Banking: Commission closes case against France over law on current account interest

  • France
  • 04/07/2008

The European Commission has decided to terminate an infringement procedure against France as it has now completely abolished its legislation (‘Code Monétaire’) that formally prohibited banks from offering interest on current accounts to their customers.

The Commission’s original decision to pursue infringement proceedings in this case follows on from the ruling of 25 October 2004 (‘CAIXA Bank’, C-02/442) by the European Court of Justice, which held that legislation such as that in force in France impeded access by EU banks to the French market. The deposit of funds by the public represents one of the basic activities in the banking sector, and the prohibition on paying interest on current accounts deprived EU banks of an instrument that could otherwise help them acquire new customers without the need for a well-established commercial network. In 2007, the Commission decided to refer the matter to the European Court of Justice.

The issue has now been settled. France abolished all legal provisions that had introduced and specified the restriction for banks to pay interest on current accounts. Initially, only two of the three relevant Articles had been abolished, permitting banks operating in France to offer interest payments to their customers. However, there was still a legal basis for fixing the interest rate in question. Now, the entire set of restrictions has been abolished.