The Principality of Monaco is not a Member State of the European Union. As a consequence, the EU freedom of establishment and the EU free provision of services are not applicable in Monaco.

Monaco is, however, part of a monetary union with France and consequently the EU, and uses the euro. In this context, Monaco has entered into several bilateral monetary agreements with France and the EU, pursuant to which French and EU prudential regulations governing the organisation of credit institutions apply to those established in Monaco. In this context, France plays an important role in Monaco in the banking industry for historical, geographical and cultural reasons.

Another key element of the Monegasque banking sector is that almost all Monegasque credit institutions are controlled by foreign and French banking groups. Pursuant to the last published annual report of the Monegasque Supervisory Commission on Financial Activities (CCAF) published in 2017, there are currently 29 credit institutions established in Monaco, 14 of which are organised as branches of foreign credit institutions established in France, Switzerland, Italy and the United Kingdom. The remaining 15 are organised as Monegasque subsidiary corporations of French, Swiss, Luxembourg, Andorran or Italian parent banking companies.

Furthermore, the activities of Monegasque credit institutions established in the form of local subsidiaries are generally orientated towards private banking and wealth management.

During 2018, the major events in the Monegasque banking sector were the promulgation of a new law and sovereign ordinance on anti-money laundering updating the Monegasque legislation with provisions similar to those of the Directive on anti-money laundering.2 In addition, the Directive on payment services (DSP II),3 except in regards to its Titles III and IV, became applicable in Monaco as from 14 September 2018.


i Brief overview of the bilateral relationship between Monaco and France in the banking sector

France and Monaco entered into a treaty on exchange control on 14 April 1945, which established the principle of the application of French banking regulations to credit institutions established in Monaco. The exchanges of letters entered into between France and Monaco on 18 May 1963, 6 April and 10 May 2001, 8 November 2005 and 20 October 2010 detailed the scope of the application of this general principle. Pursuant to such exchanges of letters, the rules provided for in the French Monetary and Financial Code (CMF) governing the organisation, functioning and supervision of credit institutions shall apply to credit institutions established in Monaco.

In addition, pursuant to the provisions of Sovereign Ordinance No. 3.021 of 26 November 2010 implementing the exchange of letters entered into between France and Monaco on 20 October 2010 (Ordinance No. 3.021), Monegasque credit institutions are under the supervision of the French prudential regulator, the ACPR.

Furthermore, in the context of the introduction of the euro in Monaco, Monaco and France, itself acting on behalf of the EU, entered into a monetary agreement on 5 December 2011 (Monetary Agreement), implemented into Monegasque legislation by Sovereign Ordinance No. 3.559 dated 5 December 2011 (Ordinance No. 3.559).

Pursuant to Article 9 of the Monetary Agreement, Monaco:

  1. directly applies, without need for any internal implementation, decisions taken by the European Council in application of Article 129 of the Treaty on the Functioning of the European Union that concern the European system of central banks;
  2. directly applies, without need for any internal implementation, EU legislation relating to bank notes and coins taken in application of Article 133 of the Treaty on the Functioning of the European Union;
  3. directly applies, without need for any internal implementation, EU legislation relating to the activities and supervision of credit institutions, and to the prevention of systemic risks, which are directly applicable in France (i.e., EU regulations) or transposed into French regulations (i.e., EU directives), in particular into the CMF. The EU legislation directly applicable in Monaco is listed under Annex A of the Monetary Agreement; and
  4. implements into Monegasque legislation equivalent measures to those contained in certain EU legislation listed under Annex B of the Monetary Agreement. The EU legislation listed under Annex B regards the fields of financial law, anti-money laundering regulations, and the fight against fraud and counterfeiting.

The list of EU legislation included under Annex A of the Monetary Agreement is amended by the European Commission from time to time whenever the texts concerned are amended and whenever a new text is adopted by the EU, taking into account the date of entry into force and, as the case may be, the date of their transposition into French legislation (although, formally, any modification of the list provided for under Annex A is published in Monaco through the publication of a sovereign ordinance in the official legal gazette of Monaco).

Where they come from an EU directive and must be transposed into French legislation, the legal measures set out under Annex A should be applied by Monaco as soon as they are incorporated into French law.

As regards EU legislation included under Annex B, a joint committee composed of representatives of Monaco and representatives of the EU is competent to amend the list under Annex B and to examine the equivalence between the legal measures taken by Monaco and those taken by EU Member States. Decisions from the joint committee are made unanimously.

On the contrary, and pursuant to Article 11 of Ordinance No. 3.021, French regulations that do not strictly concern the organisation and regulation of credit institutions do not apply in Monaco. Consequently, Monegasque credit institutions remain subject to Monegasque-specific regulations in all other fields, such as notably contract law, securities law, anti-money laundering law and financial activities. Such financial activities are governed by Law No. 1.338 of 7 September 2007 (Law No. 1.338) and Sovereign Ordinance No. 1.284 of 10 September 2007, and are defined as follows:

  1. management, on behalf of third parties, of a portfolio of securities or forward financial instruments;
  2. management of mutual funds or other collective investment vehicles incorporated under Monegasque law;
  3. receipt and transmission on financial markets of orders relating to securities or forward financial instruments on behalf of third parties;
  4. provision of advice or assistance in the areas referred to in (a) to (c) above;
  5. execution of orders on behalf of third parties;
  6. management of collective investment vehicles incorporated under a foreign law; and
  7. proprietary dealing.

Consequently, a credit institution carrying out such financial activities in Monaco will also be subject, for those activities, exclusively to this specific Monegasque legislation and under the local supervision of the CCAF.

ii Legal forms of Monegasque credit institutions and licensing requirements

Monegasque credit institutions may take the form of either a local limited liability company, the société anonyme monégasque (SAM), or a registered branch of a foreign banking company. In practice, the Monegasque authorities now tend to require that any new banking establishment in the Principality takes the form of a local SAM, and do not favour the setting up of branches of foreign credit institutions, with the exception of branches of French credit institutions involved in retail banking activities.

Pursuant to Law No. 1.144 of 26 July 1991 governing the conditions to exercise economic activities in Monaco, in particular banking activities, and to Ordinance No. 3.021, the creation of a Monegasque credit institution, whether in the form of a SAM or in the form of a local branch, is subject to the delivery of both an authorisation from the government and a licence from the ACPR, which will ensure that the prudential requirements imposed by both EU and French legislation are satisfied.

Ordinance No. 3.021 further states that a representative of the government attends all meetings of the ACPR that are considering files related to Monegasque credit institutions and that, before granting a banking licence to a credit institution, the ACPR should confirm that the establishment of such credit institution has been, in principle, approved by the government.


i Relationship with the prudential regulator

Pursuant to the provisions of Ordinance No. 3.021, Monegasque credit institutions are under the direct supervision of the ACPR.

It should be noted that Monegasque credit institutions are not within the scope of the EU Single Supervisory Mechanism under the authority of the European Central Bank. Consequently, the ACPR remains exclusively competent concerning the licensing and supervision of Monegasque credit institutions.

The ACPR carries out three supervisory missions in Monaco (granting of licences, prudential control and resolution) out of the five carried out in France. Indeed, the ACPR is not competent concerning the supervision of the fight against money laundering, which is supervised by a Monegasque-specific authority, the SICCFIN, or the protection of customers.

For the purposes of prudential supervision, the ACPR carries out ongoing control and on-site inspections of Monegasque credit institutions.

In the context of ongoing control, Monegasque credit institutions, as French credit institutions, are required to send their prudential and financial statements quarterly to the ACPR. In addition, regular exchanges and meetings are held between the ACPR and the key representatives of Monegasque credit institutions.

The ACPR may also proceed to on-site inspections in the premises of Monegasque credit institutions, under the same conditions as on-site inspections in the premises of French credit institutions. For such purposes, the agents of the French Central Bank, who are responsible for carrying out this type of control, may be assisted by the Monegasque authorities, if needed. Once an audit is finalised, the results are communicated to the Monegasque authorities by the ACPR.

The ACPR has the same powers of sanction over Monegasque credit institutions as over French credit institutions. Decisions taken by the ACPR in this respect are communicated to the Monegasque government, which will enforce them.

