In these times of crisis when rumours and fantasies most often discredit facts, it is worth reiterating that the risks faced by investors and clients of Monegasque banks are extremely limited.
A number of reasons contribute to lessening these risks:
- The first results from the intrinsic quality of the banking institutions established in Monaco. The dual Monegasque/French control over the establishment of banks in the Principality ensures that only the leading and most solid banks are present in Monaco.
- The second reason relates to the strict control of Monaco’s establishments by the French Banking Commission, on the one hand, and the Monegasque Financial Activity Supervisory Commission, on the other, each in their field of expertise. This joint control by various authorities strengthens the discipline and professionalism of participants and leaves no room for improvisation.
Strict application of “Know Your Customer” rules
When relations are initiated between a client investor and a bank, the strict application of the “Know Your Customer” rules, which requires bank to categorize their clients in order to propose investments highly suited to their expectations and situation, and the rules related to the client being informed by the bank of financial contingencies, reduces exposure to risks, especially should a systemic crisis arise. Throughout the life of a bank/client relationship, the information obligations, imposed by law on banks, as well as the many legal safety nets defined by the Monegasque texts of 2007 contribute to increasing the security of transactions. The banks’ liability in this regard can be clearly called into question should they fail to comply with these rules.
Banks protected by the courts
Despite all these safety nets and rules, incidents may occur, however, leading banks to seek court protection.
This type of incident has not happened for many years in the Principality or in France, but these countries are not safe from a systemic crisis that could affect non-European banks, for example. We must remember that since the last wave of bank bankruptcies in the 1990s, the States and the European Union have given greater strength to the systemic control measures for the banking world. Let’s hope that the work conducted by the G20 in London will lead to an even greater fortification of these procedures.
French Guarantee Funds for insolvencies
That said, in the case of class actions, one law protects Monegasque banks’ investor clients and originates from France: the French Guarantee Funds, intended to cover deposits or securities in client accounts should the bank become insolvent. Not all Monegasque banks have adopted all the guarantee terms of the French Funds, and clients should seek information from their banks when they initially enter into a relationship. If the Banking Commission notes that a bank cannot return the funds or securities to its client, the indemnification request procedure is initiated. The Guarantee Funds for Deposits then proceeds with indemnifying the clients of the bank in difficulty according to the methods defined by the law.
The maximum amount guaranteed is €70,000 for cash deposits and €70,000 for securities, i.e. a total of €140,000 per client and not per account. However, these thresholds may seem insufficient, but they should incite investors to diversify their banking relations in order to avoid “putting all their eggs in the same basket” and running the risk of a loss.
