# EUR-Lex - 52012PC0511 - EN

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# 52012PC0511

**Proposal for a COUNCIL REGULATION conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions /* COM/2012/0511 final - 2012/0242 (CNS) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Today, the solidity of the banking sector
is in many instances still closely linked to the Member State in which they are
established. Doubts about the sustainability of public debt, economic growth
prospects, and the viability of credit institutions have been creating
negative, mutually reinforcing market trends. This may lead to risks for the
viability of some credit institutions as well as for the stability of the
financial system, and may impose a heavy burden for already strained public
finances of the Member States concerned.

The situation poses specific risks within
the euro area, where the single currency increases the likelihood that developments
in one Member State can create risks for economic development and the stability
of the Euro area as a whole. Furthermore, the current risk of financial
disintegration along national borders significantly undermines the Single
Market for financial services and prevents it from contributing to economic recovery.

The creation of the European Banking Authority (EBA) by Regulation (EU) No. 1093/2010 of the
European Parliament and the Council of 24 November 2010 establishing a European
Supervisory Authority (European Banking Authority), and of the European
System of Financial Supervision (ESFS) already contributed to improved
cooperation between national supervisors and to the development of a single
rulebook for financial services in the EU. However, supervision of banks
remains to a large extent within national boundaries and thereby fails to keep
up with integrated banking markets. Supervisory failings have, since the onset
of the banking crisis, significantly eroded confidence in the EU banking sector
and contributed to an aggravation of tensions in euro area sovereign debt
markets.

The Commission has therefore called in May
2012, as part of a longer term vision for economic and fiscal integration, for
a banking union to restore confidence in banks and in the euro. One of the key
elements of the banking union should be a Single Supervisory Mechanism (SSM)
with direct oversight of banks, to enforce prudential rules in a strict and
impartial manner and perform effective oversight of cross border banking
markets. Ensuring that banking supervision across the Euro area abides by high
common standards will contribute to build the necessary trust between Member
States, which is a pre-condition for the introduction of any common backstops.

At the Euro area summit on 29 June, 2012,
the Heads of State or Government have called on the Commission "to present
proposals for the setting up of a single supervisory mechanism shortly. When
such a mechanism will be in place for banks in the euro area the ESM could,
following a regular decision, have the possibility to recapitalize banks
directly". The European Council conclusions of the meeting held on the
28/29 June 2012 state that this Euro Area statement and the proposals that the
Commission will present accordingly should take into account the development of
"a specific and time-bound road map for the achievement of a genuine
Economic and Monetary Union".

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

The Commission has taken into account the
analysis done in the context of the adoption of the "supervisory
package" creating the European Supervisory Authorities, which assessed 
operational, governance, financial and legal aspects relevant to the establishment
of a SSM. The preparation of a formal impact assessment was not possible within
the timetable set by the Euro area Summit of 29 June.

3.           LEGAL ELEMENTS OF THE PROPOSAL

The proposal is based on Article 127 (6)
TFEU, which provides a legal basis for conferring specific tasks on the ECB
concerning policies relating to the prudential supervision of credit
institutions and other institutions with the exception of insurance
undertakings.

The proposal confers certain key
supervisory tasks necessary for the supervision of credit institutions on the
ECB, while all tasks not spelt out in the regulation will remain the competence
of national supervisors. The proposal also mandates the ECB with carrying out
supervision of financial conglomerates. However, to ensure compliance with
Article 127 (6) TFEU, the ECB will be only responsible for carrying out its
tasks for the supplementary supervision of financial conglomerates on a
group-wide basis, while the prudential supervision of the individual insurance
undertaking itself will be carried out by national competent authorities.

The objectives of the proposed action
cannot be sufficiently achieved by the Member States and can therefore be
better achieved by the EU. Recent events have clearly demonstrated that only
supervision at the European level can ensure appropriate oversight of an
integrated banking sector and a high level of financial stability in the EU and
the Euro area in particular. The provisions of this proposal do not go beyond
what is necessary to achieve the objectives pursued. The ECB is entrusted with
the supervisory tasks which need to be exercised at EU level to ensure uniform
and effective application of prudential rules, risk control and crisis
prevention. National authorities will continue to carry out certain tasks which
can be better performed at national level.

According to Article 127 (6) TFEU, the
Council acts by means of regulations. Therefore a regulation is the only legal
instrument that allows for the conferral of supervisory tasks on the ECB.

4.           DETAILED EXPLANATION OF THE PROPOSAL

4.1.        Conferral of specific
supervisory tasks on the ECB

4.1.1.     Structure

The ECB will be responsible for specific
tasks concerning the prudential supervision of credit institutions which are
established in Member States whose currency is the Euro (participating Member
States) with the objective to promote the safety and soundness of credit
institutions and the stability of the financial system. The ECB will carry out
its tasks within the framework of the ESFS and will cooperate closely with
national supervisors and the EBA.

4.1.2.     Scope of supervisory
activities

After a transitional period, the ECB will
be responsible for carrying out key supervisory tasks for all credit
institutions established in participating Member States, regardless of their
business model or size. The ECB shall be the host supervisor for credit
institutions established in non-participating Member States, which establish a
branch or provide cross-border services in a participating Member State.

4.1.3.     Cooperation with the
European Supervisory Authorities

The ECB will carry out its tasks within in
the framework of the European System of Financial Supervision and will closely
cooperate with the three European supervisory Authorities. The EBA will keep
its powers and tasks to further develop the single rulebook and ensure
convergence and consistency of supervisory practice. The ECB will not take over
any tasks of the EBA and the exercise of its regulatory powers in accordance
with Article 132 TFEU will be limited to areas which are necessary for the
proper exercise of the tasks conferred on the ECB by this regulation.

The composition of the board of supervisors
of the EBA will remain unaffected and representatives from national competent
authorities will continue shaping decision-making in the EBA. However, to
reflect the ECB's supervisory responsibilities, representatives from competent
authorities from participating Member States shall coordinate and express, for
matters falling in the competences of the ECB, a common position.

4.2.        Tasks of the ECB

4.2.1.     Tasks of the ECB

The ECB will be exclusively competent for
key supervisory tasks which are indispensable to detect risks for banks'
viability and require them to take the necessary action. The ECB will, inter
alia, be the competent authority for licensing and authorizing credit institutions,
assessing qualifying holdings, ensuring compliance with the minimum capital
requirements, ensuring the adequacy of internal capital in relation to the risk
profile of a credit institution (Pillar 2 measures), conducting supervision on
a consolidated basis and supervisory tasks in relation to financial
conglomerates. Furthermore, the ECB will also ensure compliance with provisions
on leverage and liquidity, apply capital buffers and carry out, in coordination
with resolution authorities, early intervention measures when a bank is in
breach of, or is about to breach, regulatory capital requirements. The ECB will
also coordinate and express a common position of representatives from competent
authorities of the participating Member States in the Board of Supervisors and
the Management Board of the EBA, for topics relating to the abovementioned
tasks.

4.2.2.     Role of national
supervisors

National supervisors will continue to play
an important role with the creation of a Single Supervisory Mechanism.

First, all tasks not conferred on the ECB
will remain with national supervisors. For example, national supervisors will
remain in charge of consumer protection and the fight against money laundering,
and of the supervision of third country credit institutions establishing
branches or providing cross-border services within a Member State.

Second, even for the tasks conferred on the
ECB, most day-to-day verifications and other supervisory activities necessary
to prepare and implement the ECB's acts could be exercised by national
supervisors operating as an integral part of the SSM. An SSM covering all banks
in the participating Member States can only work based on a model which
integrates a strong role for national level supervisory expertise. The proposal
recognises that within the SSM national supervisors are in many cases best
placed to carry out such activities, due to their knowledge of national,
regional and local banking markets, their significant existing resources and to
locational and language considerations, and therefore enables the ECB to rely
on national authorities to a significant extent. Preparatory and implementing
activities which national authorities could deliver within the SSM for example
include the following

·
In case of a request for authorisation of a new
bank, the national supervisor could be responsible for assessing compliance
with any conditions of authorisation set out in national law,  and could
propose a decision to the ECB which could authorise the bank if it is satisfied
that the conditions set out in EU law are met. A similar procedure applies to
the withdrawal of authorisation.

·
National supervisors could carry out ongoing
day-to-day assessment of a bank's situation and on site verifications,
implementing general guidance or regulations issued by the ECB. For these
purposes national supervisors could make use of their existing powers, for
example to carry out on site examinations. If on the basis of the ongoing
assessment it appears that a bank is in serious difficulties the national supervisor
would warn the ECB.

·
In case of a request of a bank to use an
internal risk model, the national supervisor could assess the request and its
compliance with EU law and any guidance issued by the ECB and could propose to
the ECB whether and under which conditions to validate the model. After
validation, the national supervisor could oversee the application of the model
and monitor its ongoing use.

·
Sanctioning powers would be shared between the
ECB and the national level.

4.3.        Powers of the ECB

4.3.1.     Supervisory and
investigatory powers

For the purposes of carrying out its tasks,
the ECB will be considered as the competent authority of participating Member
States and will have the supervisory powers that those authorities shall have
in accordance with the EU banking legislation. Those include supervisory powers
such as the authorisation of credit institutions and the withdrawal of
authorisations and the removal of a member of a credit institution's management
board. In addition, for the purposes of carrying out the supervisory tasks
conferred on it, the ECB may impose pecuniary sanctions and periodic penalty
payments. The approach on sanctions laid down in this regulation is without
prejudice to that in other fields where EU institutions have the power to
impose sanctions, including, in certain cases, on parent undertakings.

In order to be able to carry out its tasks
the ECB will have all necessary investigatory powers. In particular, the ECB
will be able to request all relevant information from supervised entities and
persons involved in their activities, related or connected to those activities
or carrying out operational functions on their behalf. It will also be
empowered to conduct all necessary investigations, including on-site
inspections. The exercise of the investigatory powers will be subject to
appropriate safeguards.

4.3.2.     Specific provision on
authorisation and home host issues

The authorisation of credit institutions by
the ECB will take into account the additional conditions that may be set out by
national legislation. In particular, the ECB will grant the authorisation
following a proposal made by the national competent authority where the
conditions set out in national legislation are met.

Where credit institutions exercise the
right of establishment and the free provision of services in other Member
States, Union law provides for a clear attribution of competences between home
and host Member States and for specific notification. For the tasks conferred
on it, the ECB will assume the role of both home and host supervisor for credit
institutions exercising the right of establishment and the free provision of
services in other participating Member States. In relation to the issues
covered by those tasks, there is therefore no need for attribution of
competences between home and host Member States and for specific notification
procedures and the relevant provisions will no longer apply between
participating Member States.

Under Union law, supervisors of
cross-border banking groups participate in consolidated supervision of the
group and coordinate their supervisory activities in the framework of colleges
of supervisors. However, for banking groups established only in participating
Member States, the ECB will take over all relevant supervisory tasks. For these
groups the provisions on cooperation between supervisors and on colleges will
therefore no longer apply.

4.4.        Relationship with Member
States whose currency is not the Euro

The proposal takes into account the
situation of Member States that have not adopted the euro in three ways.

First, under the related proposal amending
Regulation (EU) No. 1093/2010 establishing the European Banking Authority, it
is proposed that voting arrangements within the EBA should  be adapted to
ensure EBA decision-making structures continue to be balanced and effective and
preserve fully the integrity of the Single Market (see section 4.1.3).

Second, as regards the supervision of
cross-border banks active both within and outside the Euro area, the proposal
does not affect in any way the position of non participating Member States in
the Colleges of Supervisors set up under Directive 2006/48/EC. The provisions
on those colleges and the obligation to cooperate and exchange information in
consolidated supervision and between home and host supervisors will apply fully
to the ECB – as the competent authority for the participating Member States.
Those provisions will provide an effective framework for the cooperation
between the ECB and the national supervisors in Member States that have not
adopted the euro.

Third, Member States that have not adopted
the euro but wish to participate in the banking union will be able to enter
into a close supervisory cooperation with the ECB subject to meeting specific
conditions. These include in particular that those Member States abide by and
implement relevant ECB acts. For a Member State that has entered into a close
cooperation arrangement, the ECB will carry out the supervisory tasks conferred
on it in this regulation as regards the credit institutions established in the
Member State concerned. A representative of the Member State may take part in
the activities of the supervisory board set up by the Regulation for carrying
out the planning and execution of the ECB's tasks in the area of prudential
supervision of credit institutions, subject to the conditions set out in the
decision establishing the close cooperation in compliance with the Statute of
the ESCB and the ECB.

4.5.        Organisational principles

4.5.1.     Independence and Accountability

The ECB will be independent when carrying
out banking supervision and will be subject to strong accountability provisions
to ensure that it uses its supervisory powers in the most effective and
proportionate way, within the boundaries set by the Treaty in parallel to the
arrangements provided for the European Supervisory Authorities. The ECB shall
therefore be accountable for its tasks to the European Parliament and to the
Council/the Eurogroup. The ECB will be subject to regular reporting requirements
and will respond to questions. The chair of the supervisory board will present
an annual report on the ECB's supervisory activities to the EP and the
Eurogroup and may be heard by the competent committees of the EP on any other
occasions. The ECB will also be obliged to respond to any questions asked by
the EP and its members on its supervisory activities. Moreover, under the
Treaty, the President and the Vice-President of the Governing Council as the
body with final responsibility for the ECB's action, as well as the other
members of the Executive Board, are appointed by the European Council after
consultation of the European Parliament. As the Chair of the supervisory board
will be selected from the Members of the Executive Board, this also ensures a
significant role of the EP for the selection of the Chair. As regards the
budget, in accordance with 314(1) TFEU the ECB's budget is not part of the
Union budget. Nevertheless, with a view to ensuring accountability within this
framework, the ECB will be required to develop a separate budget line for
supervisory tasks from its general budget. Expenditures relating to the ECB's
supervisory tasks will be financed by charging fees from supervised
institutions.

4.5.2.     Governance

Monetary policy tasks will be strictly
separated from supervisory tasks to eliminate potential conflicts of interest
between the objectives of monetary policy and prudential supervision. To
implement the necessary separation between both tasks and ensure appropriate
attention to supervisory tasks, the ECB will ensure that all preparatory and
executing activities within the ECB will be carried out by bodies and
administrative divisions separated from those responsible for monetary policy.
To this end a supervisory board will be set up that will prepare decisions on
supervisory matters. The Governing Council will be ultimately responsible for
taking decisions but may decide to delegate certain tasks or decision-making
power to the supervisory board. The supervisory board will be led by a Chair
and a Vice-Chair elected by the ECB Governing Council and composed in addition
to them of four representatives of the ECB and of one representative of each
national central banks or other national competent authority.

4.5.3.     Exchange of information

For the exercise of its supervisory tasks,
the ECB will be subject to the professional secrecy requirements provided for
in the EU banking legislation and will be allowed to exchange information with
relevant national authorities under the conditions set out in that legislation.

4.6.        Entry into force and
review

Due to the urgency of setting up an
effective SSM, the regulation will enter into force on 1 January 2013. In order
to ensure a smooth start of the mechanism a phasing-in approach is envisaged,
which provides for the possibility for the ECB as of 1 January 2013 to apply
its supervisory tasks to any banks, in particular banks which have received or
requested public financial assistance, while the most significant credit
institutions of European systemic importance shall be subject to ECB
supervision as of 1 July 2013. The ECB will assume in full its tasks in
relation to all other banks as from 1 January 2014 at the latest.

It is expected that the Directive on Access
to the activity of credit institutions and the prudential supervision of credit
institutions and investment firms and the Regulation on prudential requirements
for credit institutions and investment firms proposed by the Commission on 20
July 2011 (CRD IV package)[1]
will enter into force on 1 January 2013 and the ECB will therefore be able to
exercise its supervisory tasks on the basis of those acts. Nevertheless if this
was not the case, a specific transitional provision enables the ECB to carry
out its tasks already on the basis of Directives 2006/48/EC and 2006/49/EC (CRD
III).

By 1 January 2016, the Commission will
publish a report on the experiences acquired with the operation of the SSM and
the procedures laid down in this regulation.

5.           BUDGETARY IMPLICATION

This proposal has no implication for the
Union budget, since in accordance with the Treaty the ECB's budget is not part
of the Union budget.

2012/0242 (CNS)

Proposal for a

COUNCIL REGULATION

conferring specific tasks on the European Central
Bank concerning policies relating to the prudential supervision of credit
institutions

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 127(6) thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Parliament[2],

Having regard to the opinion of the
European Central Bank[3],

Acting in accordance with a special
legislative procedure,

Whereas:

(1)       Over the past decades, the
Union has made considerable progress in creating an internal market for banking
services. Consequently, in many Member States, banking groups with their
headquarters established in other Member States hold a significant market
share, and credit institutions have geographically diversified their business,
especially within the Euro area.

(2)       Maintaining and deepening
the internal market for banking services is essential in order to foster
economic recovery in the Union. However this proves increasingly challenging.
Evidence shows that the integration of banking markets in the Union is coming
to a halt.

(3)       At the same time
supervisors must step up their supervisory scrutiny to take account of the
lessons of the financial crisis in recent years, and be able to oversee highly
complex and inter-connected markets and institutions.

(4)       Competence for supervision
of individual banks in the Union remains mostly at national level. This limits
the effectiveness of supervision and the ability of supervisors to reach a
common understanding of the soundness of the banking sector throughout the
Union. In order to preserve and increase the positive effects of market
integration on growth and welfare, integration of supervisory responsibilities
should therefore be enhanced.

(5)       The solidity of credit
institutions is in many instances still closely linked to the Member State in
which they are established. Doubts about the sustainability of public debt,
economic growth prospects, and the viability of credit institutions have been
creating negative, mutually reinforcing market trends. This may lead to risks
for the viability of some credit institutions as well as for the stability of
the financial system, and may impose a heavy burden for already strained public
finances of the Member States concerned. The problem poses specific risks
within the euro area where the single currency increases the likelihood that
negative developments in one Member State can create risks for economic
development and the stability of the Euro area as a whole.

(6)       The European Banking
Authority (EBA), established in 2011 by Regulation (EU) No. 1093/2010 of the
European Parliament and the Council of 24 November 2010 establishing a European
Supervisory Authority (European Banking Authority),[4] and the European System of
Financial Supervision established by Article 2 of that Regulation and of
Regulation (EU) No 1094/2010 of 24 November 2010 establishing a European
Supervisory Authority (EIOPA),[5]
and Regulation (EU) No 1095/2010 of 24 November 2010 establishing a European
Supervisory Authority (ESMA)[6]
have significantly improved cooperation between banking supervisors within the
Union. EBA is making important contributions to the creation of a single
rulebook for financial services in the Union, and has been crucial in
implementing in a consistent way the recapitalisation of major Union credit
institutions agreed by the European Council in October 2011.

(7)       The European Parliament called
on various occasions for a European body to be directly responsible for certain
supervisory tasks over financial institutions, starting with its resolutions of
13 April 2000 on the Commission communication on implementing the framework for
financial markets: Action Plan,[7]
and of 21 November 2002 on prudential supervision rules in the European Union.[8]

(8)       The European Council
conclusions of 29 June 2012 invited the President of the European Council to
develop a road map for the achievement of a genuine Economic and Monetary Union.
On the same day, the Euro area Heads of State or Government Summit pointed out
that when an effective single supervisory mechanism is established involving
the ECB for banks in the euro area, the ESM could, following a regular
decision, have the possibility to recapitalize banks directly which would rely
on appropriate conditionality, including compliance with state aid rules.

(9)       A European banking union should
therefore be set up, underpinned by a true single rulebook for financial
services for the Single Market as a whole and composed of a single supervisory
mechanism, and a common deposit insurance and resolution framework. . In view
of the close links and interactions between Member States participating in the
common currency, the banking union should apply at least to all Euro area
Member States. With a view to maintaining and deepening the internal market,
and to the extent that this is institutionally possible, the banking union should
also be open to the participation of other Member States.

(10)     As a first step towards the
banking union, a single supervisory mechanism should ensure that the Union's
policy relating to the prudential supervision of credit institutions is
implemented in a coherent and effective way, that the single rulebook for
financial services is applied equally to credit institutions in all Member
States concerned, and that those credit institutions are subject to supervision
of the highest quality, unfettered by other, non-prudential considerations. A
single supervisory mechanism is the basis for the next steps towards the
banking union. This reflects the principle that any introduction of common
intervention mechanisms in case of crises should be preceded by common controls
to reduce the likelihood that intervention mechanisms will have to be used.

(11)     As the Euro area’s central
bank with extensive expertise in macroeconomic and financial stability issues,
the ECB is well placed to carry out supervisory tasks with a focus on
protecting the stability of Europe’s financial system. Indeed in many Member
States Central Banks are already responsible for banking supervision. The ECB
should therefore be conferred specific tasks concerning policies relating to
the supervision of credit institutions within the Euro area.

(12)     The ECB should be conferred
those specific supervisory tasks which are crucial to ensure a coherent and
effective implementation of the Union's policy relating to the prudential
supervision of credit institutions, while other tasks should remain with
national authorities. The ECB's tasks should include measures taken in
pursuance of macro-prudential stability.

(13)     Safety and soundness of large
banks is essential to ensure the stability of the financial system. However, recent
experience shows that smaller banks can also pose a threat to financial
stability. Therefore, the ECB should be able to exercise supervisory tasks in
relation to all banks of participating Member States.

(14)     Prior authorisation for
taking up the business of credit institutions is a key prudential technique to
ensure that only operators with a sound economic basis, an organisation capable
of dealing with the specific risks inherent to deposit taking and credit
provision, and suitable directors carry out those activities. The ECB should
therefore have the task to authorise credit institutions and should be
responsible for the withdrawal of authorisations.

(15)     In addition to the
conditions set out in Union legislative acts for authorisation of credit
institutions and the cases for withdrawal of such authorisations, Member States
may currently provide for further conditions for authorisation and cases for
withdrawal of authorisation. The ECB should therefore carry out its task to
authorise credit institutions and to withdraw the authorisation in case of
non-compliance with national law upon a proposal by the relevant national
competent authority, which assesses compliance with the relevant conditions set
out by national law.

(16)     An assessment of the
suitability of any new owner prior to the purchase of a significant stake in a
credit institution is an indispensable tool to ensure the continuous
suitability and financial soundness of credit institutions’ owners. The ECB as
a Union institution is well-placed to carry out such an assessment without
imposing undue restrictions to the internal market. The ECB should have the
task to assess the acquisition and disposal of significant holdings in credit
institutions.

(17)     Compliance with Union rules
requiring credit institutions to hold certain levels of capital against risks
inherent to the business of credit institutions, to limit the size of exposures
to individual counterparties, to publicly disclose information on a credit
institutions’ financial situation, to dispose of sufficient liquid assets to
withstand situations of market stress, and to limit leverage is a prerequisite
for credit institutions’ prudential soundness. The ECB should have the task to
ensure compliance with those rules and to set higher prudential requirements
and apply additional measures to credit institutions in the cases specifically
set out in Union acts.

(18)     Additional capital buffers,
including a capital conservation buffer and a countercyclical capital buffer to
ensure that credit institutions accumulate during periods of economic growth a sufficient
capital base to absorb losses in stressed periods, are key prudential tools to
ensure the availability of adequate loss absorbency. The ECB should have the
task to impose such buffers and ensure credit institutions comply with them.

(19)     The safety and soundness of
a credit institution depend also on the allocation of adequate internal
capital, having regard to the risks to which it may be exposed, and on the
availability of appropriate internal organisation structures and corporate
governance arrangements. The ECB should therefore have the task to apply
requirements ensuring that credit institutions have in place robust governance
arrangements, processes and mechanisms, including strategies and processes for
assessing and maintaining the adequacy of their internal capital. In case of
deficiencies it should also have the task to impose appropriate measures
including specific additional own funds requirements, specific publication
requirements, and specific liquidity requirements.

(20)     Risks for the safety and
soundness of a credit institution can arise both at the level of an individual
credit institution and at the level of a banking group or of a financial
conglomerate. Specific supervisory arrangements to mitigate these risks are
important to ensure the safety and soundness of credit institutions. In
addition to supervision of individual credit institutions, the ECB's tasks
should include supervision at the consolidated level, supplementary
supervision, supervision of financial holding companies and supervision of
mixed financial holding companies.

(21)     In order to preserve
financial stability, the deterioration of an institution's financial and
economic situation must be remedied before that institution reaches a point at
which authorities have no other alternative than to resolve it. The ECB should
have the task to carry out early intervention actions as defined in relevant
Union law. It should however coordinate its early intervention action with the
relevant resolution authorities. Pending the conferral of resolution powers on
a European body, the ECB should moreover coordinate appropriately with the
national authorities concerned to ensure a common understanding about
respective responsibilities in case of crises, in particular in the context of
the cross border crisis management groups and the future resolution colleges
established for these purposes.

(22)     Supervisory tasks not
conferred on the ECB should remain with national authorities. Those tasks
should include the power to receive notifications from credit institutions in
relation to the right of establishment and the free provision of services, to
supervise bodies which are not covered by the definition of credit institutions
under Union law but which are supervised as credit institutions under national
law, to supervise credit institutions from third countries establishing a
branch or providing cross-border services in the Union, to supervise payments
services, to carry out day-to-day verifications of credit institutions, to
carry out the function of competent authorities over credit institutions in
relation to markets in financial instruments and the prevention of the use of
the financial system for the purpose of money laundering and terrorist
financing.

(23)     The ECB should carry out
the tasks conferred on it with a view to ensuring the safety and soundness of
credit institutions and the stability of the financial system of the Union and
the unity and integrity of the Internal Market, thereby ensuring also the
protection of depositors and improving the functioning of the Internal Market,
in accordance with the single rulebook for financial services in the Union.

(24)     The conferral of
supervisory tasks on the ECB for some of the Member States should be consistent
with the framework of the European System of Financial Supervision (ESFS) set
up in 2010 and its underlying objective to develop the single rulebook and
enhance convergence of supervisory practices across the whole Union. Cooperation
between the banking supervisors and the supervisors of insurance and securities
markets is important to deal with issues of joint interest and to ensure proper
supervision of credit institutions operating also in the insurance and
securities sectors. The ECB should therefore be required to cooperate closely
with the EBA, the European Securities and Markets Authority and the European
Insurance and Occupational Pensions Authority, within the framework of the EFSF.

(25)     In order to ensure
consistency between supervisory responsibilities conferred on the ECB and
decision making within the EBA, the ECB should coordinate a common position
amongst representatives of the national authorities of the participating Member
States in relation to matters falling within its competence.

(26)     The ECB should carry out
its tasks subject to and in compliance with any Union law rule including the
whole of primary and secondary Union law, Commission decisions in the area of
State aids, competition rules and merger control and the single rulebook
applying to all Member States. The EBA is entrusted with developing draft
technical standards and guidelines and recommendations ensuring supervisory
convergence and consistency of supervisory outcomes within the Union. The ECB
should not replace the exercise of these tasks by the EBA, and should therefore
exercise powers to adopt regulations in accordance with Article 132 TFEU only
where Union acts adopted by the European Commission upon drafts developed by
the EBA or guidelines and recommendations issued by the EBA do not deal with
certain aspects necessary for the proper exercise of the ECB’s tasks or do not
deal with them in sufficient detail.

(27)     In order to ensure that
supervisory rules and decisions are applied by credit institutions, financial
holding companies and mixed financial holding companies, effective,
proportionate and dissuasive sanctions should be imposed in case of breaches.
In accordance with Article 132(3) TFEU and Council Regulation (EC) No. 2532/98
of 23 November 1998 concerning the powers of the European Central Bank to
impose sanctions,[9]
the ECB is entitled to impose fines or periodic penalty payments on
undertakings for failure to comply with obligations under its regulations and
decisions. Moreover, in order to enable the ECB to effectively carry out its
tasks relating to the enforcement of supervisory rules set out in directly
applicable Union law, the ECB should be empowered to impose pecuniary sanctions
on credit institutions, financial holding companies and mixed financial holding
companies for breaches of such rules. National authorities should remain able
to apply sanctions in case of failure to comply with obligations stemming from
national law transposing Union Directives. Where the ECB considers it
appropriate for the fulfilment of its tasks that a sanction is applied for such
breaches, it should be able to refer the matter to national authorities for
those purposes.

(28)     National supervisors have
important and long-established expertise in the supervision of credit
institutions within their territory and their economic, organisational and
cultural specificities. They have established a large body of dedicated and
highly qualified staff for these purposes. Therefore, in order to ensure high
quality European supervision national supervisors should assist the ECB in the
preparation and implementation of any acts relating to the exercise of the ECB
supervisory tasks. This should include in particular the ongoing day-to-day
assessment of a bank's situation and related on site verifications.

(29)     As regards the supervision
of cross-border banks active both inside and outside the Euro area the ECB
should cooperate closely with the competent authorities of non participating
Member States. As a competent authority the ECB should be subject to the
related obligations to cooperate and exchange information under Union law and
should participate fully in the colleges of supervisors. In addition, since the
exercise of supervisory tasks by a European institution brings about clear
benefits in terms of financial stability and sustainable market integration,
Member States not participating in the common currency should therefore also
have the possibility to participate in the new mechanism. However, it is a
necessary pre-condition for an effective exercise of supervisory tasks, that
supervisory decisions are implemented fully and without delay. Member States
wishing to participate in the new mechanism should therefore undertake to
ensure that their national competent authorities will abide by and adopt any
measure in relation to credit institutions requested by the ECB. The ECB should
be able to establish a close cooperation with the competent authorities of a Member
State not participating in the common currency. It should be obliged to
establish the cooperation where the conditions set out in this regulation are
met. The conditions under which representatives of the competent authorities of
the Member States which established a close co-operation take part to the
activities of the Supervisory Board should allow the greatest possible
involvement of those representatives taking into account the limits following
from the Statute of ESCB and of the ECB, in particular as regards the integrity
of its decision making process.

(30)     In order to carry out its
tasks, the ECB should have appropriate supervisory powers. Union law on the
prudential supervision of credit institutions provides for certain powers to be
conferred on competent authorities designated by the Member States for those
purposes. To the extent that these powers fall within the scope of the
supervisory tasks conferred on the ECB, for participating Member States the ECB
should be considered the competent authority and should have the powers
conferred on competent authorities by Union law. This includes powers conferred
by those acts on the competent authorities of the home and the host Member
States and the powers conferred on designated authorities.

(31)     In order to carry out its
tasks effectively, the ECB should be able to require all necessary information,
and to conduct investigations and on-site inspections. These powers should
apply to supervised entities, persons involved in the activities of those
entities and related third parties, third parties to whom those entities have
outsourced operational functions or activities and persons otherwise closely
and substantially related or connected to the activities of those entities,
including the staff of a supervised entity who are not directly involved in its
activities but who, due to their function within the entity, may hold important
information on a specific matter and firms which have provided services to
those entities. The ECB should be able to require information by simple request
under which the addressee is not obliged to provide the information but, in the
event that it does so voluntarily, the information provided should not be
incorrect or misleading and should be made available without delay. The ECB
should also be able to require information by decision.

(32)     Where credit institutions
exercise their right of establishment or to provide services in another Member
State, or where several entities in a group are established in different Member
States, Union law provides for specific procedures and for attribution of
competences between the Member States concerned. To the extent that the ECB
takes over certain supervisory tasks for all participating Member States, those
procedures and attributions should not apply to the exercise of the right of
establishment or to provide services in another participating Member State.

(33)     In its decision-making
procedures, the ECB should be bound by Union rules and general principles on
due process and transparency. The right of the addressees of the ECB’s
decisions to be heard should be fully respected.

(34)     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. The ECB should therefore be accountable for the exercise
of these tasks towards the European Parliament and the Council of Ministers
respectively the Eurogroup as democratically legitimised institutions
representing the European people and the Member States. That should include
regular reporting and responding to questions. Where national supervisors take
action under this Regulation, accountability arrangements provided under
national law should continue to apply.

(35)     The ECB is responsible for
carrying out monetary policy functions with a view to maintaining price stability
in accordance with Article 127(1) TFEU. The exercise of supervisory tasks has
the objective to protect the safety and soundness of credit institutions and
the stability of the financial system. In order to avoid conflicts of interests
and to ensure that each function is exercised in accordance with the applicable
objectives, the ECB should ensure they are carried out in full separation.

(36)     In particular, a
supervisory board responsible for preparing decisions on supervisory matters
should be set up with the ECB encompassing the specific expertise of national
supervisors. The board should therefore be chaired by a Chair and a Vice-Chair
elected by the ECB Governing Council and composed, in addition, of
representatives from the ECB and from national authorities. In order to allow
for an appropriate rotation while ensuring the full independence of the Chair
and the Vice-Chair, their term should not exceed five years and should not be
renewable. In order to ensure full coordination with the activities of the EBA
and with the prudential policies of the Union, the EBA and the European
Commission should be observers in the supervisory board. The performance of the
supervisory tasks conferred upon the ECB requires the adoption of a large
number of technically complex acts and decisions, including decisions on
individual credit institutions. In order to effectively carry out those tasks
in accordance with the principle of separation from tasks relating to monetary
policy, the ECB Governing Council of the ECB should be able to delegate certain
clearly defined supervisory tasks and related decisions to the supervisory
board, subject to the oversight and responsibility of the Governing Council,
which can give instructions and directions to that body. The supervisory board
may be supported by a steering committee with a more limited composition.

(37)     The supervisory board and
staff of the ECB carrying out supervisory duties should be subject to
appropriate professional secrecy requirements. Similar requirements should apply
to the exchange of information with the staff of the ECB not involved in
supervisory activities. This should not prevent the ECB from exchanging
information within the limits and under the conditions set out in the relevant Union
legislation, including with the European Commission for the purposes of its
tasks under Articles 107 and 108 TFEU and under Union law on enhanced economic
and budgetary surveillance.

(38)     In order to carry out its
supervisory tasks effectively, the ECB should exercise the supervisory tasks
conferred on it in full independence, in particular from undue political
influence and from industry interference which would affect its operational
independence.

(39)     In order to carry out its
supervisory tasks effectively, the ECB should dispose of adequate resources. Those
resources should be obtained in a way that ensures the ECB's independence from
undue influences by national competent authorities and market participants, and
separation between monetary policy and supervisory tasks. The costs of
supervision should be primarily borne by the entities subject to it. Therefore,
the exercise of supervisory tasks by the ECB should be financed at least partly
by fees charged to credit institutions. In view of the transfer of significant
supervisory tasks from national authorities to the ECB it is expected that any
supervisory fees due at national level can be reduced as appropriate.

(40)     Highly motivated,
well-trained and impartial staff is indispensable to effective supervision. In
order to create a truly integrated supervisory mechanism, appropriate exchange
and secondment of staff with and among national supervisors and the ECB should
be provided for. Where necessary to avoid conflicts of interest, particularly
in the supervision of large banks, the ECB should be able to request that
national supervisory teams involve also staff from competent authorities of
other participating Member States.

(41)     Given the globalisation of banking
services and the increased importance of international standards, the ECB
should carry out its tasks in respect of international standards and in dialogue
and close cooperation with supervisors outside the Union, without duplicating
the international role of the EBA. It should be empowered to develop contacts
and enter into administrative arrangements with the supervisory authorities and
administrations of third countries and with international organisations, subject
to coordination with the EBA and while fully respecting the existing roles and
respective competences of the Member States and the Union institutions

(42)     Directive 95/46/EC of the
European Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free
movement of such data[10]
and Regulation (EC) No 45/2001 of the European Parliament and of the Council of
18 December 2000 on the protection of individuals with regard to the processing
of personal data by the Community institutions and bodies and on the free
movement of such data[11]
are fully applicable to the processing of personal data for the purposes of
this Regulation.

(43)     Regulation (EC) No
1073/1999 of the European Parliament and of the Council of 25 May 1999
concerning investigations conducted by the European Anti-Fraud Office (OLAF)[12] applies to the ECB. The ECB
has also acceded to the Interinstitutional Agreement of 25 May 1999 between the
European Parliament, the Council of the European Union and the Commission of
the European Communities concerning internal investigations by the European
Anti-Fraud Office.

(44)     In order to ensure that
credit institutions are subject to supervision of the highest quality,
unfettered by other, non-prudential considerations and that the negative mutually
reinforcing impacts of market developments concerns banks and Member States is
addressed in a timely and effective way, the ECB should start carrying out
specific supervisory tasks as soon as possible. However, the transfer of
supervisory tasks from national supervisors to the ECB requires a certain
amount of preparation. Therefore, an appropriate phasing-in period should be
provided for. The number of banks subject to the supervision of the ECB should
increase progressively, taking into account the relevance of the supervision of
those banks to ensure financial stability. As a first step the ECB should be
able to apply its supervisory tasks to any banks, in particular to banks which have
received or requested public financial assistance. As a second step, banks of
European systemic importance as reflected in their total exposures and their
cross-jurisdictional activities should be covered. Total exposures should be
calculated in light of the methodologies defined in the Basel III accord of the
Basel Committee on Banking Supervisors on the calculation of the leverage ratio
and on the definition of common equity tier 1 capital. The phasing-in process should
be completed within one year from the entry into force of this Regulation at
the latest.

(45)     The current framework of
prudential requirements for credit institutions and the supplementary
supervision of financial conglomerates is formed by Directives providing for a
significant number of options and discretions for Member States when
circumscribing the powers of competent authorities. Pending the adoption of new
Union legislative acts which spell out the powers which competent authorities
shall have directly and without reference to Member States' options or
discretions, the ECB can therefore not take any decisions directly applicable
to credit institutions, financial holding companies or mixed financial holding
companies. In this transitional phase, the ECB should therefore exercise its
tasks only by instructing national competent authorities to act.

(46)     This Regulation respects
the fundamental rights and observes the principles recognised in the Charter of
Fundamental Rights of the European Union, notably the right to the protection
of personal data, the freedom to conduct a business, the right to an effective
remedy and to a fair trial, and has to be implemented in accordance with those
rights and principles.

(47)     Since the objectives of
this Regulation, namely setting up an efficient and effective framework for the
exercise of specific supervisory tasks over credit institutions by a Union
institution, and ensuring the consistent application of the single rulebook to credit
institutions, cannot be sufficiently achieved at the Member State level and can
therefore, by reason of the pan-Union structure of the banking market and the
impact of bank failures on other Member States, be better achieved at the Union
level, the Union may adopt measures, in accordance with the principle of
subsidiarity as set out in Article 5 of the Treaty on European Union. In
accordance with the principle of proportionality, as set out in that Article,
this Regulation does not go beyond what is necessary in order to achieve those
objectives.

HAS ADOPTED THIS REGULATION:

Chapter I

Subject matter and definitions

Article 1

Subject matter

This Regulation confers on the ECB specific
tasks concerning policies relating to the prudential supervision of credit
institutions, with a view to promoting the safety and soundness of credit
institutions and the stability of the financial system, with due regard for the
unity and integrity of the internal market.

Article 2

Definitions

For the purposes of this Regulation,
the following definitions shall apply:

(1)
"participating Member State" means a
Member State whose currency is the euro;

(2)
"national competent authority" means the
national competent authority designated by participating Member States in
accordance with Directive 2006/48/EC of the European Parliament and the Council
of 14 June 2006 relating to the taking up and pursuit of the business of credit
institutions (recast)[13]
and Directive 2006/49/EC of the European Parliament and the Council of 14 June
2006 on the capital adequacy of investment firms and credit institutions
(recast)[14];

(3)
"credit institutions" means credit
institutions as defined in Article 4(1) of Directive 2006/48/EC;

(4)
"financial holding company" means a
financial holding company as defined in Article 4(19) of Directive 2006/48/EC;

(5)
"mixed financial holding company" means
a mixed financial holding company as defined in Article 2(15) of Directive
2002/87/EC of the European Parliament and of the Council of 16 December 2002 on
the supplementary supervision of credit institutions, insurance undertakings
and investment firms in a financial conglomerate[15];

(6)
"financial conglomerate" means a
financial conglomerate as defined in Article 2(14) of Directive 2002/87/EC.

Chapter II

Cooperation and tasks

Article 3

Cooperation

The ECB shall cooperate closely with the
European Banking Authority, the European Securities and Markets Authority, the
European Insurance and Occupational Pensions Authority and the European
Systemic Risk Board, which form part of the European System of Financial
Supervision established by Article 2 of Regulations (EU) No. 1093/2010, (EU) No
1094/2010, and (EU) No 1095/2010.

Article 4

Tasks conferred on the ECB

1.           The ECB shall, in
accordance with the relevant provisions of Union law, 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:

(a)
To authorise credit institutions and to withdraw
authorisation of credit institutions;

(b)
To assess acquisitions and disposals of holdings
in credit institutions;

(c)
To ensure compliance with any Union acts imposing
prudential requirements on credit institutions in the areas of own funds
requirements, large exposure limits, liquidity, leverage, and reporting and
public disclosure of information on those matters;

(d)
only in the cases specifically set out in Union acts,
to set higher prudential requirements and apply additional measures to credit
institutions;

(e)
To impose capital buffers to be held by credit
institutions in addition to own funds requirements referred to in (c), including
setting countercyclical buffer rates and any other measures aimed at addressing
systemic or macro-prudential risks in the cases specifically set out in Union
acts;

(f)
To apply requirements for credit institutions to
have in place robust governance arrangements, processes and mechanisms and effective
internal capital adequacy assessment processes;

(g)
To determine whether the arrangements,
strategies, processes and mechanisms put in place by credit institutions and
the own funds held by these institutions ensure a sound management and coverage
of their risks, and on the basis of that supervisory review to impose on credit
institutions specific additional own funds requirements, specific publication
requirements, specific liquidity requirements and other measures in the cases
specifically set out in Union acts;

(h)
To carry out supervisory stress-tests on credit
institutions to support the supervisory review;

(i)
To carry out supervision on a consolidated basis
over credit institutions' parents established in one of the participating
Member States, including over financial holding companies and mixed financial
holding companies, and to participate in supervision on a consolidated basis,
including in colleges of supervisors, in relation to parents not established in
one of the participating Member State;

(j)
To participate in supplementary supervision of a
financial conglomerate in relation to the credit institutions included in it
and assume the tasks of a coordinator where the ECB is appointed as the
coordinator for a financial conglomerate in accordance with the criteria set
out relevant Union law;

(k)
To carry out supervisory tasks in relation to early
intervention where a credit institution does not meet or is likely to breach
the applicable prudential requirements, including recovery plans and intra
group financial support arrangements, in coordination with the relevant
resolution authorities;

(l)
To coordinate and express a common position of
representatives from competent authorities of the participating Member States
when participating in the Board of Supervisors and the Management Board of the
European Banking Authority, for issues relating to the tasks conferred on the
ECB by this Regulation.

2.           For credit institutions
established in a non-participating Member State, which establish a branch or
provide cross-border services in a participating Member State, the ECB shall carry
out the tasks referred to in paragraph 1 for which the national competent
authorities of the participating Member State are competent.

3.           Subject to and in
compliance with any relevant Union law rule and in particular any legislative and
non-legislative act, the ECB may adopt regulations and recommendations and take
decisions to implement or apply Union law, to the extent necessary to carry out
the tasks conferred upon it by this Regulation.

4.           This regulation is without
prejudice to the responsibilities and related powers of the competent
authorities of the participating Member States to carry out supervisory tasks
not referred to in this Regulation.

Article 5

National authorities

1.           The ECB shall carry out
its tasks within a single supervisory mechanism composed of the ECB and
national competent authorities.

2.           National competent
authorities shall assist the ECB on its request with the preparation and
implementation of any acts relating to the tasks referred to in Article 4.

3.           The ECB shall organise the
practical modalities of implementation of paragraph 2 by the national
supervisory authorities in discharging its tasks. It shall clearly define the
framework and conditions under which national competent authorities shall carry
out those activities.

4.           National competent
authorities shall follow the instructions given by the ECB.

Article 6

Close cooperation with the competent
authorities of non participating Member States

1.           Within the limits set out
in this Article, the ECB shall carry out the tasks in the areas referred to in
Article 4 (1) and (2) in relation to credit institutions established in a Member
State whose currency is not the euro, where a close cooperation has been
established between the ECB and the national competent authority of such Member
State in accordance with this Article.

To that end, the ECB may address guidelines or
requests to the national competent authority of the non participating Member
State.

2.           The close cooperation
between the ECB and the national competent authority of a non participating Member
State shall be established, by a decision adopted by the ECB, where the
following conditions are met:

(a)
The Member State concerned notifies the other
Member States, the Commission, the ECB and the EBA the request to enter into a
close cooperation with the ECB in relation to the exercise of the tasks referred
to in Article 4 with regards to all credit institutions established in the
Member State concerned;

(b)
In the notification, the Member State concerned
undertakes:

–
to ensure that its national competent authority
will abide by any guidelines or requests issued by the ECB;

–
to provide all information on the credit
institutions established in that Member State that the ECB may require for the purpose
of carrying out a comprehensive assessment of those credit institutions.

(c)
The Member State concerned has adopted national
legal acts to ensure that its national competent authority will be obliged to
adopt any measure in relation to credit institutions requested by the ECB, in
accordance with paragraph 5.

3.           The decision referred to
in paragraph 2 shall determine, in compliance with the Statute of ESCB and of
the ECB, the conditions under which representatives of the competent
authorities of the Member States which established a close cooperation in
accordance with this Article shall take part to the activities of the
Supervisory Board.

4.           The decision referred to
in paragraph 2 shall be published in the Official Journal of the European Union.
The decision shall apply 14 days after such publication.

5.           Where the ECB considers
that a measure relating to the tasks referred to in paragraph 1 should be
adopted by the competent authority of a concerned Member State in relation to a
credit institution, financial holding company or mixed-financial holding
company, it shall make a request to that authority, specifying a relevant timeframe.
That timeframe shall be no less than 48 hours unless earlier adoption is
indispensable to prevent irreparable damage. The competent authority of the
concerned Member State shall take all the necessary measures in accordance with
the obligation referred to in paragraph (2)(c).

5.           Where the conditions set
out in paragraph 2(a) to (c) are no longer met by a Member State concerned, or
where its competent authority does not act in accordance with the obligation referred
to in paragraph 2(c), the ECB may decide to terminate the close cooperation
with that Member State.

The decision shall be notified to the Member
State concerned and shall be published in the Official Journal of the European
Union. The decision shall indicate the date from which it applies, taking due
consideration of supervisory effectiveness and legitimate interests of credit
institutions.

Article 7

International relations

Without prejudice to the respective
competences of the Member States and the other Union institutions, in relation
to the tasks conferred on the ECB by this Regulation, the ECB may develop
contacts and enter into administrative arrangements with supervisory
authorities, international organisations and the administrations of third
countries, subject to appropriate coordination with the EBA. Those arrangements
shall not create legal obligations in respect of the Union and its Member
States.

Chapter III

Supervisory and investigatory powers

Article 8

Supervisory and investigatory powers

1            For the purposes of
carrying out the tasks conferred upon it by Article 4(1) and (2), the ECB shall
be considered the competent authority in the participating Member States in
accordance with the relevant acts of Union law and have the powers and
obligations which competent authorities shall have under those acts.

For the purpose of carrying out the task
referred to in Article 4(1) and (2), the ECB shall be considered as the designated
authority in accordance with the relevant acts of Union law and have the powers
and obligations which designated authorities shall have under those acts.

2            For the purposes of
carrying out the tasks conferred upon it by Article 4(1) and (2), the ECB shall
have the investigatory powers set out in Section I.

SECTION 1

Investigatory powers

Article 9

Requests for information

1.           The ECB may by simple
request or by decision require the following legal or natural persons to
provide all information that is necessary in order to carry out the tasks
conferred upon it by this Regulation, including information to be provided at
recurring intervals and in specified formats for supervisory and related
statistical purposes:

(a)
credit institutions;

(b)
financial holding companies;

(c)
mixed financial holding companies;

(d)
mixed-activity holding companies;

(e)
persons involved in the activities of the
entities referred to in (a) to (d), and related third parties;

(f)
third parties to whom the entities referred to
in (a) to (d) have outsourced operational functions or activities;

(g)
persons otherwise closely and substantially
related or connected to the activities of the entities referred to in (a) to
(d);

(h)
national competent authorities.

2.           The persons referred to in
paragraph 1 shall supply the information requested.

Article 10

General investigations

1.           In order to carry out the
tasks conferred upon it by this Regulation, the ECB may conduct all necessary
investigations of persons referred to in Article 9 (1) (a) to (g). To that end,
the ECB shall have the right to:

(a)
require the submission of documents;

(b)
examine the books and records of the persons
referred to in Article 9 (1) (a) to (g) and take copies or extracts from such
books and records;

(c)
obtain written or oral explanations from any
person referred to in Article 9(1) (a) to (g) or their representatives or
staff;

(d)
interview any other natural or legal person who
consents to be interviewed for the purpose of collecting information relating
to the subject matter of an investigation;

2.           The persons referred to in
Article 9 (1) (a) to (g) shall submit to investigations launched on the basis
of a decision of the ECB.

When a person obstructs the conduct of the
investigation, the participating Member State where the relevant premises are
located shall afford the necessary assistance, including access by the ECB to
the business premises of the legal persons referred to in Article 9(1) (a) to
(g), so that the aforementioned rights can be exercised.

Article 11

On-site inspections

1.           In order to carry out the
tasks conferred upon it by this Regulation, the ECB may conduct all necessary
on-site inspections at the business premises of the legal persons referred to
in Article 9(1) (a) to (g), in accordance with Article 12. Where the proper
conduct and efficiency of the inspection so require, the ECB may carry out the
on-site inspection without prior announcement.

2.           The officials of and other
persons authorised by the ECB to conduct an on-site inspection may enter any
business premises and land of the legal persons subject to an investigation
decision adopted by the ECB and shall have all the powers stipulated in Article
10 (1). They shall also have the power to seal any business premises and books
or records for the period of, and to the extent necessary for, the inspection.

3.           The persons referred to in
Article 9(1) (a) to (g) shall submit to on-site inspections ordered by decision
of the ECB.

4.           Officials of, as well as
those authorised or appointed by, the competent authority of the Member State
where the inspection is to be conducted shall, upon the request of the ECB,
actively assist the officials of and other persons authorised by the ECB. To
that end, they shall enjoy the powers set out in paragraph 2. Officials of the
competent authority of the participating Member State concerned may also attend
the on-site inspections upon request.

5.           Where the officials of and
other accompanying persons authorised by the ECB find that a person opposes an
inspection ordered pursuant to this Article, the competent authority of the
participating Member State shall afford them the necessary assistance.

Article 12

Authorisation by a judicial authority

1.           If an on-site inspection
provided for in Article 11(1) or the assistance provided for in Article 11(5)
requires authorisation by a judicial authority according to national rules,
such authorisation shall be applied for.

2.           Where authorisation as
referred to in paragraph 1 is applied for, the national judicial authority
shall control that the decision of the ECB is authentic and that the coercive measures
envisaged are neither arbitrary nor excessive having regard to the subject
matter of the inspection. In its control of the proportionality of the coercive
measures, the national judicial authority may ask the ECB for detailed
explanations, in particular relating to the grounds the ECB has for suspecting
that an infringement of the relevant acts of Union law has taken place and the
seriousness of the suspected infringement and the nature of the involvement of
the person subject to the coercive measures. However, the national judicial
authority shall not review the necessity for the inspection or demand to be
provided with the information on the ECB's file. The lawfulness of the ECB's
decision shall be subject to review only by the Court of Justice of the
European Union.

SECTION 2

specific supervisory powers

Article 13

Authorisation

1.           Any application for an
authorisation to take up the business of a credit institution to be established
in a participating Member State shall be introduced with the national competent
authorities of the Member State where the credit institution is to be
established in accordance with the requirements set out in relevant national
legislation.

If the credit institution complies with all
conditions of authorisation set out in national law of that Member State, the
national competent authority shall take a decision to propose to the ECB to
grant the authorisation. The decision shall be notified to the ECB and to the
credit institution concerned.

When the ECB receives the proposal from the
national competent authority referred to in the second subparagraph, it shall
grant the authorisation where the conditions set out in Union law are met. The
decision shall be notified to the credit institution concerned.

2.           The ECB may withdraw the
authorisation in the cases set out in Union acts on its own initiative or on a
proposal from the national competent authority of the Member State where the
credit institution is established.

Where the national competent authority which
has proposed the authorisation in accordance with paragraph 1 considers that
the authorisation must be withdrawn in accordance with the national law, it
shall submit a proposal to the ECB to that end. In that case, the ECB may
withdraw the authorisation.

Article 14

Powers of host authorities and
cooperation on consolidated supervision

1.           Between participating
Member States the procedures set out in Union acts for credit institutions
wishing to establish a branch or to exercise the freedom to provide services by
carrying on their activities within the territory of another Member State and
the related competences of home and host Member States shall apply only for the
purposes of the tasks not conferred upon the ECB by Article 4 of this Regulation.

2.           The provisions set out in
Union acts in relation to the cooperation between competent authorities from
different Member States for conducting supervision on a consolidated basis
shall not apply to the extent that the competent authorities involved are
competent authorities of participating Member States.

Article 15

Sanctions

1.           For the purpose of
carrying out the tasks conferred upon it by this Regulation, where credit
institutions, financial holding companies, or mixed financial holding
companies, intentionally or negligibly, breach a requirement under directly
applicable Union acts in relation to which administrative pecuniary sanctions
shall be available to competent authorities under Union law, the ECB may impose
administrative pecuniary sanctions of up to twice the amount of the profits
gained or losses avoided because of the breach where those can be determined,
or up to 10% of the total annual turnover of a legal person in the preceding
business year.

2.           Where the legal person is
a subsidiary of a parent undertaking, the relevant total annual turnover
referred to in the first subparagraph shall be the total annual turnover
resulting from the consolidated account of the ultimate parent undertaking in
the preceding business year.

3.           The sanctions applied
shall be effective, proportionate and dissuasive. In determining whether to
impose a sanction and in determining the appropriate sanction, the ECB shall
take into account all relevant circumstances set out in Union law.

4.           The ECB shall apply this
Article in accordance with Articles 3 to 5 of the Council Regulation (EC) No
2532/98.

5.           In the cases not covered
by paragraph 1, where necessary for the purpose of carrying out the tasks
conferred upon it by this Regulation, the ECB may require national competent
authorities to take action in order to ensure that appropriate sanctions are
imposed. The sanctions applied by national competent authorities will be
effective, proportionate and dissuasive.

The first subparagraph shall be applicable in
particular to pecuniary sanctions to be imposed on credit institutions,
financial holding companies or mixed financial holding companies for breaches
of national law transposing relevant EU Directives, and to any administrative
sanctions or measures to be imposed on members of the management board or any
other individuals who under national law are responsible for a breach by a
credit institution, financial holding company or mixed financial holding
company.

6.           The ECB shall publish any
sanction referred to paragraph 1 without undue delay including information on
the type and nature of the breach and the identity of persons responsible for
it, unless such publication would seriously jeopardise the stability of the
financial markets. Where publication would cause a disproportionate damage to the
parties involved, the ECB shall publish the sanction on an anonymous basis.

7.           Without prejudice to
paragraphs 1 to 6, for the purposes of carrying out the tasks conferred on it
by this Regulation, in case of breaches of ECB regulations or decisions the ECB
may impose sanctions in accordance with Council Regulation (EC) No 2532/98.

Chapter IV

Organisational principles

Article 16

Independence

1.           When carrying out the
tasks conferred upon it by this Regulation, the ECB shall act independently.

2.           Union institutions,
bodies, offices and agencies and the governments of the Member States shall
respect that independence.

Article17

Accountability

The ECB shall be accountable to the
European Parliament and to the Council for the implementation of this
Regulation, in accordance with this Chapter

Article 18

Separation from monetary policy function

1.           When carrying out the
tasks conferred on it by this Regulation, the ECB shall pursue only the
objectives set by this Regulation.

2.           The ECB shall carry out the
tasks conferred upon it by this Regulation separately from its tasks relating
to monetary policy and from any other tasks. The tasks conferred upon the ECB
by this regulation shall not interfere with the ECB's tasks relating to
monetary policy and any other tasks.

3.           For the purposes of paragraphs
1 and 2, the ECB shall adopt any necessary internal rules, including rules regarding
professional secrecy.

Article 19

Supervisory board

1.           The planning and execution
of the tasks conferred upon the ECB, shall be undertaken by an internal body
composed of four representatives of the ECB appointed by the Executive Board of
the ECB and one representative of the national authority competent for the supervision
of credit institutions in each participating Member State (hereinafter
"supervisory board").

2.           In addition, the
supervisory board shall include a Chair elected by the members of the Governing
Council from the members, with the exception of the President, of the Executive
Board, and a Vice-Chair elected by and from the members of the Governing
Council of the ECB.

3.           The Governing Council of
the ECB may delegate clearly defined supervisory tasks and related decisions
regarding individual or a set of identifiable credit institutions, financial
holding companies or mixed financial holding companies to the supervisory
board, subject to the oversight and responsibility of the Governing Council.

4.           The supervisory board may appoint
from among its members a steering committee with a more limited composition which
supports its activities, including preparing the meetings.

5.           The representatives of
the competent authority of the Member States which established a close
cooperation in accordance with Article 6 shall take part to the activities of
the supervisory board in accordance with the conditions set out in the decision
adopted in accordance with paragraphs 2 and 3 of Article 6, in compliance with
the Statute of ESCB and of the ECB.

6.           The Chair of the European
Banking Authority and a member of the European Commission may participate as
observers in the meetings of the supervisory board.

7.           The Governing Council
shall adopt the rules of procedure of the supervisory board including rules on
the term of office of the Chair and the Vice-Chair. The term of office shall
not exceed five years and shall not be renewable.

Article 20

Professional secrecy and exchange of
information

1.           Members of the Supervisory
Board and staff of the ECB carrying out supervisory duties, even after their
duties are ceased, shall be subject to the professional secrecy requirements
set out in Article 37 of Protocol No. 4 and in the relevant acts of Union law.

2.           For the purpose of
carrying out the tasks conferred upon it by this Regulation, the ECB shall be
authorised, within the limits and under the conditions set out in the relevant
acts of Union law, to exchange information with national or European
authorities and bodies in the cases where Union law allows national competent
authorities to disclose information to those entities or where Member States may
provide for such disclosure under Union law.

Article 21

Reporting

1.           The ECB shall submit each
year to the European Parliament, the Council, the Commission and the Eurogroup a
report on the execution of the tasks conferred upon it by this Regulation.

2.           The Chair of the
supervisory board of the ECB shall present this report to the European
Parliament and to the Eurogroup in the presence of representatives from any non
participating Member State in relation to which a close cooperation in
accordance with Article 6 is in place.

3.           The Chair of the supervisory
board may, at the request of the European Parliament, be heard on the execution
of its supervisory tasks by the competent committees of the European Parliament.

4.           The ECB shall reply orally
or in writing to questions put to it by the European Parliament or by the
Eurogroup.

Article 22

Resources

The ECB shall devote the necessary resources
to the exercise of the tasks conferred upon it by this Regulation.

Article 23

Budget

1.           The ECB's expenditure for carrying
out the tasks conferred upon it by this Regulation shall be entered into a
separate section of the budget of the ECB.

2.           The ECB shall, as part of
the report referred to in Article 22, report in detail on the supervisory
section of its budget. It shall publish the detailed annual accounts in
relation to the supervisory section of its budget in accordance with Article
26.2 of the Statute of the ECB and of the ESCB.

Article 24

Supervisory fees

1.           The ECB shall levy fees on
credit institutions which shall cover expenditures relating to its tasks, and
not exceed those expenditures .

2.           The amount of a fee levied
on a credit institution shall be proportionate to the importance and risk
profile of the credit institution concerned.

Article 25

Staff exchange

1.           The ECB shall ensure an
appropriate exchange and secondment of staff with and among national competent
authorities.

2.           The ECB shall require
where appropriate that supervisory teams of national competent authorities taking
supervisory actions regarding a credit institution, financial holding company
or mixed financial holding company located in one participating Member State in
accordance with this regulation involve also staff from national competent
authorities of other participating Member States.

Chapter V

General and final provisions

Article 26

Review

By 31 December 2015, the Commission shall
publish a report on the application of this Regulation. That report shall
evaluate, inter alia:

(a) the functioning of the ECB within the
European System of Financial Supervision;

(b) the effectiveness of independence and
accountability arrangements;

(c) the interaction between the ECB and the
European Banking Authority

(d) the appropriateness of governance
arrangements, including the composition of the supervisory board.

The report shall be forwarded to the
European Parliament and to the Council. The Commission shall make accompanying
proposals, as appropriate.

Article 27

Transitional provisions

1.           From the 1st of July 2013,
the ECB shall carry out the supervisory tasks conferred on it also in relation
to the most significant credit institutions, financial holding companies and
mixed financial holding companies of European systemic importance at the
highest level of consolidation, based on their size as reflected in, the sum of
exposure values of all assets and off-balance sheet liabilities not deducted
when determining the common equity tier 1 capital for regulatory purposes, and
their cross-border activity as reflected in cross-jurisdictional claims such as
deposits and other assets in respect of customers or other financial operators
located in another country and cross-jurisdictional liabilities such as loans
and notes in respect of customers or other financial operators located in
another country, which together cover at least half of the banking sector in
the Euro area as a whole, on 1 January 2013. The ECB shall adopt and make
public the list of those institutions before 1 March 2013.

2.           The ECB shall assume in
full the tasks conferred on it by this regulation on the 1 January 2014 at
latest.

3.           Before 1 January 2014 the
ECB may, by a decision addressed to the credit institution, financial holding
company or mixed financial holding company and the national competent authority
of the participating Member States concerned, start carrying out the tasks
conferred on it by this Regulation, in particular where a credit institution,
financial holding company or mixed financial holding company has received or
requested public financial assistance.

4.           From the entry into force
of this Regulation, in view of the assumption of its tasks in accordance with
paragraph 1 to 3, the ECB may require the competent authorities of the participating
Member States and the persons referred to in Article 9 to provide all relevant
information for the ECB to carry out a comprehensive assessment of the credit
institutions of the participating Member State. The credit institution and the
competent authority shall supply the information requested.

5.           By derogation from Article
4 (3), from the entry into force of this regulation and until the repeal of
Directives 2006/48/EC and 2006/49/EC and their replacement by new Union acts,
the ECB shall exercise the tasks conferred on it by this regulation by
addressing instructions to national competent authorities on the exercise of
any relevant powers conferred on them.

By derogation from Article 4 (3), from the
entry into force of this regulation and until the entry into force of
legislative acts on supplementary supervision over credit institutions,
insurance undertakings and investment firms in a financial conglomerate
enabling the ECB to exercise the powers of competent authorities, the ECB shall
exercise the tasks conferred on it by Article 4(2)(j) by addressing
instructions to national competent authorities on the exercise of any relevant
powers conferred on them.

6.           Credit institutions
authorised by participating Member States on the date referred to in Article 28 
or where relevant on the dates referred to in paragraphs 2 and 3, shall be deemed
to be authorised in accordance with Article 13 and may continue to carry on
their business. National competent authorities shall communicate to the ECB
before the date of application of this Regulation or where relevant before the
dates referred to in paragraphs 2 and 3 the identity of these credit
institutions together with a report indicating the supervisory history and the
risk profile of the institutions concerned, and any further information
requested by the ECB. The information shall be submitted in the format
requested by the ECB.

Article 28

Entry into force

This Regulation shall enter into force
on 1 January 2013.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For
the Council

The
President

[1]               COM(2011)452 and COM(2011)453 of 20 July 2011.

[2]               OJ C , , p. .

[3]               OJ C , , p. .

[4]               OJ L 331, 15.12.2010, p. 12.

[5]               OJ L 331, 15.12.2010, p. 37.

[6]               OJ L 331, 15.12.2010, p. 84.

[7]               OJ C 40, 7.2.2001, p. 453.

[8]               OJ C 25 E, 29.1.2004, p. 394.

[9]               OJ L 318, 27.11.98, p. 4.

[10]             OJ L 281, 23.11.1995, p. 31.

[11]             OJ L 8, 12.1.2001, p. 1.

[12]             OJ L 136, 31.5.1999, p. 1.

[13]             OJ L177, 30.6.2006, p. 1.

[14]             OJ L177, 30.6.2006, p. 277.

[15]             OJ L 35, 11.2.2003, p. 1–27.