Provisional text

OPINION OF ADVOCATE GENERAL

EMILIOU

delivered on 27 October 2022( )

Case C‑389/21 P

European Central Bank (ECB)

v

Crédit Lyonnais

(Appeal – Economic and monetary policy – Prudential supervision of credit institutions – Article 4(1)(d) and (3) of Regulation (EU) No 1024/2013 – Calculation of the leverage ratio – Refusal to authorise a credit institution to exclude certain exposures from the calculation of the leverage ratio – Article 429(14) of Regulation (EU) No 575/2013 – Manifest error of assessment – Standard of judicial review – Complex technical assessment – Policy discretion)





I. Introduction

1. ‘Basel III’ is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the 2007-2009 financial crisis, aimed at strengthening the regulation, supervision and risk management of banks. One of the major elements of the Basel III framework, and of its implementation in the European Union, is the introduction of a ‘leverage ratio’, which is calculated as a bank’s capital measure divided by that bank’s total exposure measure, expressed as a percentage. The leverage ratio permits the assessment of banks’ exposure to the risk of excessive leverage, which may force them to adopt unintended corrective measures to their business plan, including distressed selling of assets, which might result in significant losses.

2. By its appeal, the European Central Bank (ECB) challenges the judgment of the General Court of 14 April 2021, Crédit lyonnais v ECB, ( ) which annulled its decision refusing to grant Crédit Lyonnais a full exemption from leverage ratio requirements with respect to its exposures relating to certain regulated savings accounts.

3. The present appeal raises an issue of a systemic and constitutional nature: the standard of review by the EU Courts when assessing the lawfulness of administrative decisions adopted by other institutions, where those institutions enjoy a margin of discretion.

4. It has been said that this topic is, at least for EU lawyers, ‘not for the faint of heart’, ( ) since it is the subject of considerable controversy among legal practitioners and within academic circles. ( ) Thus, this case offers the Court an opportunity to shed more light on this issue. Indeed, although there is abundant (and, in my view, generally sound) case-law on this matter, I believe that certain key concepts and principles concerning that standard of review would benefit from further clarification.

II. Background

5. Crédit Lyonnais is a public limited company incorporated under French law and authorised as a credit institution. It is a subsidiary of Crédit Agricole SA, and as such, subject to the direct prudential supervision of the ECB.

6. On 5 May 2015, Crédit Agricole requested, on its own behalf and on behalf of the entities of the Crédit Agricole group, including Crédit Lyonnais, the ECB’s authorisation to exclude from the calculation of the leverage ratio the exposures constituted by sums relating to regulated products ( ) which it was required to transfer to Caisse des dépôts et consignations (CDC), a French public institution. That request was made pursuant to Article 429(14) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, ( ) as in force at the material time. ( )

7. According to Article 429(14) of Regulation No 575/2013, as then in force, ‘competent authorities may permit an institution to exclude from the exposure measure exposures that meet all of the following conditions: (a) they are exposures to a public-sector entity; (b) they are treated in accordance with Article 116(4); (c) they arise from deposits that the institution is legally obliged to transfer to the public-sector entity referred to in point (a) for the purposes of funding general interest investments’.

8. On 24 August 2016, the ECB adopted Decision ECB/SSM/2016‑969500TJ5KRTCJQWXH05/165 (‘the 2016 decision’), taken pursuant to Article 4(1)(d) and Article 10 of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the [ECB] concerning policies relating to the prudential supervision of credit institutions, ( ) as well as Article 429(14) of Regulation No 575/2013, by which it refused to authorise Crédit Agricole to exclude from the calculation of the leverage ratio the exposures to CDC consisting of the part of the sums deposited under the regulated savings that it was required to transfer to that institution.

9. Crédit Agricole challenged the 2016 decision before the General Court which, by judgment of 13 July 2018,( ) annulled that decision. The General Court found that the ECB had, when examining Crédit Agricole’s request, made (i) an error of law in applying Article 429(14) of Regulation No 575/2013, and (ii) a manifest error of assessment.

10. On 26 July 2018, Crédit Agricole, on its own behalf and on behalf of the various entities of the Crédit Agricole group, including Crédit Lyonnais, again requested authorisation to exclude from the calculation of the leverage ratio the sums which they were required to transfer to CDC.

11. On 3 May 2019, the ECB adopted Decision ECB‑SSM‑2019‑FRCAG‑39 (‘the contested decision’), taken pursuant to Article 4(1)(d) and Article 10 of Regulation No 1024/2013 as well as Article 429(14) of Regulation No 575/2013. By the contested decision, the ECB authorised the exclusion from the calculation of the leverage ratio of Crédit Agricole and the entities belonging to the group of the part of the sums deposited in respect of the regulated savings which they were required to transfer to CDC, with the exception of Crédit Lyonnais, in respect of which this derogation was granted only for an amount equal to 66% of such mandatory transfers.

