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Competence Sharing Between the ECB and the National Competent Supervisory Authorities Within the Single Supervisory Mechanism (SSM)

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Abstract

Within the framework of the newly established Single Supervisory Mechanism (SSM), which has been in operation since 4 November 2014, the European Central Bank (ECB) cooperates with the national competent authorities (NCAs) of euro area Member States as regards the specific (supervisory) tasks conferred upon it concerning policies relating to the prudential supervision of credit institutions and other supervised entities. This Article briefly presents the SSM framework (see below under 1) and then analyses the sharing of competences between the ECB and NCAs with regard to ‘significant’ and ‘less significant’ credit institutions, financial holding companies and mixed financial holding companies (under 2). This presentation and analysis are based on the provisions of the legal acts which govern the SSM’s operation.

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Notes

  1. OJ L 287, 29.10.2013, pp 63–89.

  2. For the other legal acts which constitute the sources of the three main pillars of the EBU, see Gortsos (2015), at pp 15–28.

  3. OJ L 141, 14.5.2014, pp 1–50.

  4. The author prefers to refer to this Regulation in this way in order to help the reader to clearly distinguish it in the text from the SSM Regulation.

  5. For a general overview of these legal acts, see Gortsos (2015), at pp 77–80.

  6. OJ L 320, 30.11.2013, pp 1–6.

  7. For a compendium of all legal acts pertaining to the SSM as well as to the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF), which constitute the second main pillar of the EBU, with a brief introduction, see Binder and Gortsos (2015).

  8. OJ C 326, 26.10.2012, pp 47–390.

  9. SSM Regulation, Article 1, first sub-paragraph.

  10. TFEU, Article 127, paragraph 1, first sentence, inter alia. On this Article (ex Article 105, paragraph 1, of the Treaty establishing the European Community (OJ C 321, 29.12.2006, pp 37–186—TEC)), see indicatively Smits (1997), at pp 184–187, and Louis (2009), at pp 150–151.

  11. Several aspects of this Regulation (and the corresponding proposal) are analysed in d’Ambrosio (2013) and Deutsche Bundesbank (2013), at pp 26–36, Ferran and Babis (2013), Ferrarini and Chiarella (2013), Huber and von Pföstl (2013), Tröger (2013), Verhelst (2013), Brescia Morra (2014), Dietz (2014), Gandrud and Hallerberg (2014), Moloney (2014) and Thiele (2014), at pp 519–525, Wymeersch (2014), Wiggins et al. (2015), Wissink et al. (2014), Alexander (2015), at pp 163–175, and Binder (2015), at pp 4–11. For a detailed analysis of the entire legal framework pertaining to the SSM, see also Gortsos (2015).

  12. On the specific supervisory tasks concerning branches in participating Member States established by credit institutions which are incorporated in non-participating Member States, see Articles 13–16 of the ECB Framework Regulation.

  13. ‘Participating Member States’ are defined (SSM Regulation, Article 2, point (1)) as meaning both the Member States whose currency is the euro (in the ECB Framework Regulation also called ‘euro area participating Member States’), and the Member States with a derogation which have established a close cooperation in accordance with Article 7 of the SSM Regulation (in the ECB Framework Regulation also referred to as ‘non-euro area participating Member States’). ‘Non-participating Member States’ are those which do not meet the above criteria (ibid, Article 2, point (13)).

  14. For an overview, see Wymeersch (2014), at pp 37–39, and analytically Gortsos (2015), at pp 137–163.

  15. Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, OJ L 176, 27.6.2013, pp 1–337).

  16. Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (…), OJ L 176, 27.6.2013, pp 338–436.

  17. Directive 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 (…), OJ L 173, 12.6.2014, pp 190–348.

  18. SSM Regulation, Article 1, third sub-paragraph, and Recital 17. On the various banks’ business models (such as investment, wholesale, focused retail, and diversified retail banking) in the current EU financial system, see Ayadi et al. (2012).

  19. Ibid, Article 1, fourth sub-paragraph.

  20. Ibid, Article 1, fifth sub-paragraph.

  21. See on this Gortsos (2015), at p 139, footnote 507.

  22. With regard to the last two aspects, however, Recital 29 provides that the ECB must fully cooperate, as appropriate, with the national authorities which are competent to ensure a high level of consumer protection and combat money laundering.

  23. The terms ‘credit institution’ and ‘financial holding company’ are defined in Article 2, points (3)–(4) of the SSM Regulation with reference to Article 4, paragraph 1, points (1) and (20), respectively, of the CRR, while the term ‘mixed financial holding company’ is defined in Article 2, point (5) with reference to Article 2, point (15) of Directive 2002/87/EC of the European Parliament and of the Council of 11 February 2003 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (…), OJ L 35, 11.2.2003, pp 1–27), as in force.

  24. ECB Framework Regulation, Article 39, paragraphs 1 and 2, respectively. On the criteria for the classification of supervised entities as significant or less significant, see Wymeersch (2014), at pp 28–32, and Gortsos (2015), at pp 101–119.

  25. SSM Regulation, Article 2, point (9), and Article 6, paragraph 1, first sentence. On the close cooperation procedure, see Gortsos (2015), at pp 183–193.

  26. TFEU, Article 282, paragraph 1, second sentence.

  27. This principle is analysed in Priego and Conlledo (2005).

  28. On the decentralised structure of the ESCB and the Eurosystem, see Smits (1997), at pp 92–94, Hadjiemmanuil (2006), at pp 551–554, and Louis (2009), at pp 135–148.

  29. SSM Regulation, Article 1, first sub-paragraph.

  30. Euro Area Summit Statement, 29 June 2012, first paragraph, second sentence.

  31. For a detailed analysis of this Article, see Smits (1997), at pp 355–360, and Lastra and Louis (2013), at pp 82–94.

  32. European Council Conclusions, 28/29 June 2012, paragraph 4(b), in finem.

  33. On these tasks, see indicatively Smits (1997), at pp 193–202 (with further references), Louis (2009), at pp 152–162, and Lastra and Louis (2013), at pp 79–81.

  34. Protocol (No 4) attached to the EU Treaties on the Statute of the European System of Central Banks and of the European Central Bank, OJ C 326, 26.10.2012, pp 230–250. For more details on all these tasks, see Smits (1997), at pp 202–221, Louis (2009), at pp 162–173, and Lastra and Louis (2013), at pp 81–95

  35. Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board, OJ L 331, 15.12.2010, pp 162–164..

  36. Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board, OJ L 331, 15.12.2010, pp 1–11.

  37. See above, under 1.4.2.

  38. CRR, Article 4, paragraph 1, point (40).

  39. ECB Framework Regulation, Article 2, point (9), third and fourth sentences.

  40. See above, under 1.4.3.

  41. SSM Regulation, Article 6, paragraph 1.

  42. Ibid, paragraph 2, first sub-paragraph, and ECB Framework Regulation, Article 20.

  43. Decision 2014/477/EU of the European Central Bank of 2 July 2014 on the provision to the ECB of supervisory data reported to the national competent authorities by the supervised entities pursuant to Commission Implementing Regulation (EU) No 680/2014 (ECB/2014/29), OJ L 214, 19.7.2014, pp 34–37.

  44. SSM Regulation, Article 6, paragraph 2, second sub-paragraph, and ECB Framework Regulation, Article 21, paragraph 1.

  45. ECB Framework Regulation, Article 21, paragraphs 2–3.

  46. Ibid, Article 6, paragraph 3.

  47. Ibid, Article 6, paragraph 8.

  48. ‘National designated authorities’ are defined (ECB Framework Regulation, Article 2, point (11), with reference to Article 2, point (7) of the SSM Regulation) as those within the meaning of European banking law, such as Article 458 of the CRR on macro-prudential or systemic risk identified at the level of a Member State, and Article 128, point (8) of the CRD IV on the definition of buffers.

  49. ECB Framework Regulation, Article 22.

  50. Ibid, Article 39, paragraph 4.

  51. Ibid, Article 2, point (6).

  52. Ibid, Article 3, paragraph 1 (see below, under 2.2.1.2).

  53. Ibid, Article 4, paragraph 1. The appointment conditions are laid down in paragraphs 2–3.

  54. Ibid, Article 5, paragraph 1.

  55. Ibid, Article 4, paragraph 4.

  56. Ibid, Article 4, paragraph 5.

  57. See on this also European Banking Authority (2014) Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP), EBA/GL/2014/13, available at https://www.eba.europa.eu/documents/10180/935249/EBA-GL-2014-13+(Guidelines+on+SREP+methodologies+and+processes).pdf.

  58. On the ECB Supervisory Board, which is governed (mainly) by Article 26 of the SSM Regulation, see Gortsos (2015), at pp 240–254.

  59. According to paragraph 1 of this Article, the national competent authorities must, at least annually, adopt a supervisory examination programme for the institutions they supervise, containing, inter alia (point (c)), a plan for inspections at the premises used by an institution, including its branches and subsidiaries established in other Member States according to Articles 52, 119 and 122 of the CRD IV.

  60. ECB Framework Regulation, Article 3, paragraph 2.

  61. Ibid, Article 6.

  62. Ibid, Article 89 (on the JSTs, see above, under 2.2.1).

  63. Ibid, Articles 90–91.

  64. These Articles of the SSM Regulation are analysed in Gortsos (2015), at pp 202–203 and 207–208, respectively.

  65. OJ 135, 31.5.1994, pp 5–14.

  66. ECB Framework Regulation, Article 92. This provision of Directive 94/19/EC is repeated in Article 2, paragraph 1, point (8) of Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (recast), OJ L 173, 12.6.2014, pp 149–178, which applies from 4 July 2015 and constitutes one of the main legal acts pertaining to the EBU. See on this, Gortsos (2014), at pp 125–126.

  67. Article 3, paragraph 1, point (7) of the CRD IV defines the term ‘management body’. According, then, to Article 3, paragraph 2, where the CRD IV refers to the management body and, pursuant to national law, its managerial and supervisory functions are assigned to different bodies or different members within one body, the Member State must identify the bodies or members of the management body responsible in accordance with its national law, unless otherwise specified therein.

  68. On Articles 14–15 of the SSM Regulation, see Gortsos (2015), at pp 212–222.

  69. ECB Framework Regulation, Article 93.

  70. Ibid, Article 94.

  71. See above, under 2.2.2.2.

  72. ECB Framework Regulation, Article 95.

  73. See below, under 2.3.2.

  74. Supervisory decisions are governed by Article 22, paragraph 2 of the SSM Regulation and Articles 33-34 of the ECB Framework Regulation. See on this, Gortsos (2015), at pp 282–283.

  75. Article 16 of the SSM Regulation is analysed in Gortsos (2015), at pp 222–224.

  76. On these Articles, see ibid, at pp 204–212.

  77. SSM Regulation, Article 6, paragraph 5, points (a) and (c)–(e), respectively.

  78. Ibid, point (b), and ECB Framework Regulation, Articles 67–69.

  79. ECB Framework Regulation, Article 67, paragraph 2.

  80. SSM Regulation, Article 6, paragraph 5, point (b). On the differences between direct (under the new Direct Recapitalisation Instrument (DRI)) and indirect financial assistance provided by the ESM, see Gortsos (2015), at pp 29–32.

  81. ECB Framework Regulation, Article 62.

  82. See above, under 2.3.1.1 (a).

  83. The term ‘financial conglomerate’ is defined in Article 2, point (6) of the SSM Regulation with reference to Article 2, point (14) of Directive 2002/87/EC.

  84. SSM Regulation, Article 6, paragraph 6.

  85. ECB Framework Regulation, Article 96.

  86. See above, under 2.3.1.1.

  87. ECB Framework Regulation, Article 97, paragraphs 1–2.

  88. Ibid, Article 97, paragraphs 3–5.

  89. See above, under (b).

  90. ECB Framework Regulation, Article 98, paragraph 1.

  91. Ibid, Article 98, paragraph 4.

  92. Ibid, Article 99.

  93. Ibid, Article 100.

  94. For an overview of the components of the ‘bank safety net’, aimed at contributing to the stability of the banking system, see Guttentag and Herring (1986), Demirgüç-Kunt and Huizinga (1999) and Gortsos (2012), at pp 90–106 (with further references).

  95. See above, under 1.4.2.

  96. See above, under 1.4.1.

  97. On this terminology, see Carletti and Dell’Ariccia (2015).

  98. See above, under 1.3 (b).

  99. See above, under 2.3.1.1 (b).

  100. See above, under 2.1.1.

  101. See above, under 2.1.2.

  102. See above, under 2.2.2 and 2.3.2, respectively.

  103. See, nevertheless, the article of Carletti and Dell’ Ariccia (2015), who are sceptical about this, premised on a model which explores how a supranational institutional design affects the incentives of national supervisory authorities to appropriately collect information on behalf of the supranational supervisor.

  104. See above, under 2.2.1.

  105. As regards national banking supervisors’ liability in the EU, see Rini (2008) (also drawing a comparison with Swiss law), Würmli (2010) and Athanassiou (2011).

  106. For a more detailed evaluation of the SSM framework, from the author’s perspective, see Gortsos (2015), at pp 307–314.

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Authors and Affiliations

  1. Department of International, European and Area Studies, Panteion University of Athens, Athens, Greece

    Christos V. Gortsos

  2. Europa-Institut, Universität des Saarlandes, Saarbrücken, Germany

    Christos V. Gortsos

  3. Law Faculty, National and Kapodistrian University of Athens, Athens, Greece

    Christos V. Gortsos

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Correspondence to Christos V. Gortsos.

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C. V. Gortsos: Professor of International Economic Law, Visiting Professor, Law Faculty.

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V. Gortsos, C. Competence Sharing Between the ECB and the National Competent Supervisory Authorities Within the Single Supervisory Mechanism (SSM). Eur Bus Org Law Rev 16, 401–420 (2015). https://doi.org/10.1007/s40804-015-0019-6

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