The taxonomy of ECB instruments available for banking supervision
Published as part of the ECB Economic Bulletin, Issue 6/2019.
In November 1999, the ECB Monthly Bulletin featured an article on the legal instruments of the European Central Bank. Since being entrusted with the task of supervising credit institutions in 2014, the ECB has adopted a wide range of further legal and non-legal instruments in the context of prudential supervision. These tasks have been conferred on the ECB by the SSM Regulation and give the ECB the exclusive competence to carry them out with respect to all credit institutions. The SSM Regulation establishes specific types of legal act which the ECB can adopt for the purpose of exercising its tasks under that regulation. The SSM Regulation also stipulates that the ECB’s supervisory tasks must be exercised separately from those relating to monetary policy. This article describes the instruments the ECB has adopted in its role as banking supervisor in recent years.
Supervising banks involves changes to their legal position, e.g. as a result of the imposition of supervisory measures which must be complied with as a legal obligation, or by granting permission for a course of action which the bank would otherwise not be allowed to take. Such changes in legal position can only be effected by means of a binding legal instrument. For these purposes, primary law (primarily the Treaty on the Functioning of the European Union and the Statue of the ESCB) and secondary law (primarily the SSM Regulation) provide a broad range of instruments (some of which qualify as legal acts) for the ECB to adopt as tools to carry out its supervisory tasks.
In many cases, however, it may be useful for the ECB – or, for that matter, any other supervisory authority – to issue instruments other than binding legal acts. Such instruments can, for instance, be used to communicate to the public the ECB’s position on a question of policy, or to provide guidance on how it intends to use its supervisory powers in the future.
There is, therefore, a range of instruments which the ECB may use in the area of supervision, reflecting the relatively wide range of supervisory activities it undertakes. Different kinds of instruments may be useful for different purposes. The present article attempts to bring some order to this multitude of different instruments and to describe their legal implications. Section II will discuss legal acts of a binding nature while Section III will broadly address legally non-binding instruments and documents, some of which qualify as legal acts in spite of their non-binding nature. Section IV will address the difficulties in distinguishing between these two categories, which is not always straightforward, and Section V will summarise and draw some general conclusions.
2 Binding legal acts and other binding instruments
2.1 General remarks
Article 4(3) of the SSM Regulation lists the binding legal instruments which are available for adoption by the ECB in its supervisory capacity. This list was not created entirely by the drafters of the SSM Regulation, but rather builds on the primary law catalogue of legal acts under Union law in Article 34.1 of the Statute of the ESCB, which lists regulations, decisions, recommendations and opinions. In addition, the SSM Regulation mentions several other instruments which are not included in the primary law catalogue of legal acts but which can be adopted in a binding manner in order to carry out its tasks under the SSM Regulation.
There are five main tools available to the ECB for this purpose: regulations, decisions, guidelines, recommendations and instructions to NCAs (mentioned in Article 9(1)(3) of the SSM Regulation and Article 22 of the SSM Framework Regulation).
2.2 ECB Regulations
ECB Regulations are characterised by two defining features which they share with Regulations adopted by Parliament and the Council: they apply on a general – rather than case-specific – basis and they are directly applicable in the Member States (of the euro area for the ECB regulations). In this sense, the term “regulation” in Article 4(3) of the SSM Regulation is used in the same sense as in Articles 288(2) and 132(1), first indent, TFEU and Article 34.1, first indent, of the Statute of the ESCB. They also benefit from the supremacy of Union law and supersede the application of conflicting national legislation. However, in the supervisory field the ECB is not a legislator itself; it is – as is made explicit in Article 4(3) of the SSM Regulation – bound by the “single rulebook” This consists of the “level 1” texts adopted by Parliament and the Council, most importantly CRD IV (Directive 2013/36/EU), the BRRD (Directive 2014/59/EU), the CRR (Regulation 575/2013), the SRM Regulation (Regulation 806/2014), as well as the “level 2” texts. These “level 2 texts” consist largely of Regulatory Technical Standards (RTSs) drafted by the EBA on the basis of Article 10 of the EBA Regulation and subsequently adopted by the Commission on the basis of Article 290 TFEU, using an empowerment included in a level 1 text and Implementing Technical Standards (ITSs) drafted by the EBA on the basis of Article 15 of the EBA Regulation and subsequently adopted by the Commission on the basis of Article 291 TFEU, also using an empowerment in a level 1 text. In addition, there are cases where the Commission adopts delegated regulations in the area of banking supervision directly on the basis of Article 290 of the TFEU and an empowerment in a level 1 text without the need for an EBA drafting procedure under Article 10 of the EBA Regulation. One example of this is Commission Delegated Regulation (EU) 2015/61 which, on the basis of Article 291 of the TFEU and Article 460 of the CRR, defines the calculation of the liquidity coverage ratio (LCR). RTSs, ITSs and Commission Delegated Regulations make up the vast majority of “level 2” texts and are adopted in the form of regulations, ensuring their direct applicability throughout the Union. The ECB is mandated to apply these acts and it may not amend or deviate from them or enact new legislation in the form of generally applicable Regulations not foreseen in the level 1 acts.
Article 4(3) is not, in itself, a sufficient legal basis for the adoption of regulations but rather presupposes an otherwise existing legal basis for the ECB to act. It is limited to stating that, in principle, regulations are also an admissible legal act which the ECB may use in the area of banking supervision. An example of the ECB acting in a regulatory capacity is Regulation 2016/445, in which the ECB exercised options and discretions available under relevant Union law with direct applicability within the Member States participating in the SSM, with the exception of Member States in close cooperation. The ECB could exercise these options and discretions only where they are entrusted not to Member States but to the competent authority – a role which, according to Article 9(1) of the SSM Regulation, is now exercised by the ECB for significant institutions. Another example is Article 6(7), which enables the adoption of regulations establishing a framework to organise the practical arrangements for the implementation of the interaction between the ECB and the NCAs within the SSM and which has been used, most importantly, for the SSM Framework Regulation (Regulation (EU) No 468/2014). These examples show some parallels with the ECB’s competence to adopt regulations within the area of monetary policy. The ECB may also only adopt regulations for specific fields of monetary policy, unlike the EU legislator which, once it is conferred a competence, is normally granted the choice of the most appropriate legal instrument to adopt. In the case of ECB regulations, publication in the Official Journal of the EU is mandatory for them to enter into effect (Article 297(2) of the TFEU and Article 17.7 of the ECB Rules of Procedure).
2.3 ECB Decisions
Different types of “decisions”
As in the rest of the Treaty, the word “decision” has three different connotations:
- First – and this is the narrowest meaning – the term is used in the same sense as in Articles 288(4) and 132(1), second indent, of the TFEU and Article 34.1, second indent, of the Statute of the ESCB. In other words, it describes an act which is intended to create legal effects which are case-specific and sometimes limited to specific addressees, rather than applicable in general – this constitutes the main difference from a regulation. This is the meaning of the word “decision” which is the focus of the present discussion.
- Second, the term is used in Article 26(8) of the SSM Regulation to describe the decision-making process within the SSM. In this sense, “decision” is a generic term that encompasses any act which must be adopted by the Governing Council of the ECB upon a proposal from the Supervisory Board. This decision-making procedure applies to all measures involving an assessment connected to the exercise of the tasks conferred on the ECB by the SSM Regulation, unless a decision-making power has been delegated to heads of business areas within the ECB – again, by the Governing Council upon a proposal from the Supervisory Board, to whom the act adopted under delegation is attributed. This second meaning includes all decisions under the first bullet point, but also goes well beyond this; the adoption of an ECB Regulation in the area of supervision, for instance, would also be a supervisory “decision” in this sense.
- Finally, in the broadest possible sense and in the sense which is closest to non-technical common usage, the word “decision” is, within the ECB, sometimes also used for any kind of resolution made by bodies of the ECB. These “decisions” need not necessarily have legal effect towards parties outside the ECB, but they are binding for the institution and the body that has adopted them. For example, certain letters to banks are decided on by the Supervisory Board of the ECB in its meetings without these letters being sent through a non-objection procedure. Such “decisions” on the text of letters sent to banks are not legal acts (and not “decisions” in the present sense) but rather tools for the execution of supervisory tasks (Article 26(1) of the SSM Regulation).
As mentioned above, the first meaning of the word “decision”, that corresponding to Articles 288(4) and 132(1), second indent, of the TFEU, is the meaning on which the present discussion will focus. In this sense, a decision is characterised by its binding legal effect, which it has in common with a regulation. The primary difference between the two lies in their scope of application. While regulations are generally applicable, decisions without addressees apply only to a specific object. Decisions, moreover, come in two varieties, either as decisions with specified addressees or decisions without addressee yet addressing a specific issue (see below).
Decisions with addressees
A decision with addressees must specify these addressees unambiguously and is binding only on them. For this reason, it is the usual form of legal act used by the ECB to carry out its supervision in concrete individual cases. Supervisory measures imposing requirements on supervised entities, or conversely granting a permission required under applicable law, for example, almost always take the form of a decision with addressee. For this reason, it can be thought of as analogous to case-specific, legally binding forms of legal acts in national administrative law systems, e.g. the Verwaltungsakt in Germany, the acte administratif in France, or the Bescheid in Austria. Owing to its legally binding nature, the decision with addressee is challengeable before the Union courts, usually by means of an action for annulment under Article 263 of the TFEU. The specified addressees have automatic standing for such an action, while (non-privileged) non-addressees do so only if they can demonstrate that they are directly and individually affected by it. Such decisions must be notified to their addressees.
Decisions without addressees
The decision without addressee is also binding, but it cannot be used to directly affect the legal situation of a given party, e.g. a supervised entity, for which purpose a decision addressed to that entity would be needed. It is the appropriate legal form to define, with legal effect, a case which affects more than the situation of a particular party while establishing binding rules for the ECB in the conduct of certain tasks. It is often used to establish organisational arrangements in a legally sound manner, e.g. the Administrative Board of Review and its procedure or the internal separation between the supervisory and the monetary policy functions of the ECB (see below). There is, therefore, a certain overlap with the scope of application for regulations, the only difference being the internally binding nature of the decisions without addressees.
The ECB has already adopted several such decisions without addressees in the context of the SSM, some of which have been published in the Official Journal. This list shows that the majority of such decisions without addressees are of an institutional nature.
- A decision on the establishment of an Administrative Board of Review.
- A decision amending the ECB’s Rules of Procedure in the light of the ECB’s supervisory tasks.
- A decision on the close cooperation with the national competent authorities of participating Member States whose currency is not the euro.
- A decision on the appointment of representatives of the ECB to the Supervisory Board.
- Decisions on the provision to the ECB of supervisory information reported to the national competent authorities.
- A decision on the implementation of separation between the monetary policy function and the supervisory function.
- A decision on public access to ECB documents in the possession of the national competent authorities.
- A decision on the disclosure of confidential information in the context of criminal proceedings.
- A decision on principles for performance feedback to national competent authority sub-coordinators.
- Decisions on the delegation of certain decision-making powers related to supervisory tasks.
2.4 ECB Instructions and guidelines
National competent authorities are responsible for assisting the ECB, where appropriate, with the preparation and implementation of any acts relating to the ECB’s supervisory tasks. To this end, the SSM Regulation gives the ECB the power to adopt guidelines and instructions addressed to national competent authorities.
Such guidelines and instructions are not legal acts (because they are not included in the catalogue of legal acts defined in Article 132(1) of the TFEU and Article 34.1 of the Statute of the ESCB), but they are legal instruments and are binding on the national competent authorities to which they are addressed.
More specifically, ECB instructions exist in two variants. They can be case-specific or general, i.e. relating not to an individual case but to a particular subject and applying in all relevant future cases.
Case-specific ECB Instructions
Case-specific instructions command the national competent authority to take a particular course of action with regard to an individual case. The instruction can, most importantly, order the adoption of a national decision or other administrative act by the national competent authority, making use of a power available to it (but not to the ECB) under the relevant national law. These instructions, which are analogous to intra-Eurosystem instructions pursuant to Article 14.3 of the Statute of the ESCB in the realm of monetary policy, have their legal basis in Article 9(1), third sub-paragraph, of the SSM Regulation, as further specified in Article 22 of the SSM Framework Regulation. The ECB may also adopt instructions addressed to the national competent authority of a Member State in close cooperation within the meaning of Article 7(1) of the SSM Regulation. The instructions are binding on the national competent authority to which they are addressed; this can be concluded from the word “require” in the legal basis cited, which denotes the creation of a binding obligation. They must be notified to their addressees (Article 17a.3 of the ECB Rules of Procedure).
General ECB Instructions
In addition, instructions can be general, i.e. not relating to an individual case but rather to a subject, to be applied in all future cases in which the issue governed by the instruction arises. In this case, the instruction is of a general nature. Such general instructions, normally addressed to only one NCA, contain the general framework and the main rules to be implemented by the national competent authorities.
Article 6(5)(a) of the SSM Regulation explicitly empowers the ECB to adopt general instructions governing the supervision of less significant institutions by the national competent authorities. This is consistent with the principle that carrying out specific supervisory tasks for less significant institutions is the responsibility of the national competent authorities, including the adoption of supervisory decisions, with the exception of licencing and the qualifying holding regime (Article 6(6) of the SSM Regulation). The ECB exercises general oversight over the functioning of the system (Article 6(5)(c) of the SSM Regulation) but does not intervene in individual cases, with the caveat that it can take over direct supervision entirely where necessary (Article 6(5)(b) of the SSM Regulation). The SSM Regulation therefore only allows the ECB to issue case-specific instructions to significant institutions for which it is directly competent, or in the case of close cooperation, while limiting it to general instructions for less significant institutions. Nonetheless, within their scope of application general instructions are also binding on the national competent authorities to which they are addressed; they are not mere “soft law” instruments. They can thus be seen as an embodiment of the idea, emphasised by the European Court of Justice, that the ECB has been conferred exclusive competences as regards the tasks listed in Article 4(1) of the SSM Regulation for the prudential supervision of less significant institutions as well, and that the activities of the national competent authorities in this regard are a case of assistance provided by them to the ECB rather than an exercise of an inherently national competence.
ECB Guidelines, which are addressed to all national competent authorities, are also of a general rather than case-specific nature, yet are nonetheless binding on their addressees. The line between general instructions and guidelines is therefore not easy to establish, and practical experience in the adoption of general instructions is limited. However, it can be argued that the main difference lies in the fact that guidelines are of a quasi-regulatory nature. Even though they do not impose obligations directly on third parties other than national competent authorities (in particular not on credit institutions), they do govern a particular area in a general manner, applying to all national competent authorities and prescribing in an abstract way what is entailed in the performance of the activities governed by the guidelines. General instructions, on the other hand, can be addressed to one or a subset of national competent authorities and in response to a narrow supervisory topic, such as a pressing need to take action which has arisen, but applying to all less significant institutions subject to the supervision of these authorities and which find themselves in the situation envisaged by the general instruction.
The ECB has to date adopted and published several ECB Guidelines:
- Guideline (EU) 2015/856 of the ECB of 12 March 2015 laying down the principles of an Ethics Framework for the Single Supervisory Mechanism (ECB/2015/12), (OJ L 135, 2.6.2015, p. 29).
- Guideline (EU) 2016/256 of the ECB of 5 February 2016 concerning the extension of common rules and minimum standards to protect the confidentiality of the statistical information collected by the ECB assisted by the national central banks to national competent authorities of participating Member States and to the ECB in its supervisory functions (ECB/2016/1), (OJ L 47, 24.2.2016, p. 16).
- Guideline (EU) 2016/1993 of the ECB of 4 November 2016 laying down the principles for the coordination of the assessment pursuant to Regulation (EU) No 575/2013 of the European Parliament and of the Council and the monitoring of institutional protection schemes including significant and less significant institutions (ECB/2016/37), (OJ L 306, 15.11.2016, p. 32).
- Guideline (EU) 2016/1994 of the ECB of 4 November 2016 on the approach for the recognition of institutional protection schemes for prudential purposes by national competent authorities pursuant to Regulation (EU) No 575/2013 of the European Parliament and of the Council (ECB/2016/38), (OJ L 306, 15.11.2016, p. 37).
- Guideline (EU) 2017/697 of the ECB of 4 April 2017 on the exercise of options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/9), (OJ L 101, 13.4.2017, p. 156).
In any case, it is imperative to distinguish between guidelines of the ECB and those issued by the EBA under Article 16 of the EBA Regulation (Regulation (EU) No 1093/2010). In spite of the use of the same label, these EBA guidelines are not legally binding; they are soft law instruments addressed by the EBA to competent authorities (the ECB being one of them) which carry only a comply-or-explain obligation.
Since ECB Guidelines, like general instructions, are not addressed to credit institutions, they cannot have any binding legal effect on such institutions. They are, however, binding upon the national competent authorities. In addition to this, and in line with the principle of harmonious interpretation, one would expect the national competent authorities not only to faithfully implement the guidelines but also to interpret and apply their respective national law in a manner which gives the best possible effect to the guidelines. There are no obligations under Union law to publish ECB Guidelines; they only need to be notified to their addressees (Article 17a.2 of the ECB Rules of Procedure for guidelines adopted under Articles 4(3) and 6(5)(a) of the SSM Regulation and Article 17.2 of the ECB Rules of Procedure for guidelines adopted on different legal bases). However, in line with the transparency obligation of EU public institutions, the ECB has published parts of the ECB Guidelines which are of interest to the general public. This, in turn, enhances the transparency of the activities of European banking supervision.
3 Non-legally binding legal acts, instruments and documents
3.1 General remarks
In addition to the legal acts and binding instruments described above, the ECB may also make public any non-binding instruments or documents for the purpose of providing transparency to supervised entities and the general public. In doing so, the ECB shall ensure that such instruments are not perceived as having any binding effect on third parties. It is noted that instruments and policy documents published on the ECB’s website, while not imposing any obligations on third parties, do bind the ECB and therefore create legitimate expectations as to how European banking supervision will perform its supervisory tasks. To the extent it has created legitimate expectations the ECB is bound to act accordingly.
3.2 ECB Recommendations
ECB Recommendations are legal acts without binding effect. They are normally adopted by the Governing Council. ECB Recommendations may be published in the Official Journal, in which case they are published in all official EU languages. There are two types of ECB Recommendation.
First, ECB Recommendations can be the instrument by which the ECB recommends legislative procedures at the Union level, leading to the enactment of complementary legislation. Although recommendations of this type may be adopted in relation to legislation relating to the ECB’s supervisory tasks, this contribution to the legislative activity is not intrinsically linked to the exercise of the ECB’s supervisory powers.
Second, ECB Recommendations can also be used by the ECB to recommend actions to be taken. In the execution of its supervisory tasks, the ECB has made use of this type of recommendation on a number of occasions to provide credit institutions with a series of recommendations on dividend distribution policies. To date, dividend distribution is the only topic on which the ECB has issued recommendations addressed to all credit institutions. The ECB has also addressed national competent authorities in a recommendation on common specifications for the exercise of some options and discretions available under Union law by national competent authorities in relation to less significant institutions. All of the aforementioned ECB Recommendations have been published in the Official Journal.
3.3 Supervisory disclosure obligations
Directive 2013/36/EU requires competent authorities responsible for banking supervision to disclose the texts of laws, regulations, administrative rules and general guidance adopted in their Member State in the field of prudential requirements, as well as the manner of exercise of the options and discretions available in Union law, the general criteria and methodologies of the Supervisory Review and Evaluation Process (SREP) and aggregate statistical data on key aspects of the implementation of the prudential. In keeping with these rules, the ECB makes public information on rules and guidance, options and national discretions, the SREP and aggregate statistical data on its Banking Supervision website.
The ECB applies all relevant Union law and all the implementing relevant laws and regulations of the Member States whose currency is the euro or whose currency is not the euro but which have established a close cooperation. In view of the large number of relevant laws and regulations applicable, the ECB’s website refers to the website of the EBA for information on these laws and regulations. The EBA lists on its website the national laws and regulations adopted by each EU Member State to implement the provisions of CRD IV and the CRR, the administrative rules, e.g. instructing supervised banks on how to comply with legislative and regulatory requirements, and general guidance, e.g. explicit disclosure requirements under CRD IV, or any other information that supervisory authorities publish to increase understanding of the new capital adequacy framework. The ECB also refers to the EBA’s website regarding the manner of exercise of the options and discretions available under Union law. Additionally, the ECB has adopted and published on its website a Regulation and a Guide on the ECB’s exercise of options and discretions available under Union law.
The ECB has made available on its website specific information about the SREP, both for significant institutions and for less significant institutions. This information includes year-by-year descriptions of the methodology used for the supervisory review and aggregate statistical data. It also publishes on its website aggregate statistical data on the financial sector, market risk, operational risk, supervisory measures and administrative penalties as well as waivers.
3.4 Policy documents
In addition to disclosing those instruments typically made public as part of the supervisory disclosure requirements, the ECB, in an ongoing effort to provide transparency to supervised entities and the general public, also publishes different types of policy documents, which are not legal acts and are not legally binding on third parties, with the purpose of clarifying supervisory practices and expectations and ensuring the consistent application and equal treatment of supervised entities. Such policy documents have differing names, including “Policy stance”, “Guidance”, “Joint Supervisory Standard”, “Methodology”, “Guide” or “Letter”. These policy documents are to be distinguished from non-binding ECB legal acts such as recommendations.
Apart from the letters to Members of the European Parliament from either the President of the ECB or the Chair of the Supervisory Board, of which there have been over 160 to date, these various policy documents can be divided into three further broad categories: guides, reports and letters to CEOs of credit institutions.
The ECB has published guides and guidance on a number of different topics. Guides typically aim to ensure consistency between and equal treatment of significant credit institutions, for instance by setting out the details of processes applied by the ECB in the exercise of its supervisory tasks (see as an example the Guide to assessments of licence applications, the Guide to internal models, the Guides to the internal liquidity adequacy assessment process (ILAAP) and the internal capital adequacy assessment process (ICAAP), the Guide to on-site inspections and internal model investigations and the Guide to fit and proper assessments). Generally speaking, the ECB will make use of “Guides” or “Guidance” where its policy objective is to provide transparency to credit institutions either on how the ECB intends to apply the relevant Union law or to describe the details of processes applied by the ECB in carrying out its supervisory tasks, as well as how it would expect a prudent credit institution to act in view of relevant Union law. It may be expected that, with the initial phase of the SSM behind it, future ECB publications on its supervisory policies would increasingly be labelled with names such as “Guide” or “Guidance”. Guides or guidance cannot and should not aim to create new obligations or requirements on credit institutions. Similarly, such documents should not appear to exclude any different application of relevant Union law in specific cases. Accordingly, the wording and context, its substance and the intention of the ECB should not produce any legal effect on credit institutions.
The ECB also publishes reports, such as the Report on recovery plans, the Report on the Thematic Review on effective risk data aggregation and risk reporting, the SSM thematic review on profitability and business models or the ECB Annual Report on supervisory activities. These documents aim to inform the general public of supervisory activities performed by the ECB or lessons learned from such supervisory activities. Such documents are typically purely descriptive in nature and follow either a specific supervisory exercise or activity. With the notable exception of the ECB Annual Report on supervisory activities, these reports are normally produced only once.
Finally, the ECB publishes letters to CEOs of credit institutions, providing transparency to the general public on the existing supervisory practices or supervisory tasks performed. Typically, letters to CEOs of credit institutions are addressed to all credit institutions and contain general, non-confidential information relevant for all credit institutions or a large portion of them. Examples of such letters are the “Announcement letter to institutions on the launch of the validation reporting on internal models for credit risk” of 5 March 2019, the “Letter on variable remuneration policy” which has been sent to credit institutions on a more or less yearly basis and recalls the importance of a sound remuneration policy and the expectation that credit institutions take into account future legislation when determining remuneration policies. Only non-confidential letters to credit institutions are made public, and usually only those letters that are addressed to or relevant for all credit institutions. Occasionally, a letter to one specific credit institution is made public, for instance the letter to Dexia of 27 November 2017containing an ECB Decision permitting Dexia Crédit Local S.A., on the basis of the consolidated situation of Dexia S.A., to include in Common Equity Tier 1 the instruments issued as a result of the conversion of the preferred shares into ordinary shares. Letters to CEOs may also merely contain information on upcoming publications or supervisory exercises. Examples of such letters are the letter on Validation reporting on internal models for credit risk of 5 March 2019 or the letter with a Status update on TRIM: overview of outcome of general topics review and interim update on preliminary results of credit risk on-site investigations of 15 June 2018.
Although most of the documents made public by the ECB in the exercise of its supervisory tasks can be placed in one of the broad categories listed above, not all such documents fit perfectly into one of these categories. A case in point would be the SSM thematic review on profitability and business models of September 2018, which is labelled as a “report” but at the same time contains certain supervisory expectations.
4 Distinguishing between binding and non-binding instruments
In its supervisory capacity the ECB is to execute the policy devised by the Union legislator, the Commission and the EBA. The ECB may adopt the necessary regulations to organise or specify the arrangements required for it to carry out the tasks conferred on it by the SSM Regulation. The ECB is prevented from adopting rules of general application imposing prudential requirements on credit institutions. Similarly, the ECB cannot regulate fields which the legislator has, for the time being, decided not to harmonise, nor can it complement Union law when the latter leaves options or discretions to the national legislature or to the financial institutions themselves. The power to act by adopting rules of general application on these matters lies with the Union legislator, together with the Commission and the EBA, as appropriate, in accordance with the Treaties.
In practice, the distinction between rules of general application on the one hand, and providing transparency on the consistent application of relevant Union law and equal treatment on the other hand, may not always be apparent. For instance, a guide setting out supervisory expectations regarding the implementation of a specific provision under Union law may be perceived as binding by its addressees if that Guide does not make explicit that such expectations will always be assessed against all the relevant circumstances of an individual case and will be adjusted where appropriate. This distinction must nevertheless be made on the basis of the content of a document as well as its title, as the jurisprudence of the ECJ makes clear that the content of a document, and not its form or designation, determines its legal effect and whether it can be challenged.
Therefore, the distinction between legally binding acts containing prudential requirements, on the one hand, and non-binding legal acts and documents, on the other, needs to be carefully applied by the ECB when adopting legal acts or when publishing policy documents. This is not only a question of legal certainty for the intended addressees of an instrument but can also be of crucial relevance in litigation, since case-law (including a ruling against an ECB policy document) has made it clear that acts with legal effects are subject to actions for annulment and may imply liability on the part of the ECB, irrespective of how they are titled.
In order to determine whether an act has legal effects, the wording and context of the act in question as well as its content are examined by the European Court of Justice. Measures producing legal effects likely to affect an addressee's interests by clearly altering its legal position constitute acts or decisions open to challenge by an application for annulment, no matter what their title, name or qualification.
In addition, the Court has consistently held that the binding legal effects of a measure must be assessed in accordance with objective criteria, such as the contents of that measure, taking into account, as appropriate, the context in which it was adopted, and the powers of the institution which adopted the measure. In extreme cases, this objective assessment can lead to an admissible action for annulment even against acts which were not subjectively intended to be binding by the adopting institution.
Against this background, the ECB, when publishing non-binding documents, either in the form of legal acts (recommendations) or in the form of policy documents, must ensure that they cannot be considered as legally binding by any interested party and that they should not have effects that modify the legal rights of a third party. This is particularly difficult in this context, in which markets have an impact on individual positions, and in which the markets react to ECB/SSM communications, even though they are not meant to be binding but rather only a clarification or preannouncement of the policy which will be applied in the future.
The ECB may adopt a wide range of legal instruments in the exercise of its supervisory tasks, and has also has regularly published non-legal acts to further clarify its position.
The ECB may adopt a number of legally binding legal acts for the purpose of exercising its supervisory powers and its supervisory discretion. The ECB has some regulatory powers to fulfil its supervisory tasks, but it can only exercise them within the scope granted to it by the legislator; it cannot legislate to amend or deviate from the Single Rulebook, or enact new legislation in the form of generally applicable regulations. By adopting legal acts, legal instruments or by disclosing documents, the ECB can, however, bind its discretion with a view to the principle of self-commitment. On the other hand, the ECB is mandated to adopt individual supervisory decisions addressed to credit institutions, and it does so on a continuous basis. In addition, the ECB has adopted decisions without addressees, mainly to further organise the functioning of the SSM. The ECB may also also adopt non-binding legal acts, primarily consisting of recommendations to banks and NCAs.
An important tool for banking supervisors, and also for the ECB in the exercise of its supervisory tasks, is the disclosure of non-binding policy documents to provide transparency on supervisory practices and expectations towards credit institutions. These policy documents are not legal acts and are therefore to be distinguished from recommendations. The ECB has made public a large number of such policy documents on its website and is expected to continue to make use of this useful and practical tool. Considering that there may be only a very fine line between adopting rules of general application, on the one hand, and providing transparency on the consistent application of relevant Union law and equal treatment, on the other, the ECB must give due consideration to the limitations of such documents and make adequate efforts to be clear on the non-binding nature of its stances in this respect. Policy documents should not appear to contain rules of general application, in either title or content, as the content of a document and not its name determines its legal effect and whether it can be challenged.
- Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).
- It corresponds, in substance, to Article 132(1) TFEU, which, in turn, constitutes a specification of the general catalogue of Union legal acts in Article 288 TFEU. Not all legal acts listed in the latter are also included in Article 132(1) TFEU and Article 34.1 of the Statute of the ESCB; in particular, the omission of directives makes it clear that the ECB is not empowered to adopt this type of legal act.
- ECB Opinions will not be discussed and further in this article. Although ECB Opinions may be adopted in relation to draft legislation relating to the supervision of credit institutions, they are not intrinsically linked to the exercise of the ECB’s supervisory powers.
- It would therefore appear that ECB Regulations are “regulatory acts” as opposed to “legislative acts” in the dichotomy developed by case-law for the purposes of Article 263(4) of the TFEU. See Case C-583/11 P Inuit Tapiriit Kanatami and Others v Parliament and Council, ECLI:EU:C:2013:625.
- This difference is visible in the field of banknotes and coins: while the rules on coins are adopted in the form of a regulation, the rules on the reproduction of banknotes had to be adopted via a decision as the Statute does not allow the ECB to adopt regulations in the field of banknotes.
- Since the Treaty of Lisbon this distinction has been explicitly codified in Article 288(4) of the TFEU, but it was common practice even before.
- This follows also from Article 17a.4 of the ECB Rules of Procedure. In addition to the addressees, and according to Article 24(5) of the SSMR, persons to whom the decision is of “direct and individual concern” may also request a review of a decision.
- Decision of the ECB of 14 April 2014 concerning the establishment of an Administrative Board of Review and its Operating Rules (ECB/2014/16), (OJ L 175, 14.6.2014, p. 47).
- Decision (EU) 2016/1717 of the ECB of 21 September 2016 amending Decision ECB/2004/2 adopting the Rules of Procedure of the ECB (ECB/2016/27), (OJ L 258, 24.9.2016, p. 17).
- Decision of the ECB of 31 January 2014 on the close cooperation with the national competent authorities of participating Member States whose currency is not the euro (ECB/2014/5), (OJ L 198, 5.7.2014, p. 7).
- Decision of the ECB of 6 February 2014 on the appointment of representatives of the ECB to the Supervisory Board (ECB/2014/4), (OJ L 196, 3.7.2014, p. 38).
- Decision of the ECB 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, p. 34); Decision (EU) 2017/1493 of the ECB of 3 August 2017 amending Decision ECB/2014/29 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/2017/23), (OJ L 216, 22.8.2017, p. 23); and Decision (EU) 2017/1198 of the ECB of 27 June 2017 on the reporting of funding plans of credit institutions by national competent authorities to the ECB (ECB/2017/21), (OJ L 172, 5.7.2017, p. 32).
- Decision of the ECB of 17 September 2014 on the implementation of separation between the monetary policy and supervision functions of the ECB (ECB/2014/39), (OJ L 300, 18.10.2014, p. 57).
- Decision (EU) 2015/811 of the ECB of 27 March 2015 on public access to ECB documents in the possession of the national competent authorities (ECB/2015/16), (OJ L 128, 23.5.2015, p. 27).
- Decision (EU) 2016/1162 of the ECB of 30 June 2016 on disclosure of confidential information in the context of criminal investigations (ECB/2016/19), (OJ L 192, 16.7.2016, p. 73).
- Decision (EU) 2017/274 of the ECB of 10 February 2017 laying down the principles for providing performance feedback to national competent authority sub-coordinators and repealing Decision (EU) 2016/3 (ECB/2017/6), (OJ L 40, 17.2.2017, p. 72).
- Decision (EU) 2017/933 of the ECB of 16 November 2016 on a general framework for delegating decision-making powers for legal instruments related to supervisory tasks (ECB/2016/40), (OJ L 141, 1.6.2017, p. 14); Decision (EU) 2017/934 of the ECB of 16 November 2016 on the delegation of decisions on the significance of supervised entities (ECB/2016/41), (OJ L 141, 1.6.2017, p. 18); Decision (EU) 2017/935 of the ECB of 16 November 2016 on delegation of the power to adopt fit and proper decisions and the assessment of fit and proper requirements (ECB/2016/42), (OJ L 141, 1.6.2017, p. 21), Decision (EU) 2017/936 of the ECB of 23 May 2017 nominating heads of work units to adopt delegated fit and proper decisions (ECB/2017/16), (OJ L 141, 1.6.2017, p. 26); Decision (EU) 2018/228 of the ECB of 13 February 2018 amending Decision (EU) 2017/936 nominating heads of work units to adopt delegated fit and proper decisions (ECB/2018/6), (OJ L 43, 16.2.2018, p. 18); Decision (EU) 2018/228 of the ECB of 13 February 2018 amending Decision (EU) 2017/936 nominating heads of work units to adopt delegated fit and proper decisions (ECB/2018/6), (OJ L 43, 16.2.2018, p. 18); Decision (EU) 2018/546 of the ECB of 15 March 2018 on delegation of the power to adopt own funds decisions (ECB/2018/10), (OJ L 90, 6.4.2018, p. 105); Decision (EU) 2018/547 of the ECB of 27 March 2018 nominating heads of work units to adopt delegated own funds decisions (ECB/2018/11), (OJ L 90, 6.4.2018, p. 110).
- Court of Justice, Judgment of 8 May 2019, Case C-450/17 P Landeskreditbank Baden-Württemberg - Förderbank v European Central Bank, ECLI:EU:C:2019:372, paras. 38-41.
- Unlike the other guidelines in this list, this particular one was adopted on the basis of a special decision-making procedure in Article 6(7) of the SSM Regulation, rather than the non-objection procedure under Article 26(8) of the SSM Regulation which is the usual procedure for the adoption of instruments in the area of banking supervision. The reason behind this is that the non-objection procedure does not apply to the general framework under which supervisory decisions are taken, like the organisational framework referred to in Article 6(7) of the SSM Regulation; see recital (6) of Decision ECB/2014/1.
- See for instance Case T-374/04 Germany v Commission, paragraph 111.
- Article 17.4 of the ECB Rules of Procedure states that ECB recommendations shall be adopted by the Governing Council or the Executive Board in their respective domain of competence, and shall be signed by the President.
- The ECB has adopted a Recommendation for a Council Regulation amending Regulation (EC) No 2532/98 concerning the powers of the ECB to impose sanctions (ECB/2014/19), (OJ C 144, 14.5.2014, p. 2).
- Recommendation of the European Central Bank of 28 January 2015 on dividend distribution policies (ECB/2015/2) (OJ C 51, 13.2.2015, p. 1.); Recommendation of the ECB of 17 December 2015 on dividend distribution policies (ECB/2015/49), (OJ C 438, 30.12.2015, p. 1.); Recommendation of the ECB of 13 December 2016 on dividend distribution policies (ECB/2016/44) (OJ C 481, 23.12.2016, p. 1.); Recommendation of the ECB of 28 December 2017 on dividend distribution policies (ECB/2017/44) (OJ C 8, 11.1.2018, p. 1.); and Recommendation of the ECB of 7 January 2019 on dividend distribution policies (ECB/2019/1) (OJ C 11, 11.1.2019, p. 1).
- Recommendation of the European Central Bank of 4 April 2017 on common specifications for the exercise of some options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/10), (OJ C 120, 13.4.2017, p. 2).
- 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, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).
- Regulation (EU) 2016/445 of the ECB of 14 March 2016 on the exercise of options and discretions available in Union law (ECB/2016/4), (OJ L 78, 24.3.2016, p. 60) and ECB Guide on options and discretions available in Union law of November 2016.
- Report on recovery plans of July 2018.
- Report on the Thematic Review on effective risk data aggregation and risk reporting of May 2018.
- SSM thematic review on profitability and business models, Report on the outcome of the assessment, September 2018.
- See for instance Commission v Council, 22/70, paragraph 39 and Athinaïki Techniki v Commission, Case C‑521/06, paragraphs 43 and 45. As the General Court recalled in its judgment in United Kingdom v ECB Case T-496/11, paragraph 30, case-law is intended to prevent the form or designation given to the act by its author from allowing that act to escape judicial review even though it does, in fact, have legal effects.
- Judgement of 23 April 1986, Parti écologiste “Les Verts” v Parliament, 294/83, ECLI:EU:C:1986:166. Judgment of 4 March 2015, T-496/11, United Kingdom v ECB, ECLI:EU:T:2015:133.
- See e.g. judgment of 20 March 1997, France v Commission, C-57/95, EU:C:1997:164, paragraph 18.
- See e.g. judgments of 9 October 1990, France v Commission, C-366/88, EU:C:1990:348, paragraph 11; of 13 November 1991, France v Commission, C-303/90, EU:C:1991:424, paragraph 10; and of 20 March 1997, France v Commission, C-57/95, cited above, paragraph 9.
- See inter alia the judgment of 11 November 1981 in Case 60/81 IBM v Commission  ECR 2639, paragraph 12.
- Judgment of 11 November 1981, C-60/81, IBM v Commission ECLI:EU:C:1981:264, paragraph 9; and judgment of 20 March 1997, C-57/95 France v Commission, ECLI:EU:C:1997:164, paragraph 9.
- Order of 13 June 1991, C-50/90, Sunzest v Commission, ECLI:EU:C:1991:253, paragraph 13, and judgment of 26 January 2010, C-362/08 P, Internationaler Hilfsfonds v Commission, ECLI:EU:C:2010:40, paragraph 58.
- Judgment of 1 December 2005, C-301/03, Italy v Commission, ECLI:EU:C:2005:727, paragraph 28.
- Judgment of 4 March 2015, T-496/11, United Kingdom v ECB, ECLI:EU:T:2015:133.