12. In point 2.1 of the contested decision, the ECB found that the conditions set out in Article 429(14)(a) to (c) of Regulation No 575/2013 were satisfied. Then, in point 2.2 of the contested decision the ECB recalled that it enjoyed discretion in granting that exemption and illustrated the methodology adopted in reviewing the request for an exemption. That methodology took into account three elements: the creditworthiness of the central administration, the risk of fire sales of assets and the concentration of exposures. Each of those elements was attributed a percentage of exemption, so that the combination of the three would give the overall exemption to be granted.

13. As regards the creditworthiness of the French central government, in point 2.2.1 of the contested decision the ECB found that there were no specific prudential issues. However, it also observed that the external credit rating bodies had not given the French State the highest possible rating and that the five-year credit default swaps traded by the French State had a non-negligible probability of default.

14. As regards the risk of fire sales of assets, in point 2.2.2 of the contested decision the ECB found that the adjustment period of the positions with CDC could lead a credit institution to resort to fire sales of assets in order to reimburse depositors, while awaiting the transfer of funds by CDC. The ECB stated that, although a period of less than 5 days amounted to an almost instantaneous transfer entailing only a low risk of emergency sales, the system of adjusting positions with CDC implied that the period could be up to 10 days. In that respect, the ECB noted that, during the recent banking crises, 10 to 30% of a credit institution’s deposits had been withdrawn in less than five days and that regulated savings were more liquid than savings accounts.

15. In relation to the assessment of the concentration of exposures to CDC, in point 2.2.3 of the contested decision the ECB emphasised that the Crédit Agricole group had a solidarity mechanism involving a legal obligation between the member entities to provide support, in the form of capital and liquidity, thereby justifying the assessment of the level of concentration for the member entities at group level. However, the ECB observed that Crédit Lyonnais was not covered by that solidarity mechanism and, therefore, in relation to that company, the concentration risk had to be examined on a sub-consolidated basis. Since the ratio between exposures to CDC and Crédit Lyonnais’ Tier 1 capital was 134% in 2015 and 231% in 2018, the ECB found that the exposures to CDC did present a concentration risk.

16. The ECB concluded that, in order to mitigate the impact on capital of a massive withdrawal of deposits, it was prudent to include a level of exposures to CDC in the calculation of Crédit Lyonnais’ leverage ratio, and set that level at 34%.

III. Proceedings before the General Court and the judgment under appeal

17. By application lodged on 12 July 2019, Crédit Lyonnais brought an action for annulment of the contested decision. In support of that action, Crédit Lyonnais raised three pleas in law alleging, first, infringement of Article 266 TFEU on account of an incorrect implementation of the 2018 judgment, ( ) second, infringement of Article 429(14) and Article 400(1)(a) of Regulation No 575/2013 and, third, a manifest error of assessment by the ECB in assessing its request.

18. By the judgment under appeal, the General Court examined, in the first place, the first plea which it divided in three parts. The General Court dismissed as unfounded both the first part (concerning the creditworthiness of the French State) and the second part (concerning the level of concentration of exposures) of that ground. As regards the third part of that ground (concerning the risk of fire sales of assets), the General Court rejected certain arguments while holding that other arguments would be best assessed in conjunction with those put forward in the context of the third plea. ( ) Next, the General Court assessed and rejected as unfounded the second plea. ( )

19. Subsequently, the General Court examined Crédit Lyonnais’ arguments (put forward in the context of the first and third pleas) criticising the ECB’s assessment of the risk of fire sales of assets. The General Court started its analysis by noting that, in that regard, the ECB relied essentially on two grounds in concluding that such a risk existed with regard to the funds that Crédit Lyonnais had to transfer to CDC: the liquidity of regulated savings and the experience of recent banking crises. As regards the first aspect, the General Court noted that, in conformity with the findings of the 2018 judgment, the ECB was required to carry out an analysis which took into account the characteristics of regulated savings. ( )

20. However, in the view of the General Court, the ECB failed to do so for three reasons. First, the ECB did not take into account the ‘safe investment’ nature of regulated savings. The General Court considered it proven that, during a banking crisis, the sums invested in regulated savings tend to increase. Second, the General Court found that regulated savings are unlikely to contribute to the creation of an excessive leverage since they must be transferred to CDC and cannot be invested in risky or non-liquid assets. Third, the General Court emphasised that regulated savings enjoy a dual State guarantee, for both depositors and credit institutions. ( )

21. In the second place, the General Court took the view that the liquidity of regulated savings cannot, by itself, warrant the ECB’s findings concerning the possibility that the bank may find it necessary to have recourse to a fire sale of assets while awaiting transfers of funds from CDC. To support its findings in that respect, the ECB had relied on one example which, in the General Court’s view, was not relevant since it concerned products that were not similar to those at issue in the present case. ( )

22. On that basis, the General Court concluded that the ECB had, when assessing the risk of fire sales of assets, failed to take into account the characteristics of regulated savings (as required by the 2018 judgment) and, more broadly, failed to take into account all relevant elements of the specific case, thereby breaching the principle of sound administration. The General Court thus upheld the first part of the third plea and the third part of the first plea, setting aside the contested decision in so far as it refused to allow Crédit Lyonnais to exclude from the calculation of its leverage ratio 34% of its exposure to CDC, and ordered the ECB to pay the costs.