Monegasque credit institutions carrying out non-banking financial services regulated by Law No. 1.338 are also under the supervision of the CCAF, and are subject to on-site and off-site monitoring by the CCAF. In this context, Monegasque credit institutions are required, within six months after the closing of the accounting year, to communicate to the CCAF their annual report and their financial accounts, as certified by their Monaco statutory auditors. The annual report contains, in particular, a description of the measures that were put in place to comply with ethical rules of good conduct and prudential rules. The CCAF may pronounce administrative sanctions consisting of warnings, reprimands, a possible temporary suspension of an authorisation of up to six months, or the definitive withdrawal of the authorisation in certain limited cases.

ii Management of banks

Further to the provisions of Ordinance No. 3.021 and Ordinance No. 3.559, the mandatory rules concerning management of credit institutions established in Monaco are also provided by French legislation.

As in France, credit institutions established in Monaco must comply with the provisions of the CRD IV,4 as transposed into French legislation on 20 February 2014, and the CRR,5 which have been included under Annex A of the Monetary Agreement.

As mentioned in Section II, Monegasque credit institutions take the form of either a local SAM or a branch of a foreign credit institution.

The executive body of Monegasque credit institutions incorporated under the legal form of a SAM is the board of directors, which must be composed of between two and eight members. Effective management must be ensured by at least two managing directors of the board of directors. The main missions of the directors are the management of the activities, risks and resources of Monegasque credit institutions.

Registered branches of foreign credit institutions must also have a local effective management composed of at least two managers. Those two managers must be empowered by a delegation of power from the board of directors (or equivalent executive body) of the foreign credit institution in order to have sufficient autonomy.

The board of directors, and other managers and compliance officers designated by the board of directors of the SAM (or, as regards branches of foreign credit institutions, the executive body of such credit institution) shall be composed of members whose knowledge, experience and expertise in the banking area are evidenced, both individually and collectively.

Monegasque credit institutions have the obligation to notify to the ACPR any change of the persons in charge of their effective management, and more broadly of their board of directors. The ACPR can use in this respect a right of opposition.

In addition, for credit institutions with a balance sheet of at least €5 billion, it is compulsory to constitute the three following committees: a risk committee, a nomination committee and a compensation committee.

Significant branches of credit institutions are exempted from constituting a nomination committee, but they must be able to prove that they constituted the two other committees or another body that achieves equivalent results.

iii Regulatory capital and liquidity

Since the CRD IV and the CRR are applicable in Monaco, credit institutions and branches established in Monaco must comply with the European standards in order to maintain their liquidity and solvency. In this context, credit institutions and branches are required to be permanently solvent.

In accordance with the provisions of the CMF, credit institutions in the form of a SAM must have a fully released initial capital of at least €5 million. The financial components included in the initial capital are the following:

  1. capital instruments;
  2. share premium accounts related to the instruments referred to in point (a) above;
  3. retained earnings;
  4. accumulated other comprehensive income; and
  5. other reserves.

Solvency ratios, capital buffers and liquidity ratios apply in the same manner as for French credit institutions.

Non-French foreign credit institutions are required to constitute in respect of their Monegasque branch a capital endowment of the same amount, and are subject to the same solvency ratio requirements.

Branches of non-French foreign credit institutions may benefit from a total or partial exemption from solvency and liquidity requirements. The exemption is granted by the ACPR, subject to the following conditions:

  1. the regulation and supervision of the country of the credit institution from which the branch is dependent take into account the risks assumed outside the branch in an equivalent manner to the provisions in force in Monaco;
  2. the credit institution from which the branch is dependent commits to ensure the supervision of operations of the branch in Monaco in accordance with the regulations in force in its country of incorporation and under the supervision of the competent authority in that country;
  3. the credit institution from which the branch is dependent confirms that it will ensure that the branch has sufficient funds in Monaco to cover its commitments, in particular to meet its short-term liquidity needs;
  4. the credit institution from which the branch depends undertakes to inform the ACPR of any relevant developments to verify that the conditions above are met on a permanent basis; and
  5. the competent authority of the country of the credit institution from which the branch is dependent:
    • agrees to the requested exemption;
    • confirms the regularity of the situation of the credit institution from which the branch depends; and
    • undertakes to inform the ACPR of any significant change in the above conditions and to provide the ACPR, upon its request, with any information relating to the credit institution in question.

The ACPR will assess and supervise mechanisms, strategies and procedures implemented by foreign credit institutions.

iv Recovery and resolution

The Bank Recovery and Resolution Directive (BRRD),6 which is listed under Annex A of the Monetary Agreement, applies to the Monegasque banking sector following its transposition into French legislation on 20 August 2015. Consequently, the ACPR has an exclusive power to launch and supervise the resolution procedure against a credit institution established in Monaco, and Regulation (EU) No. 806/2014 of 15 July 2014 establishing the Single Resolution Mechanism applies to credit institutions located in Monaco, as being also included under Annex A of the Monetary Agreement.

In this context, the ACPR has the following main missions:

  1. draft resolution plans;
  2. assess the capacity of credit institutions to be subject to resolution measures;
  3. make decisions that could reduce or suppress barriers to the implementation of resolution measures;
  4. assess the default of a credit institution; and
  5. implement resolution measures.

In this context, and in accordance with the provisions of the CMF, directors and effective managers must draft a preventive recovery plan providing measures to face the significant deterioration in the financial position of a credit institution. Such plan shall contain proceedings enabling the implementation of the planned recovery measures and for future actions to be taken by a credit institution in the event of a crisis.

The preventive recovery plan must be updated at least each year and after every substantial change within a credit institution. In addition, the ACPR can also suggest to any credit institution under its supervision a preventive recovery programme that must be implemented by the directors and effective managers if the credit institution presents a specific risk with regard to its financial stability. In cases of failure to meet this obligation, the ACPR can decide to replace them in order to ensure the recovery plan.

A credit institution is considered to be in default in the event the following situations arise:

  1. it no longer complies with the relevant equity capital requirements;
  2. it is not able to secure its payments;
  3. the value of its assets is less than the value of its liabilities; or
  4. it requires exceptional financial support from the public authorities.

If the resolution college of the ACPR considers that a credit institution is, or is likely to become, insolvent and that there is no alternative solution, the credit institution is subject to a resolution procedure. In this scenario, the resolution college of the ACPR would take control of the credit institution, and has the four following tools that could be used separately or in combination:

  1. a business divestiture through a transfer of shares, other title deeds, rights and obligations in the credit institution to a private purchaser;
  2. the separation of assets through the creation of an asset management structure, to which the poor-quality assets, rights and obligations of the credit institution that are intended to be sold or liquidated would be transferred;
  3. a bridging institution through which the shares and other deeds of property as well as the assets, rights and obligations of the credit institution are transferred to a bridging institution, which will continue their operation; and
  4. an internal bail-in instrument that allows for the absorption of losses through the recapitalisation of the credit institution thanks to the contributions of shareholders and creditors. First there is a phase of reduction of eligible commitments to such a measure to absorb the losses and reduce the net worth of the institution to zero. Then there is a conversion phase of eligible commitments to recapitalise the institution.

In a case of the insolvency of a Monegasque credit institution, Article L 613-24 et seq of the CMF apply, however taking into account the specificities of the insolvency proceedings provided by Monegasque bankruptcy legislation, in particular as regards the exercise of the mandates of directors, liquidators and statutory auditors.

There is currently no precedent on the application of the resolution procedure as transposed in the CMF to a Monegasque credit institution. It appears that such an application would under the current state of the legislation raise numerous questions, since the Monegasque insolvency regime differs strongly from the French insolvency regime. A new exchange of letters to be entered into between France and Monaco is currently under negotiation to address those questions.

Finally, effective managers and directors of a Monegasque credit institution may be held responsible for the bankruptcy of the credit institution in the event of mismanagement or an improper continuation of operations leading to the insolvency, which will lead to civil liabilities (in which case the state of personal bankruptcy is pronounced by the Monegasque court) or criminal liabilities (in which case the state of crime of bankruptcy is pronounced by the Monegasque court).

Such effective managers and directors are subject to the ACPR's disciplinary powers, and severe penalties can be imposed on managers and directors of banks.


There is no general Monegasque legislation governing the conducting of business of Monegasque credit institutions. In this respect, it should be noted that the ACPR is not competent to supervise the relationships between Monegasque credit institutions and their clients.

Monegasque credit institutions are, however, primarily branches or subsidiaries of foreign parent credit institutions, and may apply group codes of conducts implemented by such foreign credit institutions under their own legislation.

In the conduct of their business, Monegasque credit institutions may be exposed to civil, regulatory and criminal liabilities, and must comply with the banking secrecy rules.

i Civil liabilities

Monegasque credit institutions may be subject to civil liabilities in respect of a breach of their contractual relationships with their clients and a breach of their obligations towards their clients.

In particular, the case law of the courts of Monaco has defined several duties Monegasque credit institutions should comply with, and the breach of which should expose them to damages:

  1. a duty to provide information, advice and warnings to unadvised clients. The scope of this duty would depend on the knowledge and the experience of the client, his or her personal background, and the complexity of the banking transaction;
  2. a duty of care and prudence in connection with a client's orders; and
  3. a duty of non-interference in a client's business, which should not prevent Monegasque credit institutions from bringing information to the attention of the client as part of their duty to provide information, advice and warning.

ii Regulatory liabilities

Monegasque credit institutions may be subject to sanctions and fines by the ACPR in respect of any breach of the French licensing and prudential legislation applicable to them.

In connection with any breach of the obligations provided by Law No. 1.362 of 3 August 2009, on anti-money laundering, as amended by Law No. 1.462 of 28 June 2018 (AML Law), Monegasque credit institutions may be subject to sanctions pronounced ultimately by the Minister of State, upon proposition and after instruction of a special commission, which may consist of:

  1. a warning;
  2. a reprimand;
  3. a prohibition on carrying out certain activities;
  4. the temporary or definitive withdrawal of a business authorisation, or a fine of up to €1 million, or both.7

iii Criminal liabilities

Monegasque credit institutions and their representatives may face various criminal liabilities in Monaco in the course of their activities, in particular in respect to the grant of usurious loans, breach of the banking secrecy rules (see below) and breach of their duties under the AML Law.

Furthermore, pursuant to Article 8 of the treaty on exchange control on 14 April 1945, any infringements of the French prudential legislation applicable to Monegasque credit institutions that constitute criminal sanctions pursuant to such legislation may be prosecuted before the French criminal courts.

iv Banking confidentiality

Monegasque credit institutions are subject to banking confidentiality. Ordinance No. 3.021 provides that credit institutions located in the territory of Monaco are subject to the provisions of Article L 511-33 of the CMF relating to banking secrecy, which should be read in combination with Article 308 of the Monegasque Criminal Code, which criminalises more generally any breach of legal professional secrecy. Pursuant to Article 308 of the Criminal Code, any breach of the banking secrecy provisions as defined by Article L 511-33 of the CMF may lead to criminal sentences of imprisonment of six months to one year, a fine ranging from €9,000 to €18,000, or both.

As an exception, credit institutions may transmit confidential information to fulfil legal obligations, in particular towards the ACPR and the French Central Bank in the context of prudential controls, towards the SICCFIN in the context of the fight against money laundering and to the judicial authorities upon their request in the context of criminal proceedings.

The principle of such communications when they relate to nominative data must be declared to CCIN, which is the local data protection authority in Monaco.

v Financial activities

Finally, credit institutions are subject to specific obligations provided for by Law No. 1.338 for the carrying out of financial activities. Pursuant to Law No. 1.338, Monegasque credit institutions must comply with general principles of good conduct, and must enquire about their client's financial situation and investment experience.


Credit institutions established in Monaco are funded by the receipt of repayable funds from the public, or by the receipt of funds from the interbank market or from their foreign parent credit institutions. As of 31 December 2017, total assets deposited in Monegasque credit institutions amounted to €114 billion.


i Control regime

Pursuant to EU Directive No. 2007/44 of 5 September 2007 (which is included under Annex A of the Monetary Agreement), as transposed into the CMF, the ACPR receives all applications regarding the granting of a banking licence and all declarations from credit institutions concerning any change of control.

An direct or indirect acquisition or increase in a participation in a Monegasque credit institution is subject to a prior authorisation from the ACPR if one of the three following conditions is met:

  1. the participation of the acquirer in the Monegasque credit institution overcomes one-tenth, one-fifth, one-third or half of the share capital or the voting rights as a result of the acquisition;
  2. the credit institution becomes the subsidiary of the acquirer as a result of the acquisition; or
  3. the acquisition allows the acquirer to exercise a significant influence over the management of the credit institution.

All other transactions involving the share capital of Monegasque credit institutions must be declared for informational purposes to the ACPR. The ACPR will verify that the proposed transaction does not affect the conditions of the licence granted to the credit institution.

If an authorisation from the ACPR is required, the ACPR will evaluate the proposal made by the credit institution, in particular by verifying that the modification of the shareholding does not call into question the conditions of the authorisation issued to the credit institution. The ACPR also appreciates certain criteria regarding the quality of the proposed acquirer, including its reputation, experience and skills. The ACPR must decide within 60 days, which, if a request is made for additional information, may be suspended for up to 20 days.

ii Transfers of banking business

The sale of an ongoing business of a Monegasque credit institution is subject to the application of the rules of Monegasque civil and commercial law.

Unless provided to the contrary in the relevant contractual documentation, transfer of ongoing business within the context of a merger or a split-off of a Monegasque credit institution would not require customer consent. The merger or split-off will have to be approved by the ACPR. If authorised, the merger or split-off will be published in the official legal gazette of Monaco allowing creditors to file an opposition.


The main event of the year impacting the Monegasque banking sector was the promulgation of the AML Law. Pursuant to the Monetary Agreement, the fight against money laundering is an area in which Monaco is required to harmonise its legislation with the EU legislation. As such, EU Directive No. 2015/849 was included under Annex B of the Monetary Agreement. The purpose of the AML Law was to achieve this harmonisation, and most of the provisions of the Directive are now reflected in the AML Law. There are, however, still some specificities in the Monegasque legislation that a foreign banking group must be aware of when implementing their compliance procedures at the level of their Monegasque branch or subsidiary.

Another major event in 2018 was the implementation of the General Data Protection (GDPR).8 The GDPR is not applicable in Monaco per se. However, due to the extraterritorial scope of the GDPR, Monegasque credit institutions providing banking and financial services to EU residents may be subject to the GDPR. Monaco has its own law governing data protection, Law No. 1.165 of 23 December 1993, as amended by Law No. 1.353 of 4 December 2008, supplemented by Sovereign Order No. 2.230 of 19 June 2009. As a result of the implementation of the GDPR, such Monaco legislation should evolve in the near future to align itself with the GDPR.

Finally, Titles I and II of the DSPII, as transposed in the French CMF, are now directly applicable in Monaco as a result of their inclusion under Annex A of the Monetary Agreement on 14 September 2018.


The banking sector in Monaco is very stable, and the number of credit institutions present in the territory remains constant from year to year. At the same time, the amount of assets deposited in Monegasque financial institutions increases from year to year ,and Monegasque credit institutions have a good solvency ratio.

Monegasque credit institutions, despite being only slightly impacted by the 2008 crisis and enjoying great stability, seek to meet very carefully the prudential criteria provided by European and French law in accordance with the banking reform process, as envisaged by Europe.

In 2019, Monaco will be concerned with the implementation of the fifth AML Directive,9 which must be completed by 10 January 2020.


1 Mireille Chauvet is a partner at ALFA Monaco.

2 EU Directive No. 2015/849 on anti-money laundering.

3 EU Directive No. 2015/2633 on payment services.

4 EU Directive No. 2013/36 of 26 June 2013 on the access to the activity of credit institutions and the prudential supervision of credit institutions.

5 EU Regulation No. 575/2013 on Capital Requirements.

6 Directive No. 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive No. 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council.

7 The members of the commission are designated by the Monegasque State Counsel, the Ministry of State of Monaco, and by the president of the court of first instance of Monaco.

8 EU Regulation No. 2016/679.

9 Directive No. 2018/843 of the European Parliament and of the Council of 30 May 2018.