-de-Calais Comité départemental de lutte contre la mucoviscidose
Ms Ingelaere, President of Flandr’action
Mr Juppé, Mayor of and MP for Bordeaux
Mr Lapalu, President of the Association Animation et Gestion d’Organismes Privés
Mr Lazaro, MP (Nord Department)
Mr Lebreton, President of the General Council of Côtes d’Armor Department
M. Mr Ledieu, Mayor of Le Cateau-Cambrésis
Mr Leleu, Director of Crédit Mutuel Nord
Mr Maille, President of the Brest urban area
Mr Masclet, Member of the Nord-Pas-de-Calais Regional Council
Mr Méhaignerie, President of the General Council of the Ille et Vilaine Department
Mr Mio, Member of the Nord-Pas-de-Calais Regional Council
Ms Novak, President of the Association pour le Droit à l’Initiative Economique
Ms Permuy, Member of the Nord-Pas-de-Calais Regional Council
M. Mr Albert Rivaux, Member of the General Council of the Pas-de-Calais Department
Mr de Rohan, President of the Brittany Regional Council
Mr Valla, Member of the General Council of the Ardèche Department
Mr Vanlerenberghe, Mayor of Arras
Mr Villain, Mayor of Cambrai
Mr de Villiers, MP (Vendée Department).
The vast majority of third parties underlined the role played by Crédit Mutuel, particularly at regional level, in financing the social economy, especially non-profit-making organisations. They also stressed the supporting role it plays with respect to people in lower income groups, from which a large part of its customers come. Several local elected representatives emphasised Crédit Mutuel’s role in setting up undertakings and creating jobs, and in developing local initiatives in conjunction with the local authorities. Others considered that because of its decentralised structures, Crédit Mutuel was better able than centralised institutions to meet local needs and respond to the requirement of balanced regional development.
Crédit Mutuel criticises the Commission for having taken a particularly long time in dealing with the case.
- (a)
With respect to the first condition, Crédit Mutuel was engaged in the provision of two services of general economic interest, firstly by maintaining a significant branch presence in rural areas for regional development purposes and secondly by gathering deposits intended to finance social housing. As far as maintaining branches in rural areas is concerned, it disputes the Commission’s conclusion that French laws and regulations remain too vague to entrust Crédit Mutuel with any such role and thus for the first condition of the Altmark case-law to be fulfilled. According to Crédit Mutuel, the Commission draws this conclusion from the fact that this legislation did not place any specific constraints on Crédit Mutuel since it applied to the banking sector as a whole. Crédit Mutuel also holds that the Commission is trying to transfer to it the burden of proof that the first condition of the Altmark case-law has been met, which is not what is laid down in the case-law in question.
- (b)
With respect to the second condition, Crédit Mutuel stresses that the brokerage commission was created at the same time as the obligation to centralise to centralise deposits with the CDC and that the conditions for calculating the commission were drawn up in an objective and transparent manner.
- (c)
As for the third condition, the bank states that the compensation was not sufficient to cover the costs of gathering deposits, since the activity relating to the funds transferred to the CDC posted a loss over the whole of the 1991-2005 period.
- (d)Crédit Mutuel further holds that the fourth condition was met. The level of the brokerage commission was based on the costs actually incurred by Crédit Mutuel in distributing the Livret blue. Crédit Mutuel is a well-run undertaking within the meaning of the Altmark case-law, since its administrative costs are amongst the lowest. The Commission is, moreover, said to have acknowledged this in its extension Decision25; It is of the opinion that the Commission has not provided sufficient grounds to underpin its view that this condition has not been met.
Nor did the Commission correctly take into account the expenses arising from the other service of general economic interest which Crédit Mutuel regards itself as providing, that is maintaining a branch presence in rural areas with a view to encouraging saving by the general public throughout the country’s territory by facilitating access to banking services to the greatest number of people.
Crédit Mutuel also denies that there was ever any pull factor. It notes that the Commission had acknowledged in its annulled Decision that there was no formal evidence attesting to a pull factor and is of the view that no new evidence has appeared since then.
With respect to the proceedings, Crédit Mutuel relies on a number of general principles of Community law to dispute the recovery of potential aid, inter alia, the principle of legitimate expectation and the duty to act within a reasonable time.
- (a)With respect to the first condition, it emphasises that the Commission has acknowledged that Crédit Mutuel was attributed the task of providing a service of general economic interest by gathering deposits to finance social housing. It recalls that the Commission stated in its extension Decision that maintaining branches in rural areas for regional development purposes could also be regarded as a service of general economic interest29, but does not react to the arguments raised by the Commission in its extension Decision that the first condition of the Altmark case-law has not been met because there is no national legislation or regulations requiring, in a sufficiently clear manner, the institution to perform this task pursuant to Article 106(2) TFEU30.
- (b)
With respect to the second condition, France is of the opinion that the parameters for calculating the compensation were established in advance in an objective and transparent manner.
- (c)
As for the third condition, it argues that the amount of compensation (the brokerage commission) did not exceed what was necessary to cover the costs of the system and refers in this respect to Crédit Mutuel’s detailed profit-and-loss accounts for the Livret bleu for the years 1999 to 2005.
- (d)The fourth condition is also fulfilled, with France stating that Crédit Mutuel’s management meets the efficiency requirements31.
- (a)
The state resources condition is not fulfilled since the income derived by Crédit Mutuel from the deposits not centralised with the CDC (non-earmarked uses and general-interest uses) arose from resources of private origin (monies deposited by savers) which were not at the disposal of the public authorities.
- (b)Trade between Member States could not have been affected before completion of the single market for banking and financial activities on 1 January 1993, following the adoption of Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC (hereinafter ‘the Second Banking Directive’)32 The French authorities considered that, after that date, given the absence of an official European statute for cooperative societies and the constraints that this situation produced in terms of the cross-border expansion of cooperative societies such as Crédit Mutuel, the latter’s constituent regional entities did not operate across national borders. Moreover, the Livret bleu accounts opened for non-residents represented less than 0,1 % of the total. The French authorities also stated that foreign banks in France were targeting a very different market to that of Crédit Mutuel.
- (c)
The brokerage commission paid by the CDC to Crédit Mutuel on the total Livret bleu deposits centralised with it did not constitute aid, but rather remuneration for a service rendered by the bank, the price of which had been set in 1991 at 1,3 %. The French authorities underlined the scale of the management costs for the Livret bleu because of the number of accounts with deposits totalling less than FRF 5 000 (EUR 762). They referred to the cost accounts produced by Crédit Mutuel (after the measure at hand was adopted), concluding that this level of remuneration was fully justified. The French authorities argued that the advantages which Crédit Mutuel received from the Livret bleu should be examined in the light of the costs relating to a general economic interest objective. In this respect, they drew the attention of the Commission to the increase in the attribution of the deposits to financing objectives of general interest, for which the proportion rose from 50 % of Livret bleu deposits between 1975 and 1983, to 65 % between 1983 and 1991, to 100 % of deposits centralised with the CDC from 1998 onwards.
- (d)
Even assuming that there had been aid, it would have been existing aid as the Livret bleu scheme was set up before the liberalisation of the banking sector on 1 January 1993 (the deadline for transposing the Second Banking Directive).
The French authorities explained that a mechanism for the repayment of any overcompensation has existed since 1999.
France also explained that the risk of a lack of liquidity for the first month was borne by Crédit Mutuel and the risk of a lack of liquidity beyond that was borne by the CDC. With respect to deposits collected for Livret bleu accounts, France further explained that the risk-weighting percentage for the calculation of capital requirements needed for the solvency margin was zero. It pointed out that the risk weighting for Crédit Mutuel’s capital requirements for other savings products and resources other than the Livret bleu ranged from […]% to […]% from 1999 to 2005. The French authorities specified that, given the irrelevance of applying the European solvency ratio after the complete transfer of the deposits to the CDC in 1999, in order to calculate the reasonable profit corresponding to the Livret bleu, Crédit Mutuel factored in a cost of capital in reference to its other savings products and resources, which it capped ([…]% to […]% between 1999 and 2005). At the Commission’s request, France also provided precise information on the margin of compensation relating to the establishment of a compulsory reserve fund with the Banque de France.
In their comments in response to the extension Decision the French authorities and Crédit Mutuel invoke the existence of two services of general economic interest, namely the maintenance of a significant branch presence in rural areas for regional development purposes and the gathering of deposits intended for social housing financing.
It is therefore only as regards the task of gathering deposits with a view to financing social housing that it falls to be examined whether the Altmark case law applies.
The Commission considers that the fourth condition is not met in the case of the task of gathering deposits to be centralised with the CDC for the purpose of financing social housing. It should be noted that the State assigned this task, not to the highest bidder via a public procurement procedure, but directly by negotiation with Crédit Mutuel. The level of brokerage commission was not determined by reference to the costs connected with the performance of the service of general economic interest incurred by a typical, well-run undertaking. The brokerage commission of 1,3 % could not be based on the actual costs incurred by Crédit Mutuel in performing the service of general economic interest because there was no separate accounting for the Livret bleu in September 1991 making it possible to trace the costs linked specifically to the Livret bleu in the bank’s accounts. The separate accounting for the Livret bleu was developed several years later and applied retroactively for the years up to 1991. There is therefore nothing to indicate that the level of brokerage commission was determined by reference to the costs of a typical, well-run undertaking performing the general-interest task in question. The French authorities argue that Crédit Mutuel is, on the whole, well run. However, they do not really back up this claim, but instead refer mainly to paragraph 13 of the extension Decision, where the Commission simply mentions the overall financial results (balance-sheet size, net profit or loss, cost/income ratio, equity capital and solvency ratio) of Crédit Mutuel in 2004. At all events, if a Member State has determined the level of compensation on the basis of an analysis of the costs of a typical, well-run undertaking, it should have no difficulty proving it to the Commission and outlining the methodology followed — something which France has not done in this case. Finally, the fact that, as soon as the distribution of Livrets A and Livrets bleus was liberalised on 1 January 2009, Crédit Mutuel’s brokerage commission went down from 1,1 % to 0,6 % seems to indicate that the level of that commission was higher than it would have been had it been based on the costs of a typical, well-run undertaking performing the same general-interest task.
Article 107(1) TFEU provides that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
The brokerage commission was granted exclusively to Crédit Mutuel in return for its gathering savings, to be centralised with the CDC for the purpose of financing social housing, by means of the Livret bleu, for which Crédit Mutuel held an exclusive right of distribution. This measure is therefore selective in nature.
The Commission concludes, therefore, that the four necessary preconditions for the existence of aid are met.
Lastly, the aid measure is unlawful because it was not notified to the Commission in accordance with Article 108(3) TFEU and was implemented after the entry into force in France of the Treaty establishing the European Economic Community.
Since the measure at issue contains elements of State aid, the Commission must analyse the compatibility of the said measure with the internal market.
Article 106(2) TFEU provides that: ‘Undertakings entrusted with the operation of services of general economic interest […] shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union’.
- (a)
the service provided has the features of a service of general economic interest;
- (b)
the undertaking is actually required to perform this service of general economic interest by the State by means of one or more official acts;
- (c)
the principles of necessity and proportionality are respected; and
- (d)
the development of trade must not be affected to such an extent as would be contrary to the Union’s interests.
Conditions (a) and (b) are fulfilled for the reasons set out in recital 81.
In verifying the absence of any overcompensation (see subsection 7.2.5), the Commission follows — for the period from 27 September 1991 (see subsection 7.2.1) to 31 December 2005 — a global approach (see subsection 7.2.2). It takes account of all the advantages connected with the Livret bleu, without, however, including a possible pull effect whose scope could not be established (see subsection 7.2.3). A reasonable profit is taken into account (see subsection 7.2.4), including for deposits centralised with the CDC.
As stated in recitals 75 and 76, the only measure at issue in the present case is the brokerage commission, the principle of which was established on 27 September 1991, at the same time as Crédit Mutuel was tasked with centralising its deposits with the CDC with a view to financing social housing. Before that date, neither the brokerage commission nor the centralisation with the CDC existed. Consequently, the Commission must begin its assessment of the proportionality of the aid as from that date.
The costs and revenues connected with the performance of the service of general economic interest cannot therefore predate 27 September 1991. In other words, it is only as from the creation of the aid measure at issue (the brokerage commission) that account can be taken of the costs and revenues connected with the performance of the general economic interest service financed by that aid. The Commission considers in conclusion that its extension Decision was inconsistent in limiting the aid measure to the brokerage commission created on 27 September 1991 while continuing to take into account the net revenue from Livret bleu accounts during the period from 1 January 1991 to 27 September 1991.
In view of the fact that Crédit Mutuel is able to communicate the net results of general-interest uses and non-earmarked uses only on an annual basis, the Commission considers that, for the year 1991, account must be taken only of the net results corresponding to the period from 27 September 1991 to 31 December 1991, based on the proportion between the number of relevant days and the net results for the whole of 1991, i.e. 96/365. The net results for deposits centralised with the CDC for the year 1991 can be taken into account in their entirety since, as explained in recital 101, such centralisation was in fact introduced after 27 September 1991, with the result that, by definition, no part of these results relates to the period from 1 January 1991 to 27 September 1991.
Following its investigation into this case, the Commission would observe that, while the existence of a pull effect cannot be ruled out, the data it has collected do not enable it in this case to quantify the potential pull effect in a sufficiently precise manner.
The documents submitted by the complainants presume the existence of pull effects but do not formally prove their existence and succeed even less in precisely determining the financial impact of such effects.
As for the studies by the Glais consultancy (see recitals 52 and 53), the Commission would observe that Crédit Mutuel is right to assert that these statistical analyses provide no certain proof of a quantifiable pull effect.
Three subjective evaluations have been proposed in the complainants’ comments. First of all, in view of the fact that other banks had offered to distribute the Livret bleu in return for a 1 % commission, the complainants proposed an approximate order of magnitude for the pull effect by calculating the difference between the level of commission charged by Crédit Mutuel and this rate of 1 %, i.e. 0,3 %, which corresponds to approximately FRF 300 million a year. However, there is no evidence to suggest that, during the period considered, Crédit Mutuel’s competitors could have performed this task under the same conditions at this level of remuneration of 1 %. Moreover, this first argument does not demonstrate the pull effect but seems to amount to alleging that Crédit Mutuel was overcompensated, which, as will be shown, is not the case. There is no evidence to suggest that the pull effect corresponds to the difference between the brokerage commission and a hypothetical lower commission which Crédit Mutuel’s competitors proposed to charge in return for their distributing the Livret bleu.
According to the second method proposed by the complainants, the pull effect would be measured by reference to the growth in Crédit Mutuel’s market share. Such an evaluation method cannot be adopted as it is based on the assumption that the gains in market share are due solely to the Livret bleu, whereas there is no objective basis for this assumption.
The third evaluation of the exclusive distribution right is based on the tax revenue loss due to the tax exemption allowed under the Livret bleu. If Crédit Mutuel had wished to distribute a savings account without any tax exemption by offering, irrespective of the saver’s tax position, the same net yield as the Livret bleu, it would in fact have incurred an opportunity cost equal to the amount of the notional tax (potentially) payable by the saver. According to the complainants, the cumulated tax advantage of the order of FRF 4,5 billion over the period 1991-97 must be considered as having accrued to Crédit Mutuel advantages worth the same amount. This reasoning cannot be accepted as Crédit Mutuel would probably not have distributed the Livret bleu under the same conditions if it had had to bear the full cost of the tax exemption, which, besides, benefits members directly.
The advantages in question, if any, are difficult to prove and to quantify. The direct financial advantage deriving from the operation of the Livret bleu is directly measurable from the Livret bleu’s accounts. However, the financial advantage arising from the sale of other products or services to customers who remained loyal because of the Livret bleu would be observable in the cost accounts of these other products if it were possible to distinguish immediately between what was sold to customers who remained because of, or were attracted by, the Livret bleu, and what was sold to customers who came to Crédit Mutuel for other reasons, which is not the case. For these reasons, the Commission’s consultant was unable to evaluate the potential pull effect using the accounting method applied to assess all the direct financial advantages deriving from the Livret bleu.
The more sophisticated attempts by the Commission’s consultant at evaluating the pull effect were unsuccessful. Consequently, the Commission considers that it cannot take into account the advantage, if any, due to the pull effect in the calculation of whether or not there is any overcompensation.
In their letter of 1 September 2006 presenting their comments in reply to the extension Decision, the French authorities confirmed that the funds centralised with the CDC consumed no regulatory capital. Nevertheless, according to the French authorities, ‘in view of the lack of relevance of the application of the European solvency ratio from the time of full centralisation with the CDC in 1999, Crédit Mutuel [proposes to] include, in order to calculate the reasonable profit in the Livret bleu, a cost of capital obtained by reference to that of the other savings products and other resources’. The Commission does not consider such an approach to be satisfactory as it results in applying artificially to the resources centralised with the CDC a regulatory capital need dependent on the average capital need of Crédit Mutuel’s other assets, which are completely independent of the Livret bleu.
The absence of a regulatory capital need illustrates the absence of a credit loss risk, which is the case with the deposits centralised with the CDC. The activity of gathering deposits on behalf of the CDC likewise does not present a liquidity risk (apart from the intra-month risk) or a risk of maturity transformation, since the amount made over to the CDC is adjusted each month in the light of the trend in deposits and the interest paid by the CDC is immediately transferred to depositors. It is therefore certain that this general economic interest service presents a low level of risk to Crédit Mutuel. However, some other types of risk, such as the operational risk, the economic risk (the risk that the level of remuneration will not cover the costs incurred), the legal risk and the risk to reputation, do exist. Moreover, other banking activities such as the distribution of mutualised funds, asset management or the selling of financial products (such as shares and bonds) do not consume any regulatory capital but are nonetheless highly profitable. There is therefore no direct link between the consumption of regulatory capital — calculated on the basis of prudential rules the specific aim of which is in no way to evaluate the profitability of an activity — and the profit expected from an activity.
In the present case, while the Commission authorises Crédit mutuel to earn a reasonable profit in respect of that part of deposits which is centralised with the CDC, it acknowledges that determining the appropriate level of that profit is an exercise which involves a complex economic assessment. The Livret bleu is an atypical banking product with the mixed characteristics of a savings product and a current account, the gathered deposits of which are centralised with a public authority. There are therefore no directly comparable products as such which might give an indication of a reasonable profit for a similar activity.
- (a)
the profit margin of the French banking sector, that is, the profit before tax divided by turnover (in the present case, the banks’ turnover is represented by their operating results). Using the French banking sector’s figures for the period considered (from 27 September 1991 to the end of 2008), the profit margin is on average 23 % a year;
- (b)
the rate of return of the French banking sector, that is, the profit before tax divided by assets. The average annual rate of return throughout the period considered is 45 basis points (0,45 %).
1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 200873 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Profit before tax72 | 15,2 | 2,7 | 25,0 | 41,0 | 67,5 | 14,4 | 19,8 | 22,5 | 24,6 | 23,5 | 23,4 | 29,6 | 31,3 | 46,2 | 34,3 | -4,4 |
Operating profit72 | 362,4 | 335,4 | 345,6 | 356,1 | 375,3 | 60,8 | 64,6 | 70,5 | 74,9 | 77,0 | 80,6 | 83,5 | 89,5 | 104,1 | 98,0 | 79,1 |
Profit margin | 4,2 % | 0,8 % | 7,2 % | 11,5 % | 18 % | 23,7 % | 30,6 % | 31,9 % | 32,8 % | 30,6 % | 29,0 % | 35,5 % | 35,0 % | 44,4 % | 35,1 % | -5,6 % |
Average profit margin | 22,8 % | |||||||||||||||
Assets72 | Unavailable | 16 333 | 17 216 | 18 291 | 19 894 | 3 052 | 3 394 | 3 452 | 3 783 | 3 793 | 3 960 | 4 390 | 5 275 | 6 041 | 7 061 | 7 699 |
Rate of return | Unavailable | 0,02 % | 0,15 % | 0,22 % | 0,34 % | 0,47 % | 0,58 % | 0,65 % | 0,65 % | 0,62 % | 0,59 % | 0,68 % | 0,59 % | 0,77 % | 0,49 % | -0,05 % |
Average rate of return | 0,45 % | |||||||||||||||
- (a)
for the profit margin denominator, the revenue earned from the activity of gathering deposits centralised with the CDC, that is to say, the annual amount of the brokerage commission;
- (b)
for the rate of return denominator, the deposits transferred to the CDC;
- (c)
for the numerator, that is to say, the profit before tax, the Commission considers that, by taking into account as a reasonable profit a margin of 4,2 % on the activity of gathering deposits centralised with the CDC, that is to say, a pre-tax profit amounting to 4,2 % of the brokerage commission received from the CDC, Crédit Mutuel does not receive any overcompensation (see the table in recital 132).
As regards the second indicator (the rate of return), the Commission would point out that, if a rate of return of 5 basis points is taken as a reasonable profit from the activity of gathering deposits centralised with the CDC, that is to say, if account is taken of a pre-tax profit equivalent to 0,05 % of the total amount of deposits transferred to the CDC, then Crédit Mutuel did not receive any overcompensation for administering the Livret bleu during the period considered.
According to the 2005 Community framework, the reasonable profit must not exceed the average rate for the sector concerned during the relevant period. A profit margin of 4,2 % represents less than one fifth of the average profit margin of the banking sector (22,8 %). Since, as was stated in recital 124, the activity of gathering deposits centralised with the CDC is a low-risk, and hence low-return, activity, the Commission considers that a profit margin of 4,2 % is not manifestly excessive and may be deemed in this case to be a reasonable profit.
Similarly, the Commission considers that a profit of 5 basis points for deposits centralised with the CDC is reasonable in the light of the average return of 45 basis points of the French banking sector for the relevant period and represents a low, conservative threshold for what may be considered a profit which is not manifestly unreasonable in this case. Moreover, this low profit level reflects appropriately the level of risk incurred by Crédit Mutuel on its activity of gathering deposits for the CDC, which, as indicated in recital 124, is low.
(EUR million) | |||
COMPENSATION | OVER- OR UNDERCOMPENSATION | ||
|---|---|---|---|
Year | (Annual) brokerage commission | Global approach75(up to the end of 2005) | Annual approach76(from 2006) |
1991 (from 27.9.1991 to 31.12.1991) | 1,5 | 43,8 | Not applicable (the global approach was applied until 2005, see subsection 7.2.2) |
1992 | 9,1 | 125,1 | |
1993 | 16,8 | 184,0 | |
1994 | 36,6 | 127,3 | |
1995 | 59,5 | 114,5 | |
1996 | 74,7 | 107,8 | |
1997 | 82,3 | 88,4 | |
1998 | 118,9 | 92,0 | |
1999 | 188,9 | 98,3 | |
2000 | 188,2 | 106,3 | |
2001 | 181,9 | 91,3 | |
2002 | 187,8 | 76,3 | |
2003 | 197,7 | 61,2 | |
2004 | 204,4 | 45,7 | |
2005 | 196,7 | 15,0 | |
2006 | […] | -39,1 | |
2007 | […] | -24,3 | |
2008 | […] | -6,1 | |
It can be seen that the overcompensation at the end of 2005 (EUR 15 million) is less than 10 % of the compensation for 2005 (EUR 196,7 million). By virtue of point 21 of the 2005 framework this amount may be carried forward to the next year. The final result is undercompensation of EUR – 6,1 million at the end of 2008 for the whole of the period considered.
The Commission can therefore conclude that the brokerage commission has not overcompensated Crédit Mutuel for the service of general economic interest which was entrusted to it from 27 September 1991 until the end of 2008.
The Commission finds that France has unlawfully implemented the measure at issue in infringement of Article 108(3) TFEU. However, the aid may be considered compatible with the internal market under Article 106(2) TFEU, inasmuch as the compensation paid by the State has not exceeded what is necessary to cover the costs occasioned by the discharge of public service obligations, having regard to the revenues relating thereto and a reasonable profit for discharging those obligations,
HAS ADOPTED THIS DECISION: