JUDGMENT OF THE GENERAL COURT (Ninth Chamber, Extended Composition)

6 October 2021 ( *1 )

(Economic and monetary policy – Prudential supervision of credit institutions – Specific supervisory tasks assigned to the ECB – Decision to withdraw a credit institution’s authorisation – Breach of legislation on combating money laundering and the financing of terrorism – Admissibility – Powers of the national competent authorities (NCAs) of participating Member States and of the ECB under the Single Supervisory Mechanism (SSM) – Equal treatment – Proportionality – Protection of legitimate expectations – Legal certainty – Misuse of powers – Rights of the defence – Obligation to state reasons)

In Cases T‑351/18 and T‑584/18,

Ukrselhosprom PCF LLC, established in Solone (Ukraine),

Versobank AS, established in Tallinn (Estonia),

represented by O. Behrends, lawyer,

applicants,

v

European Central Bank (ECB), represented by C. Hernández Saseta and G. Marafioti, acting as Agents, and by B. Schneider, lawyer,

defendant,

supported by

European Commission, represented by A. Steiblytė, D. Triantafyllou and A. Nijenhuis, acting as Agents,

intervener,

APPLICATION under Article 263 TFEU seeking annulment, first, of decision ECB_SSM_2018_EE_1 WHD_2017‑0012 of the ECB of 26 March 2018, secondly, of decision ECB_SSM_2018_EE_2 WHD_2017‑0012 of 17 July 2018, replacing decision ECB_SSM_2018_EE_1 WHD_2017‑0012, by which the ECB withdrew Versobank’s authorisation to operate as a credit institution, and, thirdly, of decision ECB/SSM/2018‑EE‑3 of 14 August 2018 on the costs relating to the review procedure,

THE GENERAL COURT (Ninth Chamber, Extended Composition),

composed of M.J. Costeira (Rapporteur), President, D. Gratsias, M. Kancheva, B. Berke and T. Perišin, Judges,

Registrar: P. Cullen, Administrator,

having regard to the written part of the procedure and further to the hearing on 25 September 2020,

gives the following

Judgment

I. Background to the dispute

1 Versobank AS, the second applicant, is a credit institution established in Estonia. Its main shareholder is Ukrselhosprom PCF LLC, the first applicant, which has an equity holding of 85.2622% in Versobank.

2 The second applicant was classified as a less significant institution for the purposes of Article 6 of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63; ‘the Basic SSM Regulation’).

3 As a less significant credit institution, the second applicant was placed under the prudential supervision of Finantsinspektsioon (FSA, Estonia), acting as the national competent authority (NCA), within the meaning of Article 2(2) of the Basic SSM Regulation. Moreover, the latter was also competent in relation to, inter alia, the monitoring of compliance with rules intended to combat money laundering and the financing of terrorism (‘AML/CFT’).

4 From 2015 onwards, the FSA identified recurring breaches by the second applicant in connection with, first, the ineffectiveness of its AML/CFT regime as regards the management of the risks stemming from its business model and, secondly, the inadequacy of the AML/CFT governance arrangements which it had in place.

5 The FSA carried out a number of on-site inspections. The first took place between 13 April and 12 June 2015.

6 In the light of the recurrence of the breaches identified, the FSA, after sending the second applicant a number of notices to comply with the legal requirements, adopted a precept dated 8 August 2016.

7 The precept at issue, under which the shortcomings identified during the 2015 on-site inspection were to be immediately remedied, required the second applicant to take certain steps: first, the application of existing, but not properly applied, AML/CFT policies and procedures, secondly, the application of the due diligence measures laid down in Article 13(1)(3) to (5) of the Rahapesu ja terrorismi rahastamise tõkestamise seadus (Estonian law on AML/CFT) of 19 December 2007 transposing Directive (EU) 2015/849 of the European Parliament and of the Council of20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ 2015 L 141, p. 73), in the version in force at the material time in the present case, thirdly, verification of the proper application of the due diligence measures laid down in Article 13(1)(3) to (5) of the Estonian law on AML/CFT, fourthly, refusal to carry out transactions if Article 27(2) of that law, in the version in force at the material time in the present case, obliged it to exercise that right and, fifthly, immediate compliance with the notification obligation laid down in Article 32 of that law, in the version in force at the material time in the present case, which imposed an obligation to report suspicions of money laundering or terrorist financing in cases where the relevant conditions were met. In addition, that precept required that applicant to submit information in writing by 9 December 2016, at the latest, regarding the manner in which it fulfilled those obligations.

8 The FSA carried out a second on-site inspection between 13 September and 11 November 2016.

9 In addition, between 5 September and 14 November 2016, a third on-site inspection was carried out by the FSA, which related to breaches identified in connection with the operation by the second applicant of an allegedly unlawful branch or subsidiary in Latvia.

10 By letter of 9 December 2016, the second applicant sent the FSA its written observations on the precept at issue.

11 By letter of 28 February 2017, the FSA notified the second applicant that it had still not complied with all of the obligations imposed by the precept at issue. On 10 April 2017, the FSA adopted, in relation to that applicant, a failing or likely to fail declaration (‘the FOLTF decision’).

12 In the light of information received from the second applicant, the FSA considered it necessary to conduct an in-depth investigation. It carried out a fourth on-site inspection between 4 and 22 September 2017. In the course of that inspection, the FSA identified material and severe breaches of the AML/CFT legislation similar to those which it had identified in two of the previous inspections, and found that that applicant’s internal control system was weak and inadequate.

13 On 8 February 2018, the ECB received a proposal from the FSA to withdraw the authorisation of the second applicant, in accordance with Article 80 of Regulation (EU) No 468/2014 of the ECB of 16 April 2014 establishing the framework for cooperation within the SSM between the ECB and NCAs and with national designated authorities (‘the SSM Framework Regulation’) (OJ 2014 L 141, p. 1).

14 In the context of the obligation to cooperate laid down in Article 80(2) of the SSM Framework Regulation, the FSA also acted, pursuant to Article 3 of the Finantskriisi ennetamise ja lahendamise seadus (Estonian Law on the prevention and resolution of financial crises) of 18 February 2015, as the national resolution authority responsible for credit institutions, through its resolution department. On 7 February 2018, the board of directors of the FSA approved its resolution department’s assessment that there was no public interest in exercising resolution powers under Article 39(1), (3) and (4) of that law, which transposes Article 32(1)(c) and 32(5) of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (OJ 2014 L 173, p. 190).

15 On 6 March 2018, the ECB’s Supervisory Board approved the draft decision withdrawing authorisation from the second applicant and gave it five days to submit its observations on the draft decision, pursuant to Article 31 of the SSM Framework Regulation. After the authorisation withdrawal, liquidation proceedings were opened with respect to that applicant and liquidators were appointed.

16 On 14 March 2018, the second applicant submitted its observations, which were taken into account in the final decision. After examining those observations, the ECB concluded that it was necessary to withdraw its authorisation from that applicant.

17 On the basis of Articles 4(1)(a) and 14(5) of the Basic SSM Regulation, Article 83 of the SSM Framework Regulation and Article 17 of the Krediidiasutuste seadus (Estonian Law on Credit Institutions) of 9 February 1999, transposing Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338), the ECB adopted and notified to the second applicant its decision of 26 March 2018 withdrawing the latter’s authorisation (‘the decision of 26 March 2018’).

18 On 27 March 2018, the competent Estonian court adopted a decision opening the proceedings for the liquidation of the second applicant.

19 On 26 April 2018, the Administrative Board of Review of the ECB (‘the ABoR’) received an application from the first applicant for review of the decision of 26 March 2018. It held that request for review to be admissible, taking the view that that applicant was directly and individually concerned by that decision.

20 On 22 June 2018, the ABoR adopted and communicated to the ECB’s Supervisory Board Opinion AB/2018/03, by which it proposed that the Supervisory Board take the view that the substantive and procedural infringements relied on were unfounded and that it adopt a decision identical in content to the decision of 26 March 2018.

21 The ECB’s Governing Council followed that opinion and adopted the decision of 17 July 2018 (‘the decision of 17 July 2018’). That decision was notified to the liquidators of the second applicant, which had in the meantime been placed in liquidation.

22 By decision of 26 March 2018, the ECB withdrew the second applicant’s authorisation as a credit institution. By decision of 17 July 2018, it repealed and replaced its decision of 26 March 2018. In the decision on costs, it also ordered the first applicant to pay the costs relating to the review proceedings.

23 In paragraph 3.2 of the decision of 17 July 2018, the ECB observes, first, that the proposal to withdraw the second applicant’s authorisation to operate as a credit institution was adopted at the conclusion of a long and continuous period of deficiencies and breaches of applicable legal provisions on its part, secondly, that the NCA had conducted four on-site inspections since 2015 and had adopted a precept in 2016 and, thirdly, that, as that applicant had not complied either with the relevant informal requests or with the precept, it could not come to a positive assessment regarding the future compliance of that applicant with the regulatory requirements imposed on it.

24 Also, in paragraph 3.2 of the decision of 17 July 2018, the ECB expressed the view that, on the basis of the evidence gathered and the findings of the on-site inspections carried out by the FSA, the grounds for withdrawal set out in Article 18(f) of Directive 2013/36, as transposed into Estonian law, had to be regarded as being satisfied in relation to the second applicant. The grounds for that withdrawal of authorisation were as follows: – that applicant’s failure to have in place the governance arrangements required by the FSA, in accordance with the national provisions transposing Article 74 of Directive 2013/36; – that applicant’s lack of an effective AML/CFT regime to manage the risks stemming from its business model, in spite of three on-site AML/CFT inspections, several meetings and notices, the precept and a letter concerning non-compliance with the precept; – that applicant’s failure to implement the precept within the period and to the extent prescribed; – that applicant’s submission of misleading and incorrect documents and information to the FSA and its breach of conditions laid down by the legislation of a Member State of the European Economic Area (namely, the Republic of Latvia).

25 In particular, as regards the first ground on which the withdrawal of authorisation was based, namely the second applicant’s failure to have in place the governance arrangements required by the FSA, in accordance with the national provisions transposing Article 74 of Directive 2013/36, the ECB stated, in paragraph 3.3.1(a) of the decision of 17 July 2018, that the control system was weak and inadequate for the type, scope and complexity of that applicant’s business model.

26 As regards the second ground justifying the withdrawal of authorisation, the ECB stated, in paragraph 3.3.1(b) of the decision of 17 July 2018, that the second applicant’s business model focused on providing services to high-net-worth non-resident corporate customers and that, during the first three on-site inspections carried out by the FSA between 2015 and 2017, a large number of unusual transactions had been observed.

27 Furthermore, according to the ECB, the activities of the second applicant’s board of directors and supervisory board with regard to AML/CFT and risk management had been considered to be inadequate, in so far as that board had not determined that applicant’s risk tolerance, or put in place a separate risk assessment system for AML/CFT, or prepared an operational risk analysis, including a detailed analysis of the risks in that regard, in breach of Article 55(2)(2) and (3) of the Estonian Law on Credit Institutions.

28 Thus, according to the ECB, the second applicant did not have the governance arrangements required by Article 67(1)(o) of Directive 2013/36 and therefore fulfilled the condition for withdrawal of the authorisation, as laid down in Article 18(f) of that directive. Furthermore, in view of that applicant’s previous performance, the ECB shared the FSA’s view that it was highly unlikely that the applicant’s new board of directors, the fourth since 2015, would introduce, in a strict manner, the announced changes concerning its AML/CFT risk management system.

29 As regards the third ground justifying the withdrawal of authorisation, the ECB observed, in paragraph 3.3.1(c) of the decision of 17 July 2018, that the second applicant had not complied with the precept at issue within the set time limit of 9 December 2016. According to the Commission, by that precept, the FSA required, inter alia, that applicant, first, to apply the procedural rules, secondly, to apply correctly, in the future, Article 13(1)(3) to (5) of the Estonian law on AML/CFT, in the version in force at the time of the adoption of that precept, and to avoid initiating commercial relations where that proved necessary, thirdly, to verify whether those provisions had been correctly applied to existing commercial relations and, if necessary, to apply customer due diligence measures once again, fourthly, to avoid, where appropriate, carrying out transactions under the terms of Article 27(2) of that law, in the version in force at the time of the adoption of the precept at issue, fifthly, to refer to the financial intelligence unit when an activity or other circumstance could be an indication of the commission or attempted commission of money laundering or terrorist financing, or where that applicant had reason to believe or knew that money laundering or terrorist financing was taking place and, sixthly, to provide the FSA with a report of the actions taken to implement the above obligations. However, during the third on-site inspection, the FSA found that the abovementioned obligations had not been fully complied with and that the shortcomings identified were ongoing. Accordingly, the ECB concluded that the failure to comply with the precept at issue constituted another ground justifying the withdrawal of authorisation under Article 18(f) of Directive 2013/36.

30 As regards the fourth ground justifying the withdrawal of authorisation, the ECB noted, in paragraph 3.3(d) of the decision of 17 July 2018, that the second applicant had submitted misleading and inaccurate information and documents to the FSA concerning its activities in Latvia, stating, first, that it did not own a subsidiary there and, secondly, in its communication of 9 February 2016 to that NCA, that it had closed its establishment in Latvia, even though the latter was still operational. According to the ECB, the results of the on-site inspection carried out by that NCA between 5 September and 14 November 2016 had, in fact, demonstrated that that applicant had provided financial services in Latvia without interruption since October 2013. It observed that, according to the information communicated by the Latvian national supervisory authority to the FSA, that applicant had created its ‘subsidiary’ in Latvia in breach of the Latvian legislative provisions which transposed Articles 35 to 38 of Directive 2013/36 on the ‘passporting’ procedure. In its view, such conduct constituted an infringement of Article 17(1)(2) and (15) of the Estonian Law on Credit Institutions. It therefore concluded that that conduct constituted an additional ground for withdrawal of authorisation under Article 18(e) of that directive.

31 As regards the examination of the proportionality of the withdrawal of authorisation and, in the first place, of the appropriateness of such a withdrawal, the ECB stated that the purpose of withdrawing the authorisation granted to a credit institution was to put an end to that institution’s infringements of the applicable legal provisions and that the need for such an institution to have an appropriate system of governance in place stemmed from the fact that weaknesses in such a system could lead to the insolvency of that institution and to systemic problems in Member States and globally. It was of the opinion that, in view of the long-term breaches of the anti-money laundering legislation by the second applicant, the FSA had to intervene and that, in the present case, the latter had first adopted a precept, and it was only after infringement of that precept that the FSA had proposed withdrawal of authorisation, which, in those circumstances, had to be regarded as an appropriate and proportionate measure. It considered that that measure was also appropriate in relation to the infringement of the notification procedure, known as the ‘passporting’ procedure, which must be followed in order to establish a branch in another Member State.

32 In the second place, as regards the examination of the necessity of withdrawing authorisation, the ECB took into account not only the seriousness of the breaches observed, but also all the less onerous measures which had already been taken to remedy the shortcomings of the second applicant. In view of the continuing nature of the unlawful conduct of that applicant, the incorrect information which it provided in relation to its activities in Latvia and the fact that the extensive supervisory and inspection activities already carried out by the FSA had failed to put an end to the breaches, the ECB found, after analysing not only the actions already undertaken by the FSA but also all the other measures available under the applicable national legislation, namely the Estonian Law on Credit Institutions, that there were no less onerous measures capable of restoring legality.

33 In particular, the ECB found that the ‘forced sale’ option was not legally available in relation to the second applicant. It went on to set out the various alternative measures it had considered and explain why it did not believe that they would be effective in terms of restoring legality. First, a new change in the composition of the board of directors of that applicant was not regarded as an effective measure, since (i) that applicant had already made a number of changes in the board of directors without that having produced any effects in terms of compliance with the legal obligations at issue, (ii) the applicant had announced several times, from 2015 onwards, a change in its commercial strategy without those announcements being followed by concrete changes, (iii) under Estonian law, although the board of directors has the power to influence the commercial strategy of a credit institution, it does not have the power to define that strategy autonomously as its responsibility is limited to the management of the day-to-day business of the institution, and (iv) in the present case, the chances that a change in the board of directors would lead to a change in strategy were low, given that the two key positions on the board of directors are held by the two main shareholders of the credit institution, who would be in a position informally to influence the strategy and thus maintain the status quo.

34 Secondly, as regards the cessation or suspension of the voting rights of certain shareholders, pursuant to the provision of Estonian law transposing Article 26(2) of Directive 2013/36, the ECB stated that, since the shareholdings in the second applicant were highly concentrated, that measure would have resulted in the management of the bank being left to minority shareholders, who had a lower degree of involvement in the running of the credit institution and, moreover, who were very closely linked to the controlling shareholders via family ties or common financial interests, which could have resulted in an indirect influence of those same shareholders on the strategic management of that applicant, despite the measure adopted.

35 Thirdly, as regards the adoption of another precept, prohibiting the second applicant from providing financial services, at least to non-resident high-risk customers, the ECB considered that measure to be inadequate since (i) the failure to comply with the previous precept raised questions as to the applicant’s ability and willingness to comply with a potential second precept, and (ii) restriction of the bank’s activities would have resulted in very large monthly operating losses, thereby jeopardising its liquidity and thus its customers’ savings.

36 Fourthly, with regard to self-liquidation, the ECB acknowledged that such a solution had been proposed by the second applicant in its observations on the draft decision of 26 March 2018, that such a possibility existed under Estonian law and that it would have resulted in the withdrawal of authorisation in any event, but that, nevertheless, the ECB decided not to opt for it, since (i) self-liquidation would have obfuscated the substantive reasons for which the FSA had proposed the withdrawal of authorisation, (ii) such a withdrawal of authorisation would have been based on Article 16(3) of the Estonian Law on Credit Institutions and not on Article 17 of that law, (iii) self-liquidation would thus have given an inaccurate view of the severity of the applicant’s breaches of the applicable law, which, in the ECB’s view, justified a non-voluntary withdrawal of the authorisation and (iv) under Article 20(5) of Directive 2013/36, the communication regarding the withdrawal of authorisation must concern not only the withdrawal itself but also the grounds on which it is based.

37 Fifthly, as regards acquisition by another Estonian company, the ECB did not accept that solution because (i) no documentary evidence had been provided in relation to there being a specific commitment on the part of any of the investors and (ii) the second applicant’s business plan did not provide sufficient information to determine whether the transaction would have led to a change in commercial strategy. Furthermore, despite the additional period allowed to that applicant to submit the documentation, it had failed to provide the necessary information.

38 In the third place, as regards the examination of the reasonableness of the withdrawal of authorisation, the ECB considered that, in view of the severity and duration of the breaches, the fact that the second applicant had repeated its unlawful conduct despite the various warnings received, and the damage to public confidence in the Estonian and European financial system, caused by its conduct, the public interest in restoring legality outweighed the applicant’s private interest in maintaining its authorisation.

39 As regards the compatibility of the withdrawal of authorisation with the principle of the protection of legitimate expectations, the ECB took the view that the second applicant could not rely on that principle, since, first, although it had received numerous warnings on several occasions (four on-site inspections, a precept and a number of warnings), it had failed to take appropriate measures to cease its unlawful conduct, secondly, the FSA had never communicated to it that its authorisation would not be withdrawn and, thirdly, no one may rely on legitimate expectations in order to engage in or maintain unlawful conduct.

40 Having regard to all of the foregoing, the ECB concluded that there were grounds for withdrawing the second applicant’s authorisation under Article 18 of Directive 2013/36, and that such a measure was proportionate (in the sense that it was suitable, necessary and reasonable) in the light of the circumstance of the case, and was in line with the principle of protection of legitimate expectations.

II. Procedure and forms of order sought

A. Beginning of the proceedings and forms of order sought by the parties in Case T‑351/18

41 The applicants brought an action by application lodged at the Court Registry on 5 June 2018.

42 The ECB lodged its defence on 21 September 2018.

43 By document lodged at the Court Registry on 9 October 2018, the European Commission applied for leave to intervene in support of the form of order sought by the ECB.

44 By decision of 26 November 2018, the President of the Second Chamber of the General Court granted the application for leave to intervene.

45 The applicants lodged the reply on 12 December 2018. The ECB lodged its rejoinder on 18 February 2019.

46 The Commission lodged its statement in intervention on 20 December 2018. The applicants submitted their observations on that statement on 25 February 2019.

47 By document lodged at the Court Registry on 1 April 2019, the applicants requested a hearing, the summoning of witnesses and certain measures of inquiry.

48 By document lodged at the Court Registry on 29 April 2019, the ECB and the Commission submitted their observations on the applicants’ request for the summoning of witnesses and measures of inquiry.

49 The applicants claim that the Court should: – annul the decision of 26 March 2018; – order the ECB to pay the costs.

50 The ECB contends that the Court should: – dismiss the action as inadmissible as regards the first applicant; – in the alternative, dismiss the application as unfounded as regards the first applicant; – dismiss the action as unfounded as regards the second applicant; – order the applicants to pay the costs.

51 The Commission contends that the Court should: – dismiss the action as inadmissible as regards the first applicant; – in any event, dismiss the action as unfounded; – order the applicants to pay the costs.

B. Beginning of the proceedings and forms of order sought by the parties in Case T‑584/18

52 The applicants brought an action by application lodged at the Court Registry on 27 September 2018.

53 The ECB lodged its defence on 20 December 2018.

54 By document lodged at the Court Registry on 23 January 2019, the Commission applied for leave to intervene in support of the ECB.

55 By decision of 25 February 2019, the President of the Second Chamber of the General Court granted the application for leave to intervene.

56 The applicants lodged the reply on 28 March 2019. The ECB lodged its rejoinder on 3 June 2019.

57 The Commission lodged its statement in intervention on 5 April 2019. The applicants submitted their observations on that statement on 27 May 2019.

58 The applicants claim that the Court should: – annul the decision of 17 July 2018; – annul the decision on costs; – order the ECB to pay the costs.

59 The ECB contends that the Court should: – dismiss the action as inadmissible as regards the first applicant; – in the alternative, dismiss the application as unfounded as regards the first applicant; – reject the twenty-fifth plea as inadmissible, in so far as it was raised by the second applicant; – dismiss the action as unfounded as regards the second applicant, including the twenty-fifth plea, if the Court does not declare it inadmissible; – order the applicants to pay the costs.

60 The Commission contends that the Court should: – dismiss the action as inadmissible as regards the first applicant; – in any event, dismiss the action as unfounded; – order the applicants to pay the costs.

61 In their written pleadings, the applicants made requests for measures of inquiry and, in particular, requested the production of a number of documents and the summoning of witnesses.

C. Continuation of the proceedings in both cases

62 Following a change in the composition of the Chambers of the General Court, pursuant to Article 27(5) of that Court’s Rules of Procedure, the Judge-Rapporteur was assigned to the Ninth Chamber, to which the present cases were consequently allocated.

63 On a proposal from the Ninth Chamber, the Court decided on 5 February 2020, pursuant to Article 28 of the Rules of Procedure, to refer the present cases to a formation sitting in an extended composition.

64 On a proposal from the Judge-Rapporteur, the Court (Ninth Chamber, Extended Composition) decided to open the oral part of the procedure and, by way of measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, put written questions to the parties, to which the Commission, the ECB and the applicants replied by documents lodged at the Court Registry on 13 March and 16 and 17 April 2020 respectively.

65 By decision of the President of the Ninth Chamber of 27 April 2020, the present cases were joined for the purposes of the oral procedure.

66 At the hearing on 25 September 2020, the parties presented oral argument and answered questions put to them by the Court. The parties were also heard on the possibility of those cases being joined for the purpose of the decision closing the proceedings.

67 Following the death of Judge Berke on 1 August 2021, the three judges whose signatures appear on the present judgment continued the deliberations in accordance with Article 22 and Article 24(1) of the Rules of Procedure.

68 By decision of the President of the General Court of 13 August 2021, the present case was assigned to a new Judge-Rapporteur, sitting in the Ninth Chamber.

III. Law

69 The Court joins Cases T‑351/18 and T‑584/18 for the purpose of the judgment.

A. Whether the subject matter of the dispute in the main proceedings still obtains and the legal interest of the applicants in bringing proceedings in Case T‑351/18

70 According to settled case-law, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in having the contested act annulled. Such an interest, which is an essential and fundamental prerequisite for any legal proceedings, requires that the annulment of that measure must be capable, in itself, of having legal consequences and that the action, if successful, may procure an advantage for the party which has brought that action (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraphs 55 and 58 and the case-law cited).

71 An applicant’s interest in bringing proceedings must, in the light of the purpose of the action, exist at the stage of lodging the action, failing which the action will be inadmissible. That purpose must, like the interest in bringing proceedings, continue until the final decision, failing which there will be no need to adjudicate; this presupposes that the action must be capable, if successful, of procuring an advantage for the party bringing it (see judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraph 42 and the case-law cited).

72 The EU Courts may raise, of their own motion, the question as to whether there is a need to adjudicate on the ground that there is no continuing interest in bringing proceedings (judgment of 6 September 2018, Bank Mellat v Council, C‑430/16 P, EU:C:2018:668, paragraph 49).

73 In that regard, by way of a measure of organisation of procedure of 3 March 2020, the Court asked the parties to state their views on the applicants’ continuing interest in bringing proceedings, following the adoption by the ECB of the decision of 17 July 2018, by which the ECB had revoked the decision of 26 March 2018 with retroactive effect.

74 The applicants take the view that they retain their legal interest in bringing proceedings against the decision of 26 March 2018, after the adoption of the decision of 17 July 2018. According to the applicants, first, the repeal of a measure cannot invariably be equated with annulment by the EU Courts since, by definition, it does not amount to recognition of the decision’s illegality. Secondly, the ECB cannot be allowed to avoid a judicial determination of the illegality of a decision by means of a new decision and an abrogation of the previous decision. An ability to do so could be abused in a manner which is contrary to the rule of law. Thirdly, the alleged deemed replacement of the original decision by the subsequent decision at some date in the past is a fiction that is inconsistent with the law. Fourthly, the applicants seek the annulment of the decision of 26 March 2018, inter alia, to protect their reputational interests and because of their interest in obtaining financial compensation. The legitimacy of those interests was recognised in the order of 12 September 2017, Fursin and Others v ECB (T‑247/16, not published, EU:T:2017:623, paragraphs 17 to 23), and that part of the order of the General Court was not appealed and is therefore legally valid. The Court of Justice upheld that part of the order of the General Court. The fact that the Court of Justice did not examine that aspect explicitly is irrelevant. It was not necessary to do so, since that part of the order was not appealed by either the ECB or the Commission. Fifthly, a decision altering the legal position of the addressee with an ex tunc effect is authorised only in very limited circumstances, in particular where it has a positive effect on the addressee. Consequently, withdrawal of authorisation with a purported effect prior to the date of the decision is never possible.

75 The ECB submits that there is no interest on the part of the applicants which cannot be satisfied in the context of the judicial review of the decision of 17 July 2018. Accordingly, the applicants have lost their interest in bringing proceedings against the decision of 26 March 2018.

76 As is apparent from Article 24(1) of the Basic SSM Regulation, the ECB is required to establish an ABoR responsible for carrying out an internal administrative review of decisions taken by the ECB in the exercise of the powers conferred on it by that regulation. According to paragraph 2 of that article, the ABoR is to be composed of five individuals of high repute, from Member States and having a proven record of relevant knowledge and professional experience, excluding current staff of the ECB, as well as current staff of competent authorities or of other national or EU institutions, bodies, offices and agencies. By Decision 2014/360/EU of 14 April 2014 concerning the establishment of an Administrative Board of Review and its Operating Rules (OJ 2014 L 175, p. 47), adopted on the basis of Article 24 of the Basic SSM Regulation, the ECB established the ABoR.

77 It is also apparent from Article 24(7) of the Basic SSM Regulation that the internal administrative review of ECB decisions in the area of prudential supervision consists of three stages. In the first place, the ABoR issues an opinion to the Supervisory Board for the purpose of drawing up a new draft decision. In the second place, the Supervisory Board takes account of the opinion of the ABoR and submits a new draft decision to the Governing Council within the time limits laid down in Article 17(2) of Decision 2014/360. The new draft decision is to ‘abrogate the initial decision, replace it with a decision of identical content, or replace it with an amended decision’. In the third place, the new draft decision is to be deemed adopted unless the Governing Council objects within a maximum period of 10 working days.

78 Lastly, according to Article 24(1) of the Basic SSM Regulation, the scope of the internal administrative review is to pertain to the procedural and substantive conformity, with that regulation, of decisions taken by the ECB in the exercise of the powers conferred on it by that regulation. It is true that, under Article 10(2) of Decision 2014/360, the ABoR’s review is limited to examination of the grounds relied on by the applicant as set out in the request for review. However, according to Article 17(1) of that decision, the assessment of the Supervisory Board is not be limited to examination of the grounds relied upon by the applicant as set forth in the request for review, but may also take other elements into account in its proposal for a new draft decision.

79 It is apparent from a combined reading of the provisions mentioned in paragraphs 76 to 78 above that the internal administrative review of decisions taken by the ECB in the exercise of the powers conferred on it by the Basic SSM Regulation consists, taken as a whole, of a complete reassessment of the case, which is not limited to the grounds relied on in support of the request for review. This feature of the administrative review procedure is reflected in the fact that, under Article 17(1) of Decision 2014/360, the Supervisory Board, after taking into account the opinion of the ABoR, established for the purposes of a review of ECB decisions with increased independence and expertise (see paragraph 76 above), is itself endowed with a wider competence.

80 In that context, Article 24(7) of the Basic SSM Regulation provides that the review procedure may lead to three outcomes. The first consists in the simple abrogation of the initial decision. The second consists in replacing the initial decision with an identical decision. The third consists in replacing the initial decision with an amended decision.

81 For the reasons to be set out in paragraphs 82 to 85 below, Article 24(7) of the Basic SSM Regulation establishes an obligation on the part of the ECB to adopt a decision, following the review, that is retroactive to the time at which the original decision took effect, whatever the outcome of that review.

82 In particular, if the Supervisory Board and the Governing Council consider that the initial decision, pursuant to which the credit institution’s authorisation was withdrawn, is valid, the Governing Council does not simply reject the request for review on the merits, but rather, in accordance with Article 24(7) of the Basic SSM Regulation, adopts a decision that is identical to the one subject to that review. Nevertheless, in such a case, it is not possible to withdraw the same authorisation a second time. A decision identical in content to the reviewed decision can therefore only replace the latter with retroactive effect to the time at which the reviewed decision took effect.

83 That interpretation, which results from the nature of the measures at issue, is also valid where the Supervisory Board and the Governing Council consider that withdrawal of authorisation is not justified or that the shortcomings identified can be remedied by less onerous measures. In such a situation, the act repealing the withdrawal of authorisation or imposing those measures must have retroactive effect so as to cancel ex tunc the withdrawal of the credit institution’s authorisation and, where appropriate, replace it with the measure considered to be the most appropriate. In the absence of such retroactive effect, the review decision could only have effect if a new authorisation was granted in accordance with the procedure laid down in Article 14 of the Basic SSM Regulation.

84 That assessment is, indirectly but necessarily, confirmed by Article 24(8) of the Basic SSM Regulation and by Article 9(1) of Decision 2014/360, according to which the request for review is not to have suspensory effect on the application of the contested decision. It follows that the replacement of the reviewed decision by an amended decision must be made with retroactive effect to the time at which the reviewed decision took effect, as otherwise the final decision cannot have any practical effect.

85 It is also apparent from the foregoing analysis that the replacement of the initial decision by an identical or amended decision at the end of the review procedure results in the definitive disappearance of the original decision from the legal order.

86 In the present case, first, according to the introductory part of the decision of 26 March 2018, the measure contested in Case T‑351/18 took effect at 23.00 CEST on the date of its notification to the second applicant, in accordance with the third subparagraph of Article 297(2) TFEU. Secondly, according to the introductory part of the decision of 17 July 2018, namely the measure contested in Case T‑584/18, ‘the [decision of 26 March 2018] is hereby abrogated and replaced by this Decision with effect as from 23:00 CEST on the date of the notification of the [decision of 26 March 2018]’.

87 The decision of 17 July 2018 was adopted following the administrative review of the decision of 26 March 2018 and was identical in content to that decision, within the meaning of Article 24(7) of the Basic SSM Regulation.

88 It follows that, by virtue of the decision of 17 July 2018, the ECB, in accordance with the legal framework governing the administrative review procedure (see paragraphs 76 to 81 above), replaced the decision of 26 March 2018 with retroactive effect to the time at which the latter took effect and did not, as the applicants appear to maintain, merely abrogate that decision for the future.

89 The disappearance of the subject matter of the proceedings can, inter alia, result from the withdrawal or replacement of the contested act in the course of the proceedings (see, to that effect, judgment of 1 June 1961, Meroni and Others v High Authority, 5/60, 7/60 and 8/60, EU:C:1961:10, pp. 109 to 111; orders of 17 September 1997, Antillean Rice Mills v Commission, T‑26/97, EU:T:1997:131, paragraphs 14 and 15, and of 12 January 2011, Terezakis v Commission, T‑411/09, EU:T:2011:4, paragraph 15).

90 An act which is withdrawn and replaced disappears completely and with ex tunc effect from the legal order of the European Union and therefore a judgment annulling a withdrawn act would not entail any additional legal consequences by comparison with that withdrawal (see, to that effect, orders of 28 May 1997, Proderec v Commission, T‑145/95, EU:T:1997:74, paragraph 26; of 6 December 1999, Elder v Commission, T‑178/99, EU:T:1999:307, paragraph 20; and of 9 September 2010, Phoenix-Reisen and DRV v Commission, T‑120/09, not published, EU:T:2010:381, paragraph 23).

91 It follows that, in the event of withdrawal of the contested act, the applicant retains no interest in obtaining its annulment and the action against it becomes devoid of purpose, with the result that there is no longer any need to adjudicate (judgment of 1 June 1961, Meroni and Others v High Authority, 5/60, 7/60 and 8/60, EU:C:1961:10, pp. 109 to 111; orders of 6 December 1999, Elder v Commission, T‑178/99, EU:T:1999:307, paragraph 21 and 22; of 9 September 2010,Phoenix-Reisen and DRV v Commission, T‑120/09, not published, EU:T:2010:381, paragraphs 24 to 26; and of 24 March 2011, Internationaler Hilfsfonds v Commission, T‑36/10, EU:T:2011:124, paragraphs 46, 50 and 51).

92 That conclusion is even more evident where, as in the present case, the contested act has been replaced, with retroactive effect, by an identical act, which would not be affected by the potential annulment of the first act.

93 Furthermore, the applicants cannot validly rely on the order of 12 September 2017, Fursin and Others v ECB (T‑247/16, not published, EU:T:2017:623). That order was set aside by the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923), without the disappearance of the applicants’ interest in bringing proceedings by reason of the replacement of the contested act, with retroactive effect, by a new decision with identical content, adopted following an administrative review, being the subject of the appeals.

94 Consequently, contrary to what is claimed by the applicants, in a legal context which organises an administrative review giving rise to the adoption of acts intended to replace, with retroactive effect, the acts which were the subject of that review, the interests of the affected parties are fully protected by the possibility of seeking annulment of the act adopted following the review in question and compensation for any damage caused by the adoption of that review.

95 It follows that the action in Case T‑351/18 became devoid of purpose after the action had been brought and that, consequently, the applicants have lost their interest in seeking annulment of the decision contested in that case. There is therefore no longer any need to rule on the action.

B. Admissibility in Case T‑584/18

96 The ECB, while not formally raising a plea of inadmissibility, disputes, first, the admissibility of the actions only in so far as they were brought by the first applicant and, secondly, in the context of Case T‑584/18, the standing of the second applicant as regards the twenty-fifth plea seeking annulment of the decision on costs relating to the review procedure. The Commission supports that position.

97 In the first place, the applicants claim that the first applicant has standing to challenge the decisions of 26 March 2018 and of 17 July 2018, as the second applicant’s main shareholder with 85% of the voting rights, invoking the order of 12 September 2017, Fursin and Others v ECB (T‑247/16, not published, EU:T:2017:623).

98 Furthermore, the applicants submit that, in so far as the ECB accepts that the first applicant has standing in relation to the application for annulment of the decision on costs, since that decision is based on the unlawfulness of the decisions of 26 March 2018 and of 17 July 2018, it cannot be ruled out that it has standing to challenge the decision on costs. They then list the other separate interests that they claim the first applicant has, such as, inter alia, the interest in avoiding mandatory liquidation, the interest in having an opportunity to sell the bank to another investor, the interest in its own reputation as distinct from that of the bank, in addition to the financial impact that the withdrawal of the authorisation has on that applicant itself, which is distinct from that produced on the bank.

1. Admissibility of the claim for annulment of the decision of 17 July 2018

99 In the first place, it should be noted that the second applicant has standing to bring the application for annulment of the decision of 17 July 2018. That applicant is the holder of the authorisation which has been withdrawn and the addressee of that decision. In addition, power of attorney has been given to the representatives by the former director general of the second applicant, without its validity being called into question by its liquidators. Furthermore, the ECB does not dispute the admissibility of the application for annulment of that decision in so far as it was brought by that applicant.

100 In the second place, as regards the first applicant, it should be recalled that the Court of Justice has ruled that the shareholders of a credit institution were not entitled to bring an action against a decision of the ECB withdrawing authorisation in so far as they were not directly affected by that decision. First, the Court of Justice considered that, following the withdrawal of authorisation, the credit institution was no longer in a position to continue its activity and, consequently, its ability to distribute dividends was questionable, but that this negative effect of the withdrawal was of an economic nature, whereas the right of the shareholders to receive dividends, just like their right to participate in the management of the company, was not affected by the withdrawal decision (see, to this effect, judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others, C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923, paragraph 111). Secondly, the Court of Justice found that, although the liquidation directly affected the shareholders’ right to participate in the management of the company, it did not constitute implementation of the decision of 17 July 2018, which is purely automatic and results from EU rules alone, for the purposes of the applicable case-law (see, to that effect, judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others, C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923, paragraphs 113 and 114).

101 Accordingly, the application for annulment of the decision of 17 July 2018 is admissible only as regards the second applicant.

2. Admissibility of the application for annulment of the decision on costs

102 As regards the admissibility of the application for annulment of the decision on costs, it must be held that the first applicant has standing to bring such an action for annulment since it is the sole addressee of that decision which imposes on it an obligation to pay the costs of the review proceedings which it initiated and in which it alone participated. Moreover, the ECB does not dispute the admissibility of that application for annulment in so far as it was brought by that applicant.

103 By contrast, the second applicant, which chose not to bring a request for review before the ABoR, although it was entitled to do so, has no legal interest in bringing proceedings for annulment of the decision on costs, since that decision has no effect on it. Moreover, that applicant is not the addressee of that decision and cannot be regarded as being directly and individually concerned.

104 Accordingly, the application for annulment of the decision on costs is admissible only as regards the first applicant.

C. Substance

105 In support of the action brought in Case T‑584/18, the applicants rely on 25 pleas in law: the first to twenty-fourth pleas in law are put forward in support of the application for annulment of the decision of 17 July 2018 and the twenty-fifth plea in law alleges the unlawfulness of the decision of 17 July 2018, in support of the application for annulment of the decision on costs. Having regard to their substance and nature, it is appropriate to group those pleas as follows: – the first, second, fourteenth, fifteenth and nineteenth pleas, alleging that the ECB had no power to adopt a decision concerning the withdrawal of authorisation and liquidation; to assess the issues relating to money laundering and the financing of terrorism; to refuse to permit self-liquidation, or to refuse to permit the second applicant to be sold to other potential investors. The nineteenth plea, which alleges misuse of powers, can also be included in this group of pleas, as its supporting arguments are the same as those put forward in the other abovementioned pleas alleging lack of power on the part of the ECB; – the third plea, alleging that the ECB failed in its duty to conduct a careful and impartial assessment; – the fourth and fifth pleas, alleging errors of assessment or failure to take into account certain relevant aspects of the case; – the sixth, twelfth and eighteenth pleas, alleging an error of assessment in so far as the ECB wrongly based its decision on breach of the FSA precept and infringement of the principle of legal certainty; – the seventh to eleventh, thirteenth to fifteenth and seventeenth pleas, alleging breach of the principle of proportionality; – the sixteenth and eighteenth pleas, alleging infringement of the principles of equal treatment, non-discrimination, the protection of legitimate expectations and legal certainty; – the twentieth to twenty-second pleas, alleging breaches of essential procedural requirements, and, more specifically, the right to be heard, the rights of the defence, and the duty to give reasons; – the twenty-third and twenty-fourth pleas in law, alleging, inter alia, infringement of the right of access to the second applicant’s file and of the shareholder’s rights in the context of the review procedure; – the twenty-fifth plea in law, advanced in support of the application for annulment of the decision on costs, alleging that the decision of 17 July 2018 was unlawful.

1. The first, second, fourteenth, fifteenth and nineteenth pleas

106 In the first place, in their first, fourteenth and fifteenth pleas, the applicants claim that the ECB went beyond its powers in so far as it did not give the applicants the opportunity to liquidate the second applicant voluntarily, as is apparent in paragraph 3.3.2(b)(i) of the decision of 17 July 2018, when, given the fundamental allocation of responsibilities between NCAs and the ECB under the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), it had no power to do so. The same submission is made in respect of the ECB’s refusal to permit the sale of the second applicant to another investor which had expressed a potential interest, as is apparent in paragraph 3.3.2(b)(ii) of that decision.

107 In the second place, the ECB was not competent to adopt a decision to withdraw authorisation since the FSA had already adopted, on 7 February 2018, the FOLTF decision, determining whether the credit institution was in a situation of ‘failing or likely to fail’, and had thus opted for resolution measures rather than withdrawal of authorisation, this decision being a matter for the FSA alone. The applicants also dispute the ECB’s assertion that that decision is irrelevant and confidential and therefore did not need to be communicated to them.

108 Furthermore, the applicants dispute the ECB’s argument that there was no formal request for self-liquidation of the second applicant. In their view, the ECB, in the decision of 17 July 2018, irrespective of such a request, refused to authorise self-liquidation, whereas it could have invited them to submit such a request or could have asked the FSA to take a decision on that issue. They submit that the only obstacle to self-liquidation was the preference expressed by the ECB for this not to take place. According to the applicants, the new ‘SSM/SRM’ regime has introduced a system of intervening early, well ahead of a bank actually failing, under which NCAs have an opportunity to determine whether the credit institution is failing or likely to fail. They then have to consider the availability of supervisory alternatives and, as their next step, whether resolution measures are in the public interest. The applicants submit that, if those NCAs considered that that was not the case, because the bank’s insolvency would not constitute a systemic problem, the analysis would end there as far as the current resolution regime is concerned. It then remains to be seen by the NCAs whether the entity judged likely to fail will actually do so. If it does, then the failure (that is, insolvency) can be dealt with appropriately by means of national insolvency proceedings. There is therefore no room for mandatory liquidation. On the other hand, that system does not affect the possibility of self-liquidation, which is recognised under all national law, provided that the company concerned is solvent.

109 In the third place, the applicants maintain that the ECB had no power to adopt the decision of 17 July 2018, on the basis that it rested entirely on alleged non-compliance with AML/CFT rules, for which the ECB is not the competent authority. The withdrawal of authorisation in the present case cannot be justified on prudential grounds, but served only to meet the desire of the FSA and the ECB for easy publicity.

110 In the fourth place, in the context of the second and, by implication, the third plea, the applicants criticise the ECB on the ground that it failed to assess the AML/CFT issues underlying the decision of 17 July 2018 and failed to verify the FSA’s assessments. The ECB cannot be responsible for the stability of credit institutions but artificially exclude from consideration entire areas that are sources of potential risk. In addition, any flaws in that decision which are due to the draft prepared by the FSA should be capable of being relied on in the context of an action for annulment of that decision.

111 Furthermore, the objective of restoring legality, pursued by the ECB in the decision of 17 July 2018, is not a legitimate objective as regards withdrawal of authorisation since authorisation may be withdrawn only in pursuit of prudential objectives. Nevertheless, while it is theoretically possible that AML/CFT issues may be relevant in connection with withdrawal of authorisation, to the extent that such issues give rise to prudential risks, the allocation of responsibilities between the NCAs and the ECB, as well as the principle of proportionality, require that the full range of AML/CFT measures (fines, prohibition on carrying out certain types of activity, criminal proceedings) has first been exhausted.

112 The ECB, supported by the Commission, disputes the applicants’ arguments.

113 It should be noted that, in the context of the present group of pleas, the applicants invoke, in essence, two pleas in law alleging, first, the lack of power on the part of the ECB to adopt the decision of 17 July 2018 and, secondly, misuse of powers. Before examining these, the Court considers it appropriate to recall the division of powers between the ECB and the NCAs.

(a) The division of powers between the ECB and the NCAs of the Member States participating in the SSM concerning withdrawal of authorisation for infringement of AML/CFT rules

114 It is apparent from recitals 15 and 28 of the Basic SSM Regulation that the powers that are not conferred on the ECB remain vested in the NCAs.

115 In particular, recital 28 of the Basic SSM Regulation lists, among the ‘supervisory tasks not conferred on the ECB’ and which should remain with the national authorities, ‘the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and consumer protection’.

116 However, Article 4(1) of the Basic SSM Regulation states that, ‘within the framework of Article 6, the ECB shall … 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’. There follows a list of nine tasks, including authorisation and withdrawal of authorisation from credit institutions. Thus, under Article 4(1)(a) of that regulation, the power to withdraw authorisation is reserved exclusively to the ECB.

117 Article 4(3) of the Basic SSM Regulation provides that ‘for the purpose of carrying out the tasks conferred on it by [that] Regulation, and with the objective of ensuring high standards of supervision, the ECB shall apply all relevant Union law, and where the Union law is composed of Directives, the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the ECB shall apply also the national legislation exercising those options’.

118 Article 6(2) of the Basic SSM Regulation states that ‘both the ECB and [NCAs] shall be subject to a duty of cooperation in good faith, and an obligation to exchange information’.

119 It is apparent from Article 6(4) of the Basic SSM Regulation that, with regard to the tasks defined in Article 4, with the exception of paragraph 1(a) and (c) of that regulation, the ECB and the NCAs are to have the responsibilities set out in paragraphs 5 and 6 of that article respectively. Under paragraph 6 of that article, NCAs are to carry out directly the supervision of less significant credit institutions, in accordance with the criteria laid down in that paragraph, and to inform the ECB, according to the framework referred to in paragraph 7 of that article, of measures taken pursuant to paragraph 6, and closely to coordinate those measures with the ECB.

120 However, it is apparent from Article 6(5)(b) to (d) of the Basic SSM Regulation that, first, ‘when necessary to ensure consistent application of high supervisory standards, the ECB may at any time, on its own initiative after consulting with [NCAs] or upon request by [an NCA], decide to exercise directly itself all the relevant powers for one or more credit institutions referred to in paragraph 4’, secondly, that the ECB is to exercise oversight over the functioning of the system, based on the responsibilities and procedures set out in that article and, thirdly, that it may at any time make use of the powers referred in Articles 10 to 13 of that regulation relating to the investigatory powers that the ECB may exercise directly.

121 Article 6(7) of the Basic SSM Regulation provides that the ECB is to adopt and make public a framework to organise the practical arrangements for the implementation of that article, constituting the legal basis for the adoption of the SSM Framework Regulation.

122 Article 14(5) of the Basic SSM Regulation provides: ‘Subject to paragraph 6, the ECB may withdraw the authorisation in the cases set out in relevant Union law on its own initiative, following consultations with the [NCA] of the participating Member State where the credit institution is established, or on a proposal from such [NCA]. These consultations shall in particular ensure that, before taking decisions regarding withdrawal, the ECB allows sufficient time for the national authorities to decide on the necessary remedial actions, including possible resolution measures, and takes these into account. Where the [NCA] which has proposed the authorisation in accordance with paragraph 1 considers that the authorisation must be withdrawn in accordance with the relevant national law, it shall submit a proposal to the ECB to that end. In that case, the ECB shall take a decision on the proposed withdrawal taking full account of the justification for withdrawal put forward by the [NCA].’

123 Article 14(6) of the Basic SSM Regulation provides that ‘as long as national authorities remain competent to resolve credit institutions, in cases where they consider that the withdrawal of the authorisation would prejudice the adequate implementation of or actions necessary for resolution or to maintain financial stability, they shall duly notify their objection to the ECB explaining in detail the prejudice that a withdrawal would cause’, that ‘in those cases, the ECB shall abstain from proceeding to the withdrawal for a period mutually agreed with the national authorities’ and that ‘the ECB may extend that period if it is of the opinion that sufficient progress has been made. If, however, the ECB determines in a reasoned decision that proper actions necessary to maintain financial stability have not been implemented by the national authorities, the withdrawal of the authorisations shall apply immediately’.

124 Article 80 of the SSM Framework Regulation, entitled ‘NCAs’ proposal to withdraw an authorisation’, is worded as follows: ‘1. If the relevant NCA considers that a credit institution’s authorisation should be withdrawn in whole or in part in accordance with relevant Union or national law, including a withdrawal at the credit institution’s request, it shall submit to the ECB a draft decision proposing the withdrawal of the authorisation (hereinafter a “draft withdrawal decision”), together with any relevant supporting documents. 2. The NCA shall coordinate with the national authority competent for the resolution of credit institutions (hereinafter the “national resolution authority”) with regard to any draft withdrawal decision that is relevant to the national resolution authority.’

125 Under Article 81 of the SSM Framework Regulation: ‘1. The ECB shall assess the draft withdrawal decision without undue delay. In particular, it shall take into account reasons for urgency put forward by the NCA. 2. The right to be heard, as provided for in Article 31, shall apply.’

126 Article 83 of the SSM Framework Regulation provides: ‘1. The ECB shall take a decision on the withdrawal of an authorisation without undue delay. In doing so it may accept or reject the relevant draft withdrawal decision. 2. In taking its decision, the ECB shall take into account all of the following: (a) its assessment of the circumstances justifying withdrawal; (b) where applicable, the NCA’s draft withdrawal decision; (c) consultation with the relevant NCA and, where the NCA is not the national resolution authority, the national resolution authority (together with the NCA, the “national authorities”); (d) any comments provided by the credit institution pursuant to Articles 81(2) and 82(3). 3. The ECB shall also take a decision in the cases described in Article 84 if the relevant national resolution authority does not object to the withdrawal of the authorisation, or the ECB determines that proper actions necessary to maintain financial stability have not been implemented by the national authorities.’

127 Article 84 of the SSM Framework Regulation provides: ‘1. If the national resolution authority notifies its objection to the ECB’s intention to withdraw an authorisation, the ECB and the national resolution authority shall agree on a time period during which the ECB shall abstain from proceeding with the withdrawal of the authorisation. The ECB shall inform the NCA immediately after initiating contact with the national resolution authority in order to reach this agreement. 2. After the expiry of the agreed time period, the ECB shall assess whether it intends to proceed to withdraw the authorisation or to extend the agreed time period in accordance with Article 14(6) of the [Basic] SSM Regulation, taking into account any progress made. The ECB shall consult with both the relevant NCA and the national resolution authority, if different from the NCA. The NCA shall inform the ECB of the measures taken by these authorities and its assessment of the consequences of a withdrawal. 3. If the national resolution authority does not object to the withdrawal of an authorisation, or the ECB determines that proper actions necessary to maintain financial stability have not been implemented by national authorities, then Article 83 shall apply.’

128 Article 18 of Directive 2013/36, which sets out the cases in which NCAs may propose withdrawal of authorisation in respect of less significant institutions, is worded as follows: ‘The competent authorities may only withdraw the authorisation granted to a credit institution where such a credit institution: … (e) falls within one of the other cases where national law provides for withdrawal of authorisation; or (f) commits one of the breaches referred to in Article 67(1).’

129 Article 67(1) of Directive 2013/36 provides: ‘This Article shall apply at least in any of the following circumstances: … (d) an institution fails to have in place governance arrangements required by the competent authorities in accordance with the national provisions transposing Article 74; (e) an institution fails to report information or provides incomplete or inaccurate information on compliance with the obligation to meet own funds requirements set out in Article 92 of Regulation (EU) No 575/2013 [of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1)] to the competent authorities in breach of Article 99(1) of that Regulation; … (o) an institution is found liable for a serious breach of the national provisions adopted pursuant to Directive 2005/60/EC [of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ 2005 L 309, p. 15)]; …’

130 Article 74(1) of Directive 2013/36 provides that ‘institutions shall have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management’.

131 It is apparent from the provisions referred to in paragraphs 115 to 118 above that the SSM centralises functions relating to prudential supervision with the ECB, while providing for decentralised implementation by the NCAs of the participating Member States, under the supervision of the ECB, to which they provide their cooperation and assistance. Thus, within the SSM, first, the ECB exercises certain exclusive powers: ‘direct’ prudential supervision of significant credit institutions and the powers reserved to it under Article 4 of the Basic SSM Regulation with regard to all institutions, irrespective of their size. Secondly, the prudential supervision of less significant institutions is part of the decentralised exercise of power by those NCAs and is overseen and supervised, as a last resort, by the ECB, whose task is to ensure the proper functioning and effectiveness of the prudential supervision system and the consistent and uniform application of prudential rules in all participating Member States. The ECB carries out ‘indirect’ supervision of less significant institutions and, in that context, NCAs provide their cooperation and assistance to the ECB. In addition, the same NCAs remain competent in respect of matters not covered by the Basic SSM Regulation: consumer protection, markets in financial instruments, AML/CFT, and the fight against corruption.

132 More specifically, within the SSM, the overall scheme of Article 6(4) to (6) of the Basic SSM Regulation establishes a differentiation between prudential supervision of ‘significant’ entities and that of entities classified as ‘less significant’ in relation to seven of the nine tasks listed in Article 4(1) of that regulation.

133 It follows therefrom, in the first place, that the exclusive competence for the prudential supervision of ‘significant’ entities falls to the ECB. The same holds true for the prudential supervision of ‘less significant’ entities in relation to the task listed in Article 4(1)(a) of the Basic SSM Regulation concerning the authorisation and withdrawal of authorisation to credit institutions.

134 In the second place, regarding ‘less significant’ entities and the other tasks listed in Article 4(1) of the Basic SSM Regulation, it is apparent from a combined reading of Article 6(5) and (6) of that regulation that their implementation is conferred, under the ECB’s control, on the NCAs of participating Member States, which thus carry out the direct prudential supervision of those entities.

135 The Court has previously held that it was apparent from the examination of the interaction between Article 4(1) and Article 6 of the Basic SSM Regulation, as discussed in paragraphs 116 to 121 above, that the logic of the relationship between them consisted in allowing the exclusive powers delegated to the ECB to be implemented within a decentralised framework, rather than having a distribution of powers between the ECB and the NCAs of participating Member States in the performance of the tasks referred to in Article 4(1) of that regulation. That finding is supported by a reading of the recitals of that regulation. First, it is apparent from recitals 15 and 28 of the Basic SSM Regulation that only those tasks explicitly entrusted to the ECB fall outside the competence of the Member States and that prudential supervision of financial institutions on grounds other than those listed in Article 4(1) of that regulation continues to come within the competence of the Member States. It necessarily follows that it is at the stage of the definition of the tasks entrusted to the ECB by Article 4(1) of the Basic SSM Regulation that the distribution of powers between the ECB and the NCAs was carried out. Secondly, it should be noted that, although recital 28 of the Basic SSM Regulation provides a list of the supervisory tasks that are to remain within the remit of the national authorities, it does not include any of the tasks listed in Article 4(1) of that regulation. Nor does that recital present direct supervision of less significant entities as constituting the exercise of a competence coming within the remit of the national authorities (see, to that effect, judgment of 16 May 2017, Landeskreditbank Baden-Württemberg v ECB, T‑122/15, EU:T:2017:337, paragraphs 54 to 57).

136 In the third place, within the SSM composed of the ECB and the NCAs of participating Member States, first, it is apparent from the scheme of Article 6(2) and (3) of the Basic SSM Regulation that both the ECB and those NCAs are bound by the duty of cooperation and the obligation to exchange information. In particular, under the second subparagraph of Article 6(2) of that regulation, ‘the [NCAs] shall in particular provide the ECB with all information necessary for the purposes of carrying out the tasks conferred on the ECB by [that] Regulation’. In addition, under paragraph 3 of that article, it is for those NCAs to assist the ECB in preparing and implementing any acts relating to the tasks mentioned in Article 4 of that regulation and related to all credit institutions, inter alia by assisting it in its verification activities.

137 It has previously been held that the supervision of institutions classified as ‘less significant’ was referred to in recitals 38 to 40 of the Basic SSM Regulation, more specifically directly after recital 37 thereof, which states that ‘[NCAs] should be responsible for assisting the ECB in the preparation and implementation of any acts relating to the exercise of the ECB supervisory tasks’ and that ‘this should include, in particular, the ongoing day-to-day assessment of a credit institution’s situation and related on-site verifications’. The arrangement of the recitals of the Basic SSM Regulation suggests that direct prudential supervision by the NCAs under the SSM was envisaged by the Council of the European Union as a mechanism of assistance to the ECB rather than as the exercise of autonomous competence (judgment of 16 May 2017, Landeskreditbank Baden-Württemberg v ECB, T‑122/15, EU:T:2017:337, paragraph 58).

138 Secondly, the exercise of that direct prudential supervision by the NCAs is overseen by the ECB, which, under Article 6(5)(a) and (b) of the Basic SSM Regulation, has the competence to communicate to those authorities ‘regulations, guidelines or general instructions to [NCAs] according to which the tasks defined in Article 4 [of that regulation] are performed’ and to ‘decide to exercise directly itself all the relevant powers for one or more credit institutions’. Moreover, the overseeing by the ECB of the direct supervision exercised by the NCAs gives rise (i) to the supervisory powers provided for in Article 6(5)(c) of that regulation, which refers to Article 6(7)(c) thereof and (ii) to the supervisory and investigatory powers, provided for in Articles 10 to 13 of that regulation, which the ECB may decide to exercise directly in respect of less significant credit institutions under Article 4(6)(d) of that regulation.

139 Thus, it should be noted that the ECB retains important prerogatives even when the NCAs perform the supervisory tasks laid down in Article 4(1)(b) and (d) to (i) of the Basic SSM Regulation, and that the existence of such prerogatives is indicative of the subordinate nature of the intervention by the national authorities in the performance of those tasks (judgment of 16 May 2017, Landeskreditbank Baden-Württemberg v ECB, T‑122/15, EU:T:2017:337, paragraph 59).

140 In the fourth place, as regards, in particular, the withdrawal of authorisation from a credit institution, provided for in Article 4(1)(a) of the Basic SSM Regulation, the cooperation between the ECB and NCAs is expressed, in accordance with Article 14(5) of that regulation, first, by the obligation to consult those NCAs, in the event that the ECB withdraws the authorisation on its own initiative and, secondly, in the possibility that those authorities have to propose such a withdrawal to the ECB.

141 Where an NCA, pursuant to Article 14(5) of the Basic SSM Regulation, proposes the withdrawal of authorisation, the ECB, in accordance with the second subparagraph of that provision and Article 83(2) of the SSM Framework Regulation, must take full account of the justification for withdrawal put forward by that NCA, of consultations with the NCA and, where appropriate, with the national resolution authority, as well as the observations of the credit institution in question. It must also carry out its own examination as to whether there are circumstances justifying the withdrawal and thus decide whether to accept or reject the draft decision withdrawing the NCA’s authorisation.

142 In the fifth place, it should be noted that it is apparent from recitals 28 and 29 of the Basic SSM Regulation that the task of preventing the use of the financial system for the purposes of money laundering and terrorist financing remains a national competence and that the ECB has, in that regard, a duty of cooperation vis-à-vis the national authorities.

143 In the sixth place, as regards the link between AML/CFT and prudential supervision, it should be noted that, among the circumstances justifying withdrawal of a banking authorisation, first, Article 18(f) of Directive 2013/36 mentions the breaches referred to in Article 67(1) of that directive, which include serious breaches of the national provisions adopted pursuant to Directive 2005/60 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing. Secondly, Article 18(e) of that directive mentions the other cases in which national law provides for withdrawal of authorisation.

144 In that regard, it should be noted that, although Article 18 of Directive 2013/36 refers to the power of NCAs to withdraw authorisations, in view of the distribution of tasks between those NCAs and the ECB, provided for in Article 4 of the Basic SSM Regulation, and particularly in view of the fact that the power to withdraw authorisation has become an exclusive competence of the ECB, which the ECB may exercise, pursuant to Article 14(5) of that regulation, on a proposal from an NCA, Article 18 of that directive must be understood as referring to the power to propose the withdrawal of authorisation, which remains with the NCAs.

145 In the seventh place, as regards the interactions between the SSM and the SRM, it is apparent from recital 11 of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ 2014 L 255, p. 1; ‘the SRM Regulation’) that supervision and resolution are two complementary aspects of the European Banking Union and, therefore, as a matter of principle, are not alternatives.

146 It should be noted that the objectives of the SSM and of the SRM are different. As recital 7 of the SRM Regulation states, the SSM seeks to ensure a policy of micro-prudential supervision of credit institutions at European level and its coherent and effective implementation in all euro area Member States and in Member States which are not part of the euro area but which wish to participate. It also relates to macro-prudential supervision and, ultimately, to the financial stability of the European Union. By contrast, the essential tasks of the SRM are managing crisis situations that have already arisen and creating more efficient resolution mechanisms in order to prevent the harmful consequences of bank failures from spreading, following uniform rules and procedures, as is apparent from recitals 6 and 8 and Article 1 of that regulation. Thus, while the two systems work together towards the ultimate goal of soundness and stability of the EU financial system, the SSM acts to prevent crises, whereas the SRM acts to resolve crises.

147 In the eighth place, the failing or likely to fail declarations which may be issued by the ECB or by the Single Resolution Board (SRB), in the case of significant credit institutions, or by NCAs or by national resolution authorities, in the case of less significant credit institutions, as is apparent from Article 7(3) of the SRM Regulation, are preparatory acts which precede, but which do not necessarily entail the adoption of, a resolution scheme. The adoption of the latter comes within the exclusive competence of the SRB or the national resolution authorities, depending on the size of the credit institution.

148 Moreover, the failing or likely to fail assessments do not in any way constitute formal decisions on the failure of a credit institution to fulfil its regulatory obligations, but are preparatory acts which do not alter the legal situation of the credit institution in question. Those acts set out a factual assessment carried out by the ECB (or by the NCA) as to whether that institution is failing or likely to fail, which is in no way binding, but which constitutes the basis for the adoption, by the SRB (or by the national resolution authority), of resolution schemes or decisions establishing that resolution is not in the public interest (see, to that effect, order of 6 May 2019, ABLV Bank v ECB, T‑281/18, EU:T:2019:296, paragraphs 36, 48 and 49).

149 It is apparent from Article 18(1) of the SRM Regulation that such a scheme is to be adopted only if certain conditions are met. In particular, not only must the credit institution be in a situation where it is failing or likely to fail, but there must be no reasonable prospect that other private measures or supervisory action would prevent its failure within a reasonable time frame. Moreover, a resolution measure must be necessary in the public interest.

150 In that regard, according to the case-law, pursuant to recital 26 of the SRM Regulation, although the ECB (and by analogy, the NCAs) and the SRB (and, by analogy, the national resolution authorities) must be in a position to assess whether a credit institution is failing or likely to fail, it is for the SRB alone (and, by analogy, the national resolution authorities) to assess the conditions required for a resolution and to adopt a resolution scheme if it considers that all the conditions are met, as is also explicitly stated in Article 18(1) of the SRM Regulation. While the ECB (and, by analogy, the NCAs) has the power to communicate an assessment relating to the first condition, namely whether the entity is failing or likely to fail, this nevertheless constitutes a mere assessment, which does not in any way bind the SRB (and, by analogy, the national resolution authorities) (see, to that effect, order of 6 May 2019, ABLV Bank v ECB, T‑281/18, EU:T:2019:296, paragraph 34).

151 In the ninth place, it is apparent from recital 57 of the SRM Regulation, first, that the fact that an entity does not fulfil the conditions for authorisation should not in itself justify the opening of a resolution procedure, especially if the entity remains or is likely to remain viable. Secondly, an entity must be considered to be failing or likely to fail if it infringes or is likely, in the near future, to infringe the requirements for continuing authorisation.

152 There is no functional equivalence between a failing or likely to fail assessment and a withdrawal of authorisation. While it is true that such an assessment may be based on a finding that the conditions for continuing authorisation are no longer satisfied under Article 18(4)(a) of the SRM Regulation, those two acts are in no way equivalent. In that regard, it is sufficient to note that the conditions for withdrawal of authorisation set out in Article 18 of Directive 2013/36 differ clearly from the considerations underlying the failing or likely to fail assessment, as set out in Article 18(4) of that regulation (order of 6 May 2019, ABLV Bank v ECB, T‑281/18, EU:T:2019:296, paragraph 46).

153 It is in the light of those considerations that the present group of pleas in law must be examined.

(b) The first part, concerning the ECB’s lack of competence to withdraw authorisation from a credit institution, where the NCA had already issued a failing or likely to fail declaration

154 In the present case, in the first place, it should be noted that the decision of 17 July 2018 concerns the withdrawal of the second applicant’s authorisation to operate as a credit institution due to breaches of the provisions of Estonian national law which penalise, by that measure, a lack of AML/CFT governance arrangements and an effective AML/CFT system, failure to comply with an instruction issued by the NCA and the communication of misleading information or documents.

155 In the second place, it should be noted that the ECB adopted the decision of 26 March 2018, then the decision of 17 July 2018, on a proposal from the FSA, the Estonian NCA, pursuant to Articles 4(1)(a) and 14(5) of the Basic SSM Regulation and Article 83(1) of the SSM Framework Regulation.

156 In the third place, in the context of such a decision and the decentralised implementation of its exclusive competence to withdraw authorisation, given that the second applicant is a less significant credit institution, the ECB was required, under Article 14(5) of the Basic SSM Regulation and Article 83(2)(b) and (c) of the SSM Framework Regulation, to take full account of the justification for withdrawal, put forward by that NCA, and to cooperate with the NCA through consultations regarding any resolution measures that the national resolution authority considered necessary.

157 In the fourth place, it is apparent from paragraph 3.2(d) of the decision of 17 July 2018 that the FSA, which is, in Estonia, both the NCA under the SSM and the national resolution authority under the SRM (Article 3 of the Estonian Law on the prevention and resolution of financial crises), adopted, on 10 April 2017, the FOLTF decision on the ground that the second applicant had committed a number of breaches of the conditions required for authorisation, meaning that the authorisation could have been withdrawn, as provided for in recital 57 of the SRM Regulation.

158 According to recital 57 of the SRM Regulation, an entity must be considered to be failing or likely to fail if it infringes or is likely to infringe the requirements for continuing authorisation.

159 Next, it is apparent from paragraph 3.1(b) of the decision of 17 July 2018 that, on 7 February 2018, the FSA, acting in its capacity as national resolution authority, adopted a decision establishing that a resolution was not in the public interest. It is that decision that the applicants refer to in their written submissions as the ‘second FOLTF decision’.

160 Thus, although the FSA adopted the FOLTF decision, for which it was competent, and, consequently, the first condition laid down in Article 18(1)(a) of the SRM Regulation for the adoption of a resolution scheme was satisfied, there was considered to be no public interest in implementing resolution measures and, therefore, the third condition laid down in Article 18(1)(c) of that regulation was not satisfied. Accordingly, in the present case, that decision did not lead the national resolution authority (the FSA) to adopt a resolution scheme, since the conditions required were not cumulatively satisfied.

161 By contrast, it is apparent from paragraph 3.1(c) of the decision of 17 July 2018 that, on 6 March 2018, the FSA adopted a proposal for a decision withdrawing authorisation and that, following receipt of that proposal, the ECB gave the second applicant the opportunity to submit its observations on that proposal, before then adopting the decision of 26 March 2018, and then that of 17 July 2018, which is based on justifications and factual assessments and the results of verifications and inspections carried out by the FSA.

162 First, the ECB was correct to take the view, in paragraph 2.1 of the decision of 17 July 2018, that it was exclusively competent to adopt a decision on the withdrawal of authorisation. Such a conclusion is consistent with, on the one hand, Articles 4(1)(a) and 14(5) of the Basic SSM Regulation and Article 83 of the SSM Framework Regulation and, on the other, the case-law referred to in paragraph 135 above.

163 Secondly, it was in accordance with the division of powers between the NCAs of the participating Member States and the ECB under the SSM, the applicable provisions and the case-law, as referred to in paragraphs 136, 137, 140 and 141 above, that the FSA submitted to the ECB a proposal for a decision to withdraw authorisation and that the ECB relied on the grounds set out in that proposal as the basis for its own decision.

164 Since the second applicant is a less significant credit institution, on the one hand, it was for the FSA, that is to say, the Estonian NCA, to carry out the necessary factual verifications and to assist the ECB in the preparation and implementation of any acts related to the tasks referred to in Article 4 of the SSM Regulation, including the decision to withdraw authorisation.

165 On the other hand, in accordance with the provisions and case-law referred to in paragraphs 138 and 139 above, the ECB had the power to oversee the direct supervision carried out by the FSA, which the ECB exercised, in the present case, by carrying out a number of consultations with the FSA, particularly from April 2017 onwards, and after the last inspection, as the ECB confirmed at the hearing.

166 Thirdly, the ECB certainly had the power to adopt the decision of 17 July 2018, notwithstanding and independently of the decisions relied on by the applicants.

167 In that regard, the applicants’ arguments that the ECB lacked competence to adopt the decision of 17 July 2018, since the NCA had adopted a decision that the second applicant was failing or likely to fail, are based on a misreading of the interaction between the SSM, on the one hand, and the SRM, on the other hand, and from certain factual errors.

168 The applicants submit, in essence, that the SSM and the SRM are alternative systems, that, contrary to what was previously provided for under national law, the failure to adopt a resolution measure does not mean that the credit institution is to be liquidated under national law and that the ECB, following a FOLTF decision, does not have the power to decide to withdraw authorisation.

169 However, contrary to what the applicants claim, the FSA did not adopt two decisions, but rather, on the one hand, the FOLTF decision, namely a failing or likely to fail declaration, on 10 April 2017 and, on the other hand, in its role as the national resolution authority, a decision establishing that a resolution was not in the public interest, on 7 February 2018, as is clear from the decision of 17 July 2018, the passages of which are referred to in paragraphs 157 and 159 above.

170 The acts in question are distinct, with a failing or likely to fail declaration being one of the preconditions for adopting a final resolution decision, namely a resolution scheme under Article 18(6) of the SRM Regulation. That condition is, however, a necessary, but not sufficient, condition for the adoption of a resolution measure, as is apparent from paragraph 149 above.

171 That interpretation has been confirmed by the case-law referred to in paragraph 148 above, according to which a failing or likely to fail declaration contains an assessment of the facts by the NCA as to whether that institution is failing or likely to fail, which is in no way binding, but which forms the basis for the adoption, by the national resolution authority, of resolution mechanisms or decisions establishing that a resolution is not in the public interest.

172 It is a decision of that second type that the FSA, acting in its capacity as national resolution authority, adopted in this case.

173 Contrary to what is claimed by the applicants, such a decision in no way prohibits the ECB from subsequently adopting a decision withdrawing authorisation.

174 On the contrary, it must be held that, in so far as the failing or likely to fail declaration, which may be adopted, inter alia, where the conditions for withdrawal of authorisation are satisfied, as is apparent from recital 57 of the SRM Regulation and as also acknowledged by the second applicant, and which may be used as the basis for the adoption of a resolution measure, does not give rise to such a measure, according to the national resolution authority, which is competent to adopt it under Article 7(3)(e) of that regulation (in respect of a less significant credit institution), the ECB may decide to withdraw the authorisation of the credit institution which no longer meets the conditions for continuing authorisation.

175 Although the SRM shares the same task as that referred to under the SSM of protecting the stability and safety of the European Union’s financial system, and is therefore complementary to the latter, as is apparent from recital 11 of the SRM Regulation, it is nevertheless intended to be applied where an entity is insolvent or at risk of becoming insolvent and is aimed at managing financial crises once they have arisen, as is apparent from recital 7 of that regulation.

176 That conclusion is confirmed, moreover, by recital 57 of the SRM Regulation, according to which ‘the fact that an entity does not meet the requirements for authorisation should not justify per se the entry into resolution, especially if the entity remains or is likely to remain viable’ and by the case-law referred to in paragraph 152 above.

177 The measures adopted under the SSM and the SRM could be mutually exclusive, as claimed by the applicants, only where an entity no longer satisfies the conditions for continuing authorisation and, in addition, is no longer solvent.

178 In that case alone, the ECB would have to give priority to a resolution measure adopted by the SRB or by a national resolution authority (depending on the size of the credit institution), under the coordination and cooperation mechanism with those other authorities, outlined in Article 14(5) and (6) of the Basic SSM Regulation and in Articles 83(3) and 84 of the SSM Framework Regulation. In addition, the ECB is required, under Article 83(2) of that framework regulation, to take due account of consultations with national resolution authorities before adopting its decision to withdraw authorisation.

179 The coexistence of the SSM and the SRM cannot be understood as precluding the possibility for the competent authority for prudential supervision, namely the ECB, to withdraw authorisation, in the absence of the conditions required for adopting a resolution measure, namely where the credit institution in question is not at risk of becoming unviable.

180 That would amount to exempting credit institutions which are financially sound from the obligation to comply with the other prudential rules imposed on them for the purposes of maintaining their authorisation.

181 As regards the applicants’ argument that the ‘FOLTF decisions’ should have been communicated to them, suffice it to note that the final decision by which the national resolution authority established that there was no public interest in a resolution and the failing or likely to fail declaration of the FSA form part of a procedure that is distinct from that which led to the decision of 17 July 2018 and, therefore, the absence of notification of the FOLTF decision to the second applicant has no bearing on the lawfulness of the decision of 17 July 2018. Moreover, in so far as the grounds on which the FOLTF decision is based are the same as the grounds given in the FSA’s proposal for a decision to withdraw authorisation, as set out again in the decision of 17 July 2018, those grounds must be regarded as being known to that applicant, which is the addressee of those decisions.

182 Furthermore, in view of the precisions provided in paragraphs 173 to 180 above relating to the interactions between the SSM and SRM systems, it must be held that the applicants’ arguments concerning the reference in the decision of 17 July 2018 to a provision of national law allegedly repealed by the entry into force of those two systems, and in particular to Article 118 of the Estonian Law on Credit Institutions, are ineffective.

183 It follows from all of the foregoing that the present part cannot be upheld.

(c) The second part, concerning the ECB’s lack of competence to assess matters relating to AML/CFT

184 The applicants challenge, in essence, the ECB’s power to adopt a decision withdrawing authorisation on the ground of infringement of AML/CFT provisions, an area in which it lacks competence. By contrast, withdrawal of authorisation may be justified solely on prudential grounds.

185 In the first place, as can be seen from Article 67 of Directive 2013/36, withdrawal of authorisation is also provided for where a credit institution fails to comply with AML/CFT requirements. Thus, compliance with such obligations is clearly relevant in the context of prudential supervision, since, as underlined in recitals 1 and 2 of Directive 2005/60, the use of the financial system for money laundering purposes is likely to threaten the stability, integrity and reputation of the financial system and of the single market.

186 The fact that the wording of Article 18 of Directive 2013/36 also mentions the power of national supervisory authorities to withdraw authorisation cannot call into question the intention of the EU legislature as reflected in the provisions of the Basic SSM Regulation currently in force.

187 Although the Member States remain competent to implement the AML/CFT provisions, as expressly provided for in recital 28 of the Basic