CELEX: 62021CJ0389
Appeal
Economic and monetary policy
Prudential supervision of credit institutions
Regulation (EU) No 575/2013
Calculation of the leverage ratio
Exposure measure
Article 429(14)
Exclusion of exposures meeting certain conditions
Partial refusal of authorisation
Discretion of the European Central Bank (ECB)
Action for annulment
Manifest error of assessment
Judicial review

By its appeal, the European Central Bank (ECB) asks the Court to set aside the judgment of the General Court of the European Union of 14 April 2021,
Crédit lyonnais
v
ECB
(T‑504/19, EU:T:2021:185; ‘the judgment under appeal’), by which the General Court upheld Crédit lyonnais’s action for annulment of Decision ECB-SSM-2019-FRCAG-39 of the European Central Bank (ECB) of 3 May 2019 (‘the decision at issue’), adopted pursuant to Article 4(1)(d) and  Article 10 of 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 2013 L 287, p. 63) and Article 429(14) of 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 2013 L 176, p. 1), as amended by Commission Delegated Regulation (EU) 2015/62 of 10 October 2014 (OJ 2015 L 11, p. 37) (‘Regulation No 575/2013’), in so far as that decision refuses to authorise Crédit lyonnais to exclude certain exposures from the calculation of its leverage ratio.

Legal context

Regulation
No 5
75/2013,
Recitals 90, 91 and 94 of Regulation No 575/2013 state as follows:
‘(90)      The years preceding the financial crisis were characterised by an excessive build up in institutions’ exposures in relation to their own funds (leverage). During the financial crisis, losses and the shortage of funding forced institutions to reduce significantly their leverage over a short period of time. This amplified downward pressures on asset prices, causing further losses for institutions which in turn led to further declines in their own funds. The ultimate results of this negative spiral were a reduction in the availability of credit to the real economy and a deeper and longer crisis.
(91)      Risk-based own funds requirements are essential to ensure sufficient own funds to cover unexpected losses. However, the crisis has shown that those requirements alone are not sufficient to prevent institutions from taking on excessive and unsustainable leverage risk.
…
(94)      A leverage ratio is a new regulatory and supervisory tool for the [European] Union. In line with international agreements, it should be introduced first as an additional feature that can be applied on individual institutions at the discretion of supervisory authorities. Reporting obligations for institutions would allow appropriate review and calibration, with a view to migrating to a binding measure in 2018.’
Article 4(1)(93) and (94) of that regulation provides:
‘For the purposes of this Regulation, the following definitions shall apply:
…
(93)      “leverage” means the relative size of an institution’s assets, off-balance sheet obligations and contingent obligations to pay or to deliver or to provide collateral, including obligations from received funding, made commitments, derivates or repurchase agreements, but excluding obligations which can only be enforced during the liquidation of an institution, compared to that institution’s own funds;
(94)      “risk of excessive leverage”  means the risk resulting from an institution’s vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets’.
Article 116(4) of that regulation provides:
‘In exceptional circumstances, exposures to public-sector entities may be treated as exposures to the central government, regional government or local authority in whose jurisdiction they are established where in the opinion of the competent authorities of this jurisdiction there is no difference in risk between such exposures because of the existence of an appropriate guarantee by the central government, regional government or local  authority.’
Article 412(1) of Regulation No 575/2013 is worded as follows:
‘Institutions shall hold liquid assets, the sum of the values of which covers the liquidity outflows less the liquidity inflows under stressed conditions so as to ensure that institutions maintain levels of liquidity buffers which are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of thirty days. …’
Article 429(2) and (14) of Regulation No 575/2013 provide:
‘2.      The leverage ratio shall be calculated as an institution’s capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.
…
…
14.      Competent authorities may permit an institution to exclude from the exposure measure exposures that meet all of the following conditions:
(a)      they are exposures to a public sector entity;
(b)      they are treated in accordance with Article 116(4);
(c)      they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (a) for the purposes of funding general interest investments.’
Article 429a(1)(j) of Regulation No 575/2013, as amended by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 (OJ 2019 L 150, p. 1) (‘Regulation No 575/2013 as amended’), applicable from 28 June 2021, in accordance with Article 3(2) of Regulation 2019/876, provides:
‘1.      By way of derogation from Article 429(4), an institution may exclude any of the following exposures from its total exposure measure:
…
(j)      exposures that meet all of the following conditions:
(i)      they are exposures to a public sector entity;
(ii)      they are treated in accordance with Article 116(4);
(iii)      they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (i) for the purposes of funding general interest investments’.

Regulation
No 1
024/2013,
Recital 55 of Regulation No 1024/2013 states:
‘The conferral of supervisory tasks implies a significant responsibility for the ECB to safeguard financial stability in the Union, and to use its supervisory powers in the most effective and proportionate way. …’
Article 4(1)(d) and (3) of that regulation provides:
‘1.      Within the framework of Article 6, the ECB shall, in accordance with paragraph 3 of this Article, be exclusively competent to carry out, for prudential supervisory purposes, the following tasks in relation to all credit institutions established in the participating Member States:
…
(d)      to ensure compliance with the acts referred to in the first subparagraph of Article 4(3), which impose prudential requirements on credit institutions in the areas of own funds requirements, securitisation, large exposure limits, liquidity, leverage, and reporting and public disclosure of information on those matters;
…
3.      For the purpose of carrying out the tasks conferred on it by this Regulation, and with the objective of ensuring high standards of supervision, the ECB shall apply all relevant Union law, and where this Union law is composed of Directives, the national legislation transposing those Directives. …’
Under Article 6(1) of that regulation:
‘The ECB shall carry out its tasks within a single supervisory mechanism composed of the ECB and national competent authorities. The ECB shall be responsible for the effective and consistent functioning of the [single supervisory mechanism]’.

Background to the dispute
Crédit lyonnais is a public limited company incorporated under French law and authorised as a credit institution. That credit institution is a subsidiary of Crédit agricole SA, and is, as such, subject to the direct prudential supervision of the ECB.
On 5 May 2015, Crédit agricole, on its own behalf and on behalf of the entities forming part of the Crédit agricole group, including Crédit lyonnais, applied to the ECB for authorisation to exclude the exposures to the Caisse des dépôts et consignations (Deposit and Loans Fund, France) (‘the CDC’), resulting from deposits on Livrets A (Savings Passbooks A), Livrets d’épargne populaire (Popular Savings Passbooks) and Livrets de développement durable et solidaire (Sustainable and Socially Responsible Passbooks), which must, under the applicable French legislation, be transferred to the CDC (together, ‘the regulated savings’) from the exposure measure for the purposes of calculating the leverage ratio.
By decision of 24 August 2016, the ECB refused to grant Crédit agricole the authorisation that it had sought. That decision was annulled by the judgment of 13 July 2018,
Crédit agricole
v
ECB
(T‑758/16, EU:T:2018:472).
On 26 July 2018, Crédit agricole, on its behalf and on behalf of the entities forming part of the Crédit agricole group, including Crédit lyonnais, again applied to the ECB for authorisation to exclude the exposures to the CDC resulting from deposits on regulated savings passbooks from the exposure measure for the purposes of calculating the leverage ratio.
After sending Crédit agricole a draft decision and having received its observations in that regard, on 3 May 2019 the ECB adopted the decision at issue.
By that decision, Crédit agricole and the entities forming part of the Crédit agricole group, with the exception of Crédit lyonnais, were authorised to exclude all of their exposures to the CDC, resulting from deposits on regulated savings passbooks, from the exposure measure for the purposes of calculating the leverage ratio. By contrast, Crédit lyonnais was allowed to exclude only 66%.
In support of that decision, the ECB took the view that the conditions laid down in Article 429(14)(a) to (c) of Regulation No 575/2013 were satisfied in the present case. Taking the view that it had a discretion to grant an exemption under that provision, the ECB applied a methodology that took into account three factors, namely the creditworthiness of the French central government, the risk of fire sales of assets and the level of concentration of exposures to the CDC, resulting from deposits on regulated savings passbooks.
In conclusion, the ECB took the view that the exposures to the CDC of entities subject to its prudential supervision pose a low risk. However, in the case of Crédit lyonnais, it considered, on the basis of the assessment of the three elements of its methodology and, in particular, the deferred adjustment period between the positions of that credit institution and those of the CDC, the high and increasing concentration of the exposures of that credit institution to the CDC linked to  regulated savings and the fact that that credit institution is not covered by the joint and several liability mechanism existing at the Crédit agricole group level, that a balance between the interest in applying a risk-neutral leverage ratio and the interest in exempting certain low-risk exposures justified granting it, for the purposes of calculating that ratio, only a 66% exclusion percentage in respect of its exposures to the CDC.

The action before the General Court and the judgment under appeal
By application lodged at the Court Registry on 12 July 2019, Crédit lyonnais brought an action for annulment of the decision at issue in so far as that decision refuses to authorise Crédit lyonnais to exclude all of its exposures to the CDC, resulting from deposits on regulated savings passbooks, from the exposure measure for the purposes of calculating the leverage ratio.
In support of that action, Crédit lyonnais raised three pleas in law alleging, first, infringement of Article 266 TFEU as a result of the ECB’s failure to comply with the judgment of the General Court of 13 July 2018,
Crédit agricole
v
ECB
(T‑758/16, EU:T:2018:472), second, infringement of Article 429(14) and Article 400(1)(a) of Regulation No 575/2013; and, third, manifest errors of assessment on the part of the ECB.
The General Court rejected the first and second pleas in law, while considering, in paragraph 69 of the judgment under appeal, that it was necessary to examine the argument, set out in the third part of the first plea in law, which concerned the question of whether the assessment carried out by the ECB was consistent with paragraph 81 of the judgment of 13 July 2018,
Crédit agricole
v
ECB
(T‑758/16, EU:T:2018:472), together with the third plea.
In paragraphs 101 to 123 of the judgment under appeal, the General Court examined the first part of the third plea in law, relating to the manifest error of assessment made by the ECB, in the decision at issue, when assessing the risk of fire sales of assets.
In the context of that examination, the General Court, in the first place, noted, in paragraphs 107 to 114 of the judgment under appeal, that regulated savings have certain essential characteristics, namely, first, the ‘safe investment’ status of those savings in the event of a banking crisis, which was not referred to in the decision at issue, second, the existence of a dual guarantee from the French Republic in relation to regulated savings deposits and, third, the fact that those savings are unlikely to contribute to the creation of excessive leverage, given that they must be transferred to the CDC and cannot therefore, unlike other types of bank deposits, be invested in high-risk or illiquid assets.
In the second place, the General Court held, in paragraphs 105 and 115 to 117 of that judgment, that, in the light of the factors set out in paragraphs 107 to 114 of that judgment, the justification for the decision at issue based on the fact that the regulated savings are particularly liquid was not sufficient, in itself, to support the conclusion which the ECB had reached with regard to Crédit lyonnais and according to which, in the present case, there was a risk of fire sales of assets, with the result that the merits of that conclusion depended on the other factor on which the ECB had essentially relied, namely the experience drawn from recent banking crises.
In that regard, the General Court held, in the third place, in paragraphs 118 to 122 of that judgment, that the example taken into account by the ECB in order to conclude that the experience of recent banking crises showed that there had been massive withdrawals did not concern deposits which, in the light of the factors referred to in paragraph 23 of the present judgment, were sufficiently similar to deposits made in respect of regulated savings.
The General Court held, in paragraph 123 of the judgment under appeal, that the first part of the third plea had to be upheld, since the ECB had not taken into account, when assessing the risk of fire sales of assets, all the characteristics of regulated savings and concluded, in paragraph 124 of that judgment, that the ECB did not ‘correctly comply’ with paragraph 81 of the judgment of 13 July 2018,
Crédit agricole
v
ECB
(T‑758/16, EU:T:2018:472), with the result that the reasoning set out, in that respect, in the third part of the first plea had to be upheld.
In paragraph 125 of the judgment under appeal, the General Court held that the ground of the decision at issue relating to the assessment of the risk of fire sales of assets was therefore vitiated by illegality.
In paragraph 126 of that judgment, it considered, having regard to the methodology applied by the ECB in the decision at issue, that the other grounds of that decision, concerning the creditworthiness of the French central government and the level of concentration of exposures to the CDC, assuming that they were not vitiated by illegality, did not amount to grounds for the refusal issued to Crédit lyonnais by the ECB. On the basis of that methodology, had those grounds alone been taken into consideration, that would not have led, according to the General Court, to a refusal to grant Crédit lyonnais the full benefit of the derogation under Article 429(14) of Regulation No 575/2013.
Consequently, without analysing the arguments relating to the other grounds of the decision at issue, the General Court annulled that decision in so far as the ECB had refused to allow Crédit lyonnais to exclude 34% of its exposures to the CDC, resulting from deposits in regulated savings passbooks, from the exposure measure for the purposes of calculating the leverage ratio.

Forms of order sought by the parties
By its appeal, the ECB submits that the Court should:
–        set aside the judgment under appeal; and
–        order Crédit lyonnais to pay the costs.
Crédit lyonnais contends that the Court should:
–        dismiss the appeal as manifestly unfounded; and
–        order the ECB to pay the costs.

The appeal
The ECB raises four grounds of appeal. The first ground of appeal alleges that the General Court disregarded the limits on the exercise of its judicial review. The second to fourth grounds allege, respectively, infringement of the obligation to state reasons, distortion of the evidence submitted to the General Court and infringement of Article 4(1)(94) and Article 429(14) of Regulation No 575/2013.

Arguments of the parties
By its first ground of appeal, the ECB submits that the General Court disregarded the limits on the exercise of its judicial review.
As a preliminary point, the ECB observes that, where the institutions or the bodies of the European Union enjoy a broad discretion, in particular because of the complex economic assessments which they must undertake, the power of review of the Courts of the European Union is limited. In addition to the absence or inadequacy of the statement of reasons, distortion of the facts, error of law and misuse of powers, the Courts of the European Union can only penalise a manifest error of assessment made by the institution or body in question when adopting the decision referred to them, without, however, substituting their assessment for that of the institution or body.
It is apparent from the wording of Article 429(14) of Regulation No 575/2013 that the competent authorities referred to in that provision enjoy a wide discretion, having regard, in particular, to their technical competence in matters of banking supervision and to the confidential information to which they may have access on that basis. That article provides that, even if the exposures concerned meet the conditions listed therein, the competent authorities may grant or refuse the exclusion from the exposure measure requested by an institution.
In that regard, the General Court, did not show that the ECB’s conclusions were manifestly unfounded in the light of the facts established by the ECB. The truth of the matter is that it based its decision on reasoning other than that put forward by the ECB in support of the decision at issue. Apart from the fact that the reasons given by the General Court are incorrect, the review carried out by that court in the present case amounted to transferring to it the carrying out of complex economic assessments.
Thus, although the ECB had considered, in the decision at issue, that the risk of fire sales of assets, even if it were unlikely, nevertheless existed and that, if it materialised in Crédit lyonnais’s case, it could give rise to significant losses in view of the level of the exposures of that credit institution to the CDC, the General Court concluded, on the basis of its own assessment of certain characteristics of the regulated savings passbooks, that that risk was not established in the case of Crédit lyonnais.  Accordingly, the General Court substituted its own assessment for that made by the ECB.
Such a substitution was made with regard to several grounds of the decision at issue.
First, the ECB criticises the General Court for having held, in paragraphs 107 to 110 of the judgment under appeal, that since regulated savings have ‘safe investment’ status, deposits in regulated savings passbooks were not or were unlikely to be the subject of massive withdrawals by depositors over a short period of time. However, the ECB itself did not disregard the characteristic of ‘safe investment’ in the event of a banking crisis, but concluded that that characteristic did not, in the absence of statutory rules restricting the ability of depositors to make withdrawals, completely eliminate the risk of massive withdrawals.
The ECB takes the view that, although the reasoning in support of the decision at issue was consistent, the evidence on which the General Court relied in the judgment under appeal is not relevant because of its age or general nature, was misinterpreted in that judgment and is not capable of substantiating the findings which that court makes on the basis of that evidence in the judgment.
Secondly, the ECB submits that, in paragraph 113 of the judgment under appeal, the General Court wrongly held that the deposits in the regulated savings passbooks transferred to the CDC by Crédit lyonnais were not capable of giving rise to an excessive leverage risk, even though it had held, in the decision at issue, that that risk, although low, could not be disregarded.
In that regard, the ECB observes that the obligation to transfer to the CDC part of the deposits in regulated savings passbooks is one of the conditions which the exposures must meet, in accordance with Article 429(14)(c) of Regulation No 575/2013, in order to be excluded from the exposure measure for the purposes of calculating the leverage ratio. By considering that that condition was sufficient to eliminate any risk of excessive leverage, the General Court substituted its own assessment for that of the ECB and failed to have regard to the definition of that risk, set out in Article 4(1)(94) of that regulation, which does not refer to the ability to use deposits freely. The ECB takes the view that, in order to determine whether there is a risk of excessive leverage, within the meaning of that provision, it is necessary to determine whether the institution is in a position to honour an obligation on the date on which it must be fulfilled and, if that is not the case, whether it must make fire sales of assets in order to be able to fulfil that obligation. In the present case, a risk of excessive leverage could not have been ruled out in the absence, first, of any certainty that the withdrawals of the sums deposited on the regulated savings passbooks by depositors and the repayment of those sums by the CDC would be simultaneous and, secondly, of statutory rules restricting the right to withdraw those sums.
Thirdly, the ECB notes that the General Court held, in paragraph 122 of the judgment under appeal, that, because of the protection of savings passbooks regulated by a dual guarantee from the French Republic, depositors perceive the level of safety of those passbooks as greater than that of deposits benefiting from the protection of the guarantee mechanism resulting from the transposition of Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ 2014 L 173, p. 149) alone. The General Court considered that that dual guarantee helps to prevent those savings from being the subject of massive withdrawals over a short period of time. However, the ECB had taken the view, in the decision at issue, that that dual guarantee could not entirely prevent the risk of massive withdrawals over such a period of time and that, therefore, that risk had to be taken into consideration for the purposes of assessing an excessive leverage risk.
Fourthly, the ECB submits that the General Court, in paragraph 116 of the judgment under appeal, substituted its own assessment for that of the ECB, finding that the liquidity of the deposits on the regulated savings passbooks contributed to those savings passbooks being a ‘safe investment’ in times of crisis. However, the ECB had taken the view that account had to be taken of the fact that the liquidity of the regulated savings prevented any risk of massive withdrawals over a short period of time being ruled out.
Furthermore, the General Court relied on an extract from the annual report of the observatoire de l’épargne réglementée (Regulated Savings Observatory, France), the content of which does not support the conclusions which the General Court draws from it.
Crédit lyonnais takes the view that the ECB’s arguments are unfounded.
It maintains that the General Court correctly applied the standards of judicial review established by the case-law of the Court of Justice in areas in which the author of the decision whose annulment is sought has discretion. That review implies, according to that case-law, including in the area of monetary policy, verification of compliance with certain procedural requirements, including the obligation to examine carefully and impartially all the elements of the situation in question.
In the judgment under appeal, the General Court found that the ECB, in its analysis of the characteristics of the regulated savings passbooks with a view to assessing the prudential risk associated with Crédit lyonnais’s exposures to the CDC, had clearly relied on factors which were not relevant in that regard and had failed to take into account, or voluntarily disregarded, relevant factors, namely the ‘safe investment’ status of those savings passbooks during a period of crisis, the lack of freedom in the use, by the institution collecting them, of the deposits made on those savings passbooks and the French Republic’s dual guarantee.
Crédit lyonnais disputes the ECB’s arguments put forward against the General Court’s reasoning.
First, Crédit lyonnais submits that the General Court identified a lacuna in the ECB’s reasoning, in that it relied exclusively on the liquidity of deposits made on regulated savings passbooks, without taking into account that those savings passbooks are a ‘safe investment’ during a period of crisis. That they are a safe investment, which the ECB does not dispute, implies that those savings passbooks can only expose the institution which collected those savings to a slight risk of massive withdrawals in the event of a crisis.
Crédit lyonnais further submits that the ECB did not challenge before the General Court the evidence which it had put forward in its action at first instance and which was relied on in the grounds of the judgment under appeal.
Secondly, as regards the assessment of the leverage risk, the General Court was fully entitled to take into account the legislature’s intention, as set out in paragraphs 48 to 51 of the judgment of 13 July 2018, Crédit agricole v ECB (T‑758/16, EU:T:2018:472), and the analyses of the European Banking Authority (‘the EBA’). Furthermore, it merely stated that deposits on regulated savings passbooks are not freely at the disposal of the institutions which collect them.
Thirdly, the General Court merely found, in paragraphs 114 and 122 of the judgment under appeal, with regard to the French Republic’s dual guarantee in favour of deposits on regulated savings passbooks, that the deposit guarantee scheme established by Directive 2014/49 does not have the same characteristics as those of the dual guarantee measure, in particular in terms of savers’ perception of the safety of deposits. The General Court thus considered that the ECB’s reasoning, in so far as it is based exclusively on the scheme established by that directive and does not take into account the French Republic’s dual guarantee, was not relevant for the purpose of assessing the leverage risk to which the sums appearing on the regulated savings passbooks exposed Crédit lyonnais.
Fourth  ly, the General Court, in paragraph 115 of the judgment under appeal, took into account all the evidence submitted to it in the context of the examination of the dispute before it, without erring in law in its interpretation. The ECB, for its part, has not adduced evidence in support of its argument that the liquidity of deposits in regulated savings passbooks creates, in itself, a risk of fire sales of assets. Thus, the General Court took into account, in paragraph 116 of the judgment under appeal, the fact that that liquidity may indeed encourage savers to make withdrawals, but found that there was a lacuna in the grounds of the decision at issue, since that decision is, in that regard, based exclusively on that liquidity and disregards the evidence submitted to the contrary.

Findings of the Court
As the General Court pointed out, in essence, in paragraph 98 of the judgment under appeal, in so far as the ECB has a broad discretion in deciding whether or not to apply  Article 429(14) of Regulation No 575/2013, the judicial review which the Courts of the European Union must carry out of the merits of the grounds of a decision such as the decision at issue must not lead it to substitute its own assessment for that of the ECB, but seeks to ascertain that that decision is not based on materially incorrect facts and that it is not vitiated by a manifest error of assessment or misuse of powers (see, to that effect, judgments of 25 January 1979,
Racke
, 98/78, EU:C:1979:14, paragraph 5; of 18 July 2007,
Industrias Químicas del Vallés
v
Commission
, C‑326/05 P, EU:C:2007:443, paragraph 76; of 11 September 2014,
CB
v
Commission
, C‑67/13 P, EU:C:2014:2204, paragraph 46; and of 11 December 2018,
Weiss and Others
, C‑493/17, EU:C:2018:1000, paragraph 24).
In that regard, it is settled case-law that the Courts of the European Union must, inter alia, establish not only whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the relevant information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (judgments of 26 March 2019,
Commission
v
Italy
, C‑621/16 P, EU:C:2019:251, paragraph 104, and of 11 November 2021,
Autostrada Wielkopolska
v
Commission and Poland
, C‑933/19 P, EU:C:2021:905, paragraph 117).
Where an institution enjoys broad discretion, observance of procedural guarantees is of fundamental importance, including the obligation for that institution to examine carefully and impartially all the relevant aspects of the situation in question (see, to that effect, judgments of 21 November 1991,
Technische Universität München
, C‑269/90, EU:C:1991:438, paragraph 14, and of 11 December 2018,
Weiss and others
, C‑493/17, EU:C:2018:1000, paragraph 30).
In the present case, in order to rule on the merits of the ECB’s assessment relating to the existence of a risk of fire sales of assets, the General Court first of all assessed, in paragraphs 107 to 114 of the judgment under appeal, certain elements relating to the characteristics of regulated savings passbooks, put forward by Crédit lyonnais in its application at first instance, namely their ‘safe investment’ status in the event of a banking crisis, the fact that the institution collecting them could not make free use of the deposits made on those savings passbooks and the dual guarantee of the French Republic which those deposits enjoy.
For the purposes of that assessment, the General Court, in particular, compared the characteristics of deposits on regulated savings passbooks with those of ordinary deposits. It thus held, in paragraphs 111 and 113 of the judgment, that ordinary deposits could be invested in assets which might contribute to the creation of excessive leverage, whereas deposits on regulated savings passbooks were unlikely to contribute to the creation of such leverage.
The General Court then held, in paragraph 115 of the judgment under appeal and in the light of its assessment of the factors set out in paragraphs 107 to 114 of that judgment, that the explanation based on the claim that deposits made on those savings passbooks are particularly liquid could not be found, in itself, to demonstrate that the ECB’s finding that the exposures to the CDC in respect of those deposits posed a risk of fire sales of assets was well founded.
The General Court added, in paragraph 116 of that judgment, that it could be seen from the evidence submitted by Crédit lyonnais that the ECB’s assessment of the impact of the particularly liquid nature of those deposits on the risk of fire sales of assets did not take into consideration the fact that that liquidity also contributed to the ‘safe investment’ status of regulated savings passbooks, in the event of a banking crisis, as did their high level of security.
Lastly, the General Court held, in paragraph 120 of the judgment under appeal, that the example on which the ECB’s conclusion that the exposures to the CDC in respect of deposits on regulated savings passbooks presented a risk of fire sales of assets was based did not involve deposits with characteristics sufficiently close to those of savings passbooks for them to be properly taken into consideration.
In that regard, the General Court held, in paragraph 122 of that judgment, referring to the assessments made in paragraphs 107 to 110 and 114 of that judgment, that the potential  for a massive and sudden withdrawal of those deposits in the event of a crisis was not the same in the case of the deposits taken into consideration by the ECB as examples in the decision at issue.
The General Court concluded, in paragraphs 125 and 126 of the judgment under appeal, that the ground of the decision at issue relating to the level of risk of fire sales of assets was vitiated by ‘illegality’ and, consequently, that the other two elements of the methodology also referred to in paragraph 17 of the present judgment, namely the creditworthiness of the French central government and the level of concentration of Crédit lyonnais’s exposures to the CDC, could not have led the ECB to refuse, in the decision at issue, to grant Crédit lyonnais the benefit of the exclusion provided for in Article 429(14) of Regulation No 575/2013 for the entirety of that credit institution’s exposures to the CDC. Accordingly, in paragraph 127 of the judgment under appeal, it annulled that decision in so far as it refused to exclude 34% of those exposures from the calculation of Crédit lyonnais’s leverage ratio.
It is apparent from the paragraphs of the judgment under appeal referred to in paragraphs 58 to 64 of the present judgment that, in order to justify the partial annulment of the decision at issue, the General Court, first, carried out its own assessment of the characteristics of the regulated savings by finding, in particular, that the ‘safe investment’ status of the regulated savings outweighed the liquidity of those savings and, secondly, found that the ECB had based its reasoning regarding the experience of recent banking crises on an example of the withdrawal of deposits with characteristics that are insufficiently close to regulated savings in that the regulated savings differ from the deposits covered by that example in the lack of freedom of use, by the institution collecting them, of deposits  made on the savings passbooks and by their status as a ‘safe investment’ in the event of a banking crisis linked to the dual guarantee of the French Republic which those deposits enjoy.
The General Court thus considered that the level of risk of fire sales of assets which was apparent from its own assessment of the characteristics of the regulated savings and their cumulative effect was not sufficiently high to justify refusing to exclude all Crédit lyonnais’s exposures to the CDC from the measure of its exposures for the purposes of calculating the leverage ratio.
It must be stated, in the first place, that the General Court did not call into question the ECB’s findings concerning the characteristics of regulated savings, findings which led the ECB to conclude that those characteristics did not make it possible to rule out completely any risk of massive withdrawals which might compel Crédit lyonnais to make fire sales of assets during the deferred adjustment period between its own positions and those of the CDC.
Thus, it is apparent from paragraph 116 of the judgment under appeal that, when assessing the characteristics of the regulated savings, the General Court found that the high liquidity of those savings and the French Republic’s dual guarantee from which the sums deposited on the savings passbooks benefited contributed to conferring on them ‘safe investment’ status in the event of a banking crisis. However, as it submits before the Court of Justice, the ECB had, in the decision at issue, taken into account, in order to assess the risk of fire sales of assets, the characteristics which, according to the General Court, confer on those savings ‘safe investment’ status.
In that regard, it must be pointed out that the General Court did not call into question the ECB’s findings, in the decision at issue, relating to the high liquidity of the regulated savings in the absence of statutory rules limiting withdrawals of those savings and to Crédit lyonnais being under an obligation to reimburse depositors even during the deferred adjustment period between the positions of Crédit lyonnais and those of the CDC.
Consequently, it cannot be held that the reasoning on the basis of which the General Court partially annulled the decision at issue calls into question the material accuracy, reliability and consistency of the factors taken into account in that decision, or establishes that those factors do not constitute all the relevant information which had to be taken into consideration by the ECB in the present case.
In the second place, in so far as the General Court nevertheless concludes that the information taken into account by the ECB was not capable of substantiating the conclusions drawn from it in the decision at issue, it must be held that that finding of the General Court follows from its own assessment of the level of risk of fire sales of assets, an assessment which, while relying on the same factors as those taken into account by the ECB, departs from the assessment made by the ECB without establishing that that assessment was manifestly incorrect.
By reasoning in that way, the General Court did not review the manifest error of assessment as was incumbent on it, in accordance with the case-law referred to in paragraphs 55 to 57 of the present judgment, but substituted its own assessment for that of the ECB in a situation, moreover, in which, that institution enjoys a broad discretion.
Furthermore, as regards the General Court’s assessment, in paragraphs 117 to 122 of the judgment under appeal, of the ECB’s reasoning based on the experience of recent banking crises, the General Court did not establish, in that judgment, how the considerations, referred to in paragraph 121 of that judgment, that regulated savings deposits cannot be invested, unlike the sight deposits referred to in paragraph 118 of that judgment, in risky or illiquid assets, are such as to demonstrate that the ECB’s assessment of the

possible risk of massive withdrawals, which had to be used to analyse the risk of fire sales of assets to which Crédit lyonnais was exposed, was manifestly incorrect. The same is true of the considerations set out in paragraph 122 of that judgment, based on the difference between the dual guarantee of the French Republic enjoyed by regulated savings passbooks and the guarantee mechanism under Directive 2014/49.
It follows that the General Court annulled the decision at issue in so far as it concerned Crédit lyonnais, substituting its own assessment of the risk of fire sales of assets to which Crédit lyonnais was exposed, without establishing how the ECB’s assessment set out in that decision was, in that regard, vitiated by a manifest error of assessment. In so doing, it exceeded the scope of its judicial review referred to in paragraph 55 of the present judgment. It was also wrong to find that the ECB had failed to fulfil its obligation, arising from the case-law referred to in paragraph 57 of the present judgment, to examine carefully and impartially all the relevant aspects of the situation in question.
It follows from the foregoing that, without it being necessary to examine the other grounds of appeal, the first ground of appeal must be upheld and, consequently, the judgment under appeal must be set aside in so far as it upholds the first part of the third plea in law and, in part, the third part of the first plea in law of the action at first instance and annuls in part the decision at issue.

The action at first instance
In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, if the Court quashes the decision of the General Court, it may itself give final judgment in the matter, where the state of the proceedings so permits.
That is the case here, since the Court has all the information necessary to rule on the action at first instance of Crédit lyonnais.
That action is based on three pleas in law, referred to in paragraph 20 of the present judgment.
As is apparent from paragraph 21 above, the first plea, with the exception of the argument set out in its third part, alleging infringement of Article 266 TFEU arising from failure to comply, on the part of the ECB, with paragraph 81 of the judgment of 13 July 2018,
Crédit agricole
v
ECB
, (T‑758/16, EU:T:2018:472), and the second plea were rejected by the General Court, without Crédit lyonnais challenging, in the context of a cross-appeal, the merits of the assessments made by the General Court in respect of those pleas. In those circumstances, the judgment under appeal, in respect of those assessments, has the force of
res judicata
, notwithstanding the partial annulment of that judgment arising from the ECB’s first ground of appeal being upheld (see, to that effect, judgment of 4 March 2021,
Commission
v
Fútbol Club Barcelona
, C‑362/19 P, EU:C:2021:169, paragraphs 109 to 111).
It follows that the Court must examine only the third plea in the action at first instance and the argument in the third part of the first plea referred to in the preceding paragraph.

Third part of the first plea, and the first part of the third plea

Arguments of the parties
By the third part of the first plea and the first part of the third plea, which it is appropriate to examine together, Crédit lyonnais submits that, when assessing the risk of fire sales of assets, the ECB did not carry out a detailed analysis of the characteristics of regulated savings passbooks, whereas it should have done so in accordance with the case-law also referred to in paragraph 57 of the present judgment.
Crédit Lyonais submits, first, that several studies and economic reports show that those savings passbooks are a ‘safe investment’ in the event of a banking crisis, because of the guarantee from the French Republic, from which deposits in those savings passbooks benefit, which makes it a particularly safe savings product, so that the hypothesis of a massive withdrawal of those deposits in times of crisis is not credible.
Credit Lyonais disputes the ECB’s reference to a possible withdrawal covering 10% to 30% of guaranteed deposits in less than five days, which is an unverifiable and irrelevant hypothesis.
In addition, the ECB does not show how the period of 10 days between the withdrawals of depositors with regulated savings passbooks and the repayment by the CDC to Crédit lyonnais of the sums corresponding to those withdrawals gives rise to a liquidity risk in the context of the assessment of the leverage ratio when it does not present such a risk in the context of the liquidity ratio, as the ECB acknowledged.
Secondly, Crédit lyonnais takes the view that the regulated savings passbooks fall within a structurally balanced mechanism regarding balance sheets as the deposits made on those savings passbooks, which are centralised with the CDC, correspond to debts in the same amount held by Crédit lyonnais against the CDC. The amounts collected on those savings passbooks cannot be invested in high risk assets and are fully covered by the CDC’s obligation to refund the amounts of those deposits withdrawn by savers, with the result that an institution which, like Crédit lyonnais, collects those deposits does not have to distress sell  its assets in order to obtain the necessary liquidity in order to  allow withdrawals.
Thirdly, Crédit lyonnais argues that the volume of deposits on regulated savings passbooks does not depend on the strategy of the institution collecting them, but on factors outside its control.  That institution  merely acts as a transit vehicle between the depositor and the CDC.
Those characteristics of regulated savings passbooks show that they do not expose the collecting institutions to an excessive leverage risk, which is confirmed by an EBA report of 3 August 2016 on exposures benefiting from specific legal guarantee mechanisms and by Article 429a(1)(j) of amended Regulation No 575/2013.
The ECB contends that that line of argument should be rejected.

Findings of the Court
As has been noted in paragraphs 55 to 57 of the present judgment, when determining whether or not to apply  Article 429(14) of Regulation No 575/2013, the ECB has a broad discretion, with the result that the judicial review which the Courts of the European Union must carry out of the merits of the grounds of a decision such as the decision at issue must not lead them to substitute their assessment for that of the ECB, but is intended to ascertain that that decision is not based on materially incorrect facts and is not vitiated by a manifest error of assessment or misuse of powers.
In the present case, the ECB took the view that the exposures to the CDC resulting from deposits made on regulated savings passbooks represented a low prudential risk for the institutions subject to its supervision, but that, as regards Crédit lyonnais, there was still a prudential risk which had to be taken into consideration by limiting to 66% the exclusion of those exposures from the exposure measure for the purposes of calculating Crédit lyonnais’s leverage ratio.
In the context of the analysis on which that conclusion was based, the ECB assessed, in the light of the characteristics of regulated savings passbooks, including, as is clear from the assessment of observations Nos 2 and 4 submitted by Crédit agricole, set out in the annex to the decision at issue, those relating to the existence of a dual guarantee from the French Republic, whether the institutions subject to the supervision of the ECB could, during a banking crisis, be exposed to massive withdrawals in a short period of time which may necessitate corrective measures not provided for in the business plan, including distressed selling of assets in order to have the funds necessary to comply with requests for withdrawals, within the meaning of Article 4(1)(94) of Regulation No 575/2013.
It follows that the ECB carried out a prudential analysis of a provisional nature, determining the effects that events that may or may not occur could have on an institution’s ability to withstand those events.
In order to carry out that analysis, although the ECB must rely, in the context of its broad discretion, on scenarios which are not implausible in the light of the available information, it cannot, however, be considered, in view of the provisional nature of that analysis, that it is required to prove the existence of past events with the same characteristics as the scenario analysed.
As regards the reference to a withdrawal scenario covering 10% to 30% of guaranteed deposits in less than five days, used by the ECB in the decision at issue, it does not appear that that scenario, which is based on an example which actually took place in a situation with aspects comparable to that of exposures to the CDC resulting from deposits on regulated savings accounts, is manifestly implausible.
In that regard, it is true that the arguments and evidence put forward by Crédit lyonnais concerning the ‘safe investment’ status of those savings passbooks, linked, in particular, to the fact that they enjoy a guarantee from the French Republic, permit a finding that, during certain past banking crisis episodes, the overall level of deposits on certain regulated savings passbooks tended to increase.
However, that general finding cannot for that reason result in the scenario, used by the ECB in its projected analysis of the risk of fire sales, of a probability, even if limited, of massive withdrawals of regulated savings deposited with Crédit lyonnais, in the event of a banking crisis, being rendered wholly implausible.
Although the arguments and evidence put forward by Crédit lyonnais which make it possible to make that finding may, as the ECB acknowledged, explain that, in the event of tension or crisis on the financial markets, savers will, as a general rule, be inclined to turn to those forms of secure and liquid investment to the detriment of other forms of investment that are more risky or less liquid, those arguments and evidence are not, however, such as to clearly establish that any risk that depositors will make instantaneous and massive withdrawals of those savings with the aim, for example, of reinvesting them in safer institutions was plainly ignored. Consequently, those arguments must be rejected.
As regards the existence of a dual guarantee from the French Republic in relation to the regulated savings, Crédit lyonnais has not established how the ECB, in the decision at issue, committed a manifest error of assessment by not regarding that characteristic, in the light of the experience of recent banking crises, as being such as to protect that credit institution against any risk of massive withdrawals and, therefore, against any risk of fire sales of assets.
As regards, moreover, Crédit lyonnais’s argument that regulated savings are reflected in structurally balanced transactions in the collection institution’s balance sheet of deposits made on that basis, it should be noted that the ECB took the view that, in a transfer system such as that covered by the condition laid down in Article 429(14)(c) of Regulation No 575/2013, which is satisfied by the exposures to the CDC resulting from such deposits, massive withdrawals would not in themselves lead to a lack of assets for the institution required to respond to requests for withdrawal if, in the absence of a mechanism limiting the right of withdrawal, such an institution could require and receive immediately from the public sector entities to which those deposits have been transferred the amounts corresponding to the sums withdrawn. The ECB found, in the decision at issue, that that was not the case here.
It took into consideration the fact that the sums deposited on the regulated savings accounts were transferred to the CDC in order to finance general interest investments and that there was an obligation on the CDC, guaranteed by the French Republic, to repay to the deposit-taking institutions the amounts withdrawn by depositors. However, it took the view that the deferred adjustment period between the withdrawal of the sums deposited and the repayment by the CDC of the sums withdrawn gave rise to a risk of fire sales of assets.
It does not appear that the choice of that institution, based on a withdrawal scenario that is not manifestly implausible, consisting of taking into consideration the consequences that that deferred adjustment period might have on the need for the institution concerned to have recourse to corrective measures not provided for in the business plan, including a distressed selling of assets, exceeded the limits of the ECB’s broad discretion in assessing the prudential level of risk considered relevant for the purposes of the application of Article 429(14) of Regulation No 575/2013.
That consideration is not called into question by Crédit lyonnais’s argument that the ECB does not show how that deferred adjustment period is capable of giving rise to a liquidity risk in the context of the assessment carried out in order to determine the leverage ratio, even though the same is not true in the context of the assessment carried out in order to determine the liquidity coverage requirement.
It should be noted that, in the decision at issue, the ECB justified the taking into account of such a deferred period by pointing out that, in the calculation of the leverage ratio, no appropriate time horizon is determined, which is not the situation concerning the calculation of the liquidity ratio.
In that regard, it should be noted that, as the ECB pointed out before the General Court, the liquidity coverage requirement, which is governed, inter alia, by Article 412 of Regulation No 575/2013, is intended to ensure that the total value of liquid assets ‘covers the liquidity outflows less the liquidity inflows under stressed conditions’ so as to ensure that institutions maintain ‘levels of liquidity buffers which are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of thirty days’. The leverage ratio is governed, inter alia, by Article 429 of that regulation and is intended to protect the institution from the risk of excessive leverage, that is to say, from the risk ‘due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets’. Thus, while the liquidity requirement is intended to ensure sufficient coverage of liquidity outflows under stressed conditions over a period of 30 days, the leverage ratio, for its part, is intended to prevent an institution which is in a situation of insufficient liquidity from being forced to resort to corrective measures such as ‘distressed’ selling of assets under conditions of depreciation.
The ECB noted that, if a withdrawal of 30% of regulated savings deposits were to occur in less than five days that would amount, for Crédit lyonnais, to a volume of EUR 5.4 billion. It took the view that the possibility of such a volume and speed of withdrawal could not be ruled out in respect of that credit institution and that, in that event, it might have to take measures which were not provided for in the business plan, including distressed selling of assets in order to have the funds necessary to grant withdrawal requests.
It follows that, having regard to those differences in time horizon stemming from Regulation No 575/2013, it does not appear that the ECB’s assessment relating to the taking into account of the deferred period between depositors’ withdrawals and the reimbursement of the CDC in the context of the application of Article 429(14) of that regulation is vitiated by a manifest error.
As regards, moreover, Crédit lyonnais’s argument that the volume of regulated savings depends not on the strategy of the institution collecting those savings, but on factors outside its control, it must be stated that Crédit lyonnais merely put forward evidence to show that factors external to its action also had an influence on that volume. It has neither claimed nor demonstrated that it did not have any form of influence on the volume of deposits made on regulated savings passbooks.
In those circumstances, Crédit lyonnais’s argument must be rejected.
Similarly, Crédit lyonnais’s arguments based on Article 429a(1)(j) of Regulation No 575/2013, as amended, and the EBA report referred to in paragraph 87 of the present judgment, must be rejected.
First, that provision came into force after the adoption of the decision at issue and is therefore not applicable
ratione temporis
in the present case. In addition, as is apparent from its wording, the purpose of that provision is not to exclude by operation of law certain exposures, such as those related to regulated savings, from the measure of total exposure for the purposes of calculating the leverage ratio, but to remove the obligation for the institutions concerned to obtain authorisation from the competent authorities for the purposes of such exclusion, by transferring to them the responsibility to assess whether that exclusion is justified for exposures satisfying the conditions laid down in Regulation No 575/2013.
In addition, in so far as that legislative amendment may mean that the legislature considered that the exposures linked to regulated savings would not create a leverage risk, that finding does not permit the inference that the ECB should have viewed Crédit lyonnais’s situation in the light of the indications which Article 429a(1)(j) of Regulation No 575/2013, as amended, gives as to the legislature’s intention as regards the future regime for those exposures.
As regards, secondly, the EBA report referred to in paragraph 87 of the present judgment, it should be noted that that report recommended the application of an exclusion similar to that resulting from Article 429(14) of Regulation No 575/2013 for exposures other than those resulting from deposits made on regulated savings passbooks.
In any event, that report, which is not binding on the ECB when it adopts a decision on the basis of that article, makes it possible at most to note that the EBA considered that those other exposures also had a low risk profile, which corresponds, as noted in paragraph 90 of the present judgment, to the overall assessment made by the ECB in the decision at issue as regards regulated savings passbooks.
It follows from the foregoing that, by its arguments, Crédit lyonnais has not shown that the ECB’s assessment relating to the risk of fire sales of assets generated by its exposures to the CDC resulting from deposits made on regulated savings accounts, which contributed to justifying the exclusion of only 66% of those exposures from the exposure measure for the purposes of calculating the leverage ratio, is vitiated by a manifest error of assessment.
It follows that the first part of the third plea and the third part of the first plea must be rejected.

The second part of the third plea

Arguments of the parties
Crédit lyonnais takes the view that the ECB has not adduced evidence capable of giving credence to the likelihood of a default on the part of the French Republic which would justify a refusal, even in part, to authorise the exclusion provided for in Article 429(14) of Regulation No 575/2013.
The ECB contends that that line of argument should be rejected.

Findings of the Court
In point 2.2.1 of the decision at issue, the ECB took into consideration the creditworthiness of the French central government in order to assess whether there was a risk, in the event of the CDC’s default, that that government would not be in a position to repay to the entities under prudential supervision the amounts transferred to the CDC corresponding to deposits made on regulated savings passbooks which would be withdrawn by savers.
It is also apparent from that point of the decision at issue that the ECB took the view that that risk did not, in itself, give rise to ‘prudential issues’ which would justify it not authorising the exclusion requested under Article 429(14) of Regulation No 575/2013.
However, in the light of the rating attributed to the French Republic by the external credit rating bodies, which include Standard & Poor’s, which was not ‘the highest possible’, and of the five-year credit default swaps, which implied ‘a non-negligible probability of default [of that country]’, the ECB submitted that the extent of the exposure to the CDC of the institutions subject to its prudential supervision was a relevant factor to be taken into consideration in assessing the overall prudential risk represented by the situation of those institutions.
It follows that the ECB assessed the risk of default on the part of the French Republic on the basis of evidence which reasonably allowed the view to be taken that the risk linked to the creditworthiness of the French central government was not negligible, without Crédit lyonnais being able to demonstrate that that assessment was vitiated by a manifest error of assessment.
It should be noted, in that regard, that in the present case it was for the ECB, in the context of the exercise of the broad discretion available to it, to determine whether the low risk of default on the part of the French Republic which it found, on the basis of an assessment that did not contain a manifest error, had to be taken into account for the purposes of the assessment required of it.
It follows that, in the light of that broad discretion, it cannot be held that the level of risk chosen and its impact on the situation of the institutions subject to its supervision are vitiated by a manifest error of assessment.
The second part of the third plea and, with it, that plea in its entirety must  therefore  be rejected.
In the light of all the foregoing considerations, the action at first instance must be dismissed.

Costs
Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to the costs.
Article 138(1) of those rules, applicable to appeal proceedings by virtue of Article 184(1) thereof, provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
In the present case, since Crédit lyonnais has been unsuccessful and the ECB has applied, both before the Court of Justice and before the General Court, for Crédit lyonnais to be ordered to pay the costs, Crédit lyonnais must be ordered to bear its own costs and to pay those incurred by the ECB in the proceedings at first instance and in the present appeal.
On those grounds, the Court (First Chamber) hereby:
1.
Sets aside the judgment of the General Court of the European Union of 14 April 2021,
Crédit lyonnais
v
ECB
(T
‑
504/19, EU:T:2021:185), in so far as it upholds the first part of the third plea in law and, in part, the third part of the first plea in law relied on at first instance and annuls Decision ECB-SSM-2019-FRCAG-39 of the European Central Bank (ECB) of 3 May 2019, in so far as that decision refused to exclude from the calculation of the leverage ratio of Crédit lyonnais 34% of its exposures on the Caisse des dépôts et consignations;
2.
Dismisses the action brought in Case T
‑
504/19 by Crédit lyonnais at first instance;
3.
Orders Crédit lyonnais to pay the costs.
[Signatures]
*
Language of the case: French.