FRANCE - The European Commission has launched an investigation into the way France’s most popular tax-advantaged savings product, the Livret A, is sold - striking a blow to its main provider Caisse d’Epargne.
Livret A accounts are currently sold through a duopoly between the Post Office (La Banque Postale) and branches of leading French bank Caisse d’Epargne.
Brussels has asked the French government to justify this regime in regard to its compatibility with competition laws.
The move is widely believed to follow pressure from other French banks such as Societe Generale and BNP Paribas who were irritated by the duopoly and want to see a level playing field.
In particular they fear competition from La Poste. which last year was granted the right to operate like an ordinary bank offering a range of products. With its massive distribution network it will be a major threat to other retail banks.
Caisse d’Epargne currently manages 24.5m Livret A products worth 8.7% of revenue while La Poste has 21.6m worth 16.5% of revenue. In total around three quarters of the French population hold them.
The announcement is bad news for Caisse d’Epargne which this week signed an agreement to merge its investment arm, Natexis, with Banque Populaire’s investment division Ixis creating a €25bn company called Natixis.
The Livret A accounts, which have been around since 1818, allow investors to save up to €15,000 tax-free and were seen as the perfect tool to help Caisse d’Epargne and Natexis convince their customers to take up other savings products such as the new stakeholder-style personal pensions known as PERPs.
So far sales of PERPs in France have been dismal because, although there are tax advantages, the money must be converted into an annuity at retirement when it is taxed. Also they are in competition with existing tax-advantaged life assurance savings products which allow investors to withdraw their money after only eight years.