Case T‑122/15

Landeskreditbank Baden-Württemberg — Förderbank

v

European Central Bank

(Economic and monetary policy — Prudential supervision of credit institutions — Article 6(4) of Regulation (EU) No 1024/2013 — Article 70(1) of Regulation (EU) No 468/2014 — Single supervisory mechanism — Competences of the ECB — Decentralised exercise by the national authorities — Assessment of the size of a credit institution — Need for direct supervision by the ECB)

Summary — Judgment of the General Court (Fourth Chamber, Extended Composition), 16 May 2017

Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Single supervisory mechanism — Less significant institutions subject to direct prudential supervision by the national authorities — Decentralised implementation by those authorities of an exclusive competence of the Union — No possibility of reclassifying a significant institution as less significant on the ground that the national authorities appropriate for exercising direct supervision of it

Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Single supervisory mechanism — Competences of the European Central Bank — Decentralised implementation by the national authorities — Assessment of the significance of an institution — Exclusive competence of the ECB

Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Single supervisory mechanism — Significant institutions subject to direct prudential supervision of the ECB — Classification of an institution as significant — Appropriateness of supervision by the ECB compared with that capable of being exercised by the national authorities

Exclusive competence for the prudential supervision of significant credit institutions falls to the European Central Bank pursuant to Articles 4 and 6 of Regulation No 1024/2013, conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions. Article 6(4), second subparagraph, of that regulation provides that an institution need not be classified as ‘significant’ in ‘particular circumstances’ which the ECB is entrusted with specifying. That specification of ‘particular circumstances’ allowing for the declassification of a credit institution as ‘significant’ is given in Articles 70 and 71 of Regulation No 468/2014, establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities. In that regard, the wording of Article 70(1) of Regulation No 468/2014 focuses solely on the examination of whether or not the classification of an entity as significant is appropriate and, therefore, its supervision by the ECB alone, in relation to the objectives of Regulation No 1024/2013. No reference is made to an examination of the need for direct supervision of a significant entity by the ECB. Whilst generally the examination of whether an EU act is appropriate focuses on whether it is suitable for attaining the legitimate objectives pursued by the legislation at issue, the assessment as to whether it is necessary consists in ascertaining whether or not it goes beyond what is necessary in order to achieve those objectives. Therefore, Article 70(1) of Regulation No 468/2014, referring as it does to ‘specific and factual circumstances that make the classification of a supervised entity as significant inappropriate, taking into account the objectives and principles of Regulation No 1024/2013’, must necessarily be understood as suggesting that direct prudential supervision by the ECB, implied by the classification of an entity as ‘significant’, is less able to ensure achievement of the objectives of the Basic Regulation than direct prudential supervision of that entity by the national authorities. On the other hand, a literal interpretation of Article 70(1) of Regulation No 468/2014 does not suggest reclassification of a ‘significant entity’ as ‘less significant’ on the ground that direct supervision by the national authorities under the single supervisory mechanism is just as able to achieve the objectives of the Basic Regulation than supervision by the ECB alone. (see paras 22, 28, 29, 44-46)

See the text of the decision. (see paras 40, 41)

It follows from the general system of Regulation No 1024/2013 that the Council has delegated to the ECB exclusive competence in respect of the prudential tasks laid down in Article 4(1) of that regulation and that the sole purpose of Article 6 of that same regulation is to enable decentralised implementation under the Single Supervisory Mechanism of that competence by the national authorities, under the control of the ECB, in respect of the less significant entities and in respect of the tasks listed in Article 4(1)(b) and (d) to (i) of the Basic Regulation, whilst conferring on the ECB exclusive competence for determining the content of the concept of ‘particular circumstances’ within the meaning of Article 6(4), second subparagraph, of that same regulation, which was implemented through the adoption of Articles 70 and 71 of Regulation No 468/2014, establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities. (see para. 63)

Although, when it does apply, the principle of subsidiarity involves inter alia a determination as to whether the proposed action can be better achieved by the European Union or whether it can be achieved just as effectively by the Member States, under Article 5(3) TEU it applies only in areas which do not fall within exclusive EU competence. (see para. 65)

See the text of the decision. (see paras 67, 68)

When supervising less significant institutions pursuant to the Single Supervisory Mechanism described in Article 6 of Regulation No 1024/2013, the national authorities act within the scope of decentralised implementation of an exclusive competence of the Union, not the exercise of a national competence. Therefore, the only competence liable to be affected by the exercise of direct prudential supervision by the ECB is the Member States’ competence in principle for the implementation of EU law in their legal order, underscored in Article 291(1) TFEU. That provision states that, according to the institutional system of the Union and the rules governing between the Union and the Member States, it is for the latter, in the absence of any contrary provision of EU law, to ensure that EU law is implemented within their territory. It is clear, however, that preservation of that competence cannot involve an interpretation of ‘particular circumstances’ allowing for the declassification of a credit institution as ‘significant’ within the meaning of Article 70(1) of Regulation No 468/2014 establishing the framework for SSM cooperation between the ECB, the national competent authorities and the national designated authorities (‘the SSM Framework Regulation’) which would require ascertaining on a case-by-case basis in respect of an institution classified as significant under the criteria laid down in Article 6(4) of Regulation No 1024/2013 whether its objectives may be just as well attained through direct supervision by the national authorities. Such an interpretation would amount to calling into question the balance provided for in that regulation, involving as it does a case-by-case determination as to whether, despite the application of the criteria set out in Article 6(4) of the said regulation, a significant institution should come under the direct supervision of the national authorities on the ground that they are better able to attain the objectives of Regulation No 1024/2013. More specifically, such an examination would run directly counter to two factors that play a fundamental role in the logic of that provision, being, firstly, the principle that significant institutions come under the sole supervision of the ECB and, secondly, the existence of specific alternative criteria enabling the significance of a credit institution to be assessed. (see paras 72-76)

See the text of the decision. (see para. 84)

See the text of the decision. (see para. 122)

See the text of the decision. (see paras 123, 124, 131)