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Litigation on prudential treatment of French regulated saving accounts goes into third round

The ECB has appealed the decision in Case T-504/19 of the EU General Court in favour of Crédit Lyonnais, a French bank and part of the Crédit Agricole group. The bank successfully challenged the ECB’s decision to permit only 66% of its exposures resulting from regulated saving deposits to be excluded from the calculation of its leverage ratio. The appeal is the first case under the SSM in which the ECB challenges the General Court’s approach to the review of its discretion. 

The General Court decisions in 2018

In 2018, six French banking groups successfully challenged decisions of the ECB refusing their respective requests to exclude from the calculation of their leverage ratio under Article 429(14) CRR, their exposure to the Caisse des Dépots et Consignation (CDC), a French public financial institution. The exposure consists of regulated savings deposits, ultimately guaranteed by the French State, which under French law banks are required to transfer to the CDC.

The General Court ruled in a series of virtually identical judgments that the ECB had incorrectly exercised its discretion by committing a manifest error of judgement. While confirming that the ECB had a broad discretion whether to grant or refuse authorisation under Article 429(14) CRR, the challenge succeeded for several  reasons:

  1. The ECB could not decide in a manner which would render the possibility of an exemption practically inapplicable in practice "without depriving that [Article 429(14) CRR] of any useful effect and misunderstanding the objectives that led to its introduction" (effet utile);
  2. The ECB had pointed out the mere possibility of a default by the French State without examining the plausibility thereof to assess whether to grant the exemption which the legislator had intended to cover precisely exposures such as these (insufficient examination);
  3. The ECB’s reasoning that excludes, in fact, any possibility of granting a request based on Article 429 (14) CRR results in the decision being vitiated by an error of law;
  4. The ECB’s assessment of the liquidity risks involved contained a manifest error of assessment and a failure to observe the requirement of good administration

The 2021 General Court decision in Crédit Agricole v ECB

Following that judgment the Crédit Agricole group, one of the successful applicants re-applied for authorisation, which the ECB granted except in respect of its subsidiary Crédit Lyonnais. The ECB refused authorisation to exclude from the calculation of Crédit Lyonnais' leverage ratio 34% of its exposures to the CDC.

In its decision of 14 April 2021 in Case T-504/19 Crédit Lyonnais the Court doubled down on its reasoning and took the side of the French bank for a second time, annulling the ECB’s decision.

While the Court was largely satisfied, that the ECB had taken into account the Court’s 2018 decision, the Court still held that the ECB had failed to take into account the individual characteristics of the regulated saving accounts. In particular, their status as safe investments (valeur refuge) in a crisis was not fully considered, which meant they were at lower risk of a 'bank run'. By failing to take this into consideration, the ECB did not abide by the obligation of good administration. 

The Court also rejected the ECB’s reliance on a single example of large and sudden withdrawals of State-guaranteed deposits in a banking crisis on the ground that the relevant deposits were insufficiently similar in nature to the regulated savings deposits. 

The current appeal

The ECB appealed the decision relying on four grounds: 

  1. The Court exceeded limits of judicial review by substituting its own judgment for that of the ECB;
  2. Breach of duty to state reasons by not elaborating on why the ECB’s assessment of the State guarantee was flawed;
  3. The Court distorted the evidence by interpreting the contested decision manifestly incorrectly; and
  4. Infringement of Articles 4(1)(94) and 429(14) CRR by adding additional to the definition of ‘risk of excessive leverage’ criteria and thus depriving the ECB of its discretion.

The case may be evidence of a more robust stance of the General Court in the review of the ECB’s discretion. Indeed, in its statement of appeal, the ECB argues that the Court has overstepped the proper bounds of its judicial review power.

The Court has adopted a limited approach to the review of legal acts adopted by EU institutions which require assessment of complex economic issues, according them a large measure of discretion. Thus, judicial review of the exercise of discretion by EU institutions is limited. The Court must not substitute its own decision for that of the institution and only annul a decision on limited grounds including materially incorrect facts, error of law, manifest error of fact and misuse of powers.

It is clear that the Court has demanded a thorough investigation from the ECB of the particular risk profile of the regulated saving deposits. This stands in contrast with earlier decisions in which it appeared more deferential to the ECB’s analysis. In decision T-712/15 Crédit Mutuel Arkéa the Court deferred extensively to the ECB’s assessment. the Court accepted its reliance on the possible occurrence of an exit of the applicant from the cooperative group of banks as a ground for imposing a higher capital requirement. The decision was later confirmed on appeal.

On the other hand, in the present case the Court was still, in principle, prepared to accept the ECB’s reliance on single example of a 'bank run' on similar assets as a ground to permit only a restricted exclusion of the exposures.  It was only the fact that the example was not close enough in nature to the deposits at hand that meant the ECB could not convince the Court it had carried-out a risk analysis honing in closely on the peculiar risks of the regulated savings products.


It remains to be seen if this decision marks a more permanent change in the Court’s approach to the review of discretion. This will certainly depend on whether the Court of Justice (CoJ) backs up this approach on appeal.

The CoJ has so far overturned the General Court only once in one case under the SSM, the 2019 decision in Trasta Komercbanka. However, this is the first time the ECB is challenging the General Court’s review of its discretion. We do not expect the CoJ to deliver its judgment until later this year.

Further Reading 

Full judgment of the General Court (T-504/19) not available in English. See available language versions here. 

Read the ECB’s statement of appeal here.