IV. Proceedings before the Court of Justice and the form of order sought

23. In its appeal before the Court of Justice, lodged on 24 June 2021, the ECB asks the Court to set aside the judgment under appeal and order Crédit Lyonnais to pay the costs. In its statement of defence, lodged on 7 September 2021, Crédit Lyonnais asks the Court to dismiss the appeal as unfounded and order the ECB to pay the costs.

24. On 23 November 2021, the ECB submitted a reply, and on 17 January 2022, Crédit Lyonnais submitted a rejoinder. The ECB and Crédit Lyonnais also presented their views at the hearing before the Court, held on 15 June 2022.

V. Assessment

25. The ECB raises four grounds of appeal. These grounds concern: the standard of judicial review applied by the General Court when assessing the lawfulness of the contested decision (A), the adequacy of the statement of reasons contained in the judgment under appeal (B), an alleged distortion, by the General Court, of the contested decision and of the evidence submitted to it (C), and the interpretation of Article 4(1)(94) and Article 429(14) of Regulation No 575/2013 (D).

26. This Opinion will focus mainly on the first ground of appeal, since not only does it raise the issue that lies at the heart of the present appeal proceedings, but, as already mentioned in the introduction, it is also of systemic constitutional importance. By contrast, the second, third and fourth grounds of appeal appear rather ‘ancillary’ to the first ground since they criticise, in essence, the manner in which, and the intensity with which, the General Court exercised its review of the contested decision. Those three grounds thus overlap, to a large extent, with the first ground. Therefore, since, in my view, the first ground of appeal is well founded, those three grounds will be dealt with more concisely.

A. Standard of judicial review (first ground)

1. Arguments of the parties

27. By its first ground of appeal, the ECB alleges that the General Court exceeded the limits of judicial review, in breach of the standard of review set out in well-established case-law. According to the ECB, the General Court carried out an ex novo assessment of the situation, and disregarded the margin of discretion which the legislature entrusted to the ECB on prudential matters.

28. In particular, the ECB argues that the General Court made an autonomous assessment of the characteristics of regulated savings, which differed from that of the ECB. That assessment was, moreover, based on an erroneous assessment of both the contested decision and the underlying factual situation. In that regard, the ECB points out that, according to settled case-law, in the case of complex economic assessments, the EU institution concerned must enjoy some leeway, with the consequence that the acts adopted by it are subject to limited judicial review. The EU Courts cannot substitute their own assessment of complex facts for that made by the competent institution.

29. In addition, the ECB points out that Article 429(14) of Regulation No 575/2013 expressly granted to it a discretionary power with regard to the possibility of excluding certain exposures from the calculation of the leverage ratio. The existence of such a discretionary power also called, the ECB contends, for the exercise of some restraint on the part of the General Court. The ECB argues that, by subjecting the contested decision to a particularly intrusive standard of review, the General Court largely deprived it of that discretionary power.

30. For its part, Crédit Lyonnais submits that, in the judgment under appeal, the General Court made no error of law, remaining within the boundaries of permissible judicial review. According to Crédit Lyonnais, the General Court found that the ECB had failed to consider certain elements which were relevant to the analysis, and that the conclusions reached in the contested decision were not substantiated by the evidence that was before it.

31. In particular, the General Court stated – correctly, in Crédit Lyonnais’ view – that the ECB should have taken into consideration the fact that, in the event of tension or crisis, regulated savings are generally regarded as a ‘safe investment’, thanks to the existence of a dual State guarantee. That characteristic of regulated savings was not contested by the ECB before the General Court. In addition, the General Court found – again correctly, according to Crédit Lyonnais – that the example concerning the risks arising in case of a bank run was incapable of supporting the conclusions to which the ECB arrived, since that example concerned a different type of account.

2. Analysis

32. In order to best address the issues raised in the present ground of appeal, I find it useful first to describe the relevant legal background. To that end, by way of preliminary remarks, I will briefly recall some key principles concerning the EU institutional system which appear relevant in the present case (a) and, subsequently, outline the role and powers of the ECB in the area of prudential supervision (b). Next, I shall explain the main principles and concepts governing the standard of judicial review applicable to areas subject to the so-called ‘marginal review’ (c). It is against those principles that I shall finally assess the arguments put forward by the parties (d).

(a) Preliminary remarks (I): the EU institutional framework

33. At the outset, I would like to point out that, according to Article 13(2) TEU, EU institutions must ‘act within the limits of the powers conferred on [them] in the Treaties, and in conformity with the procedures, conditions and objectives set out in them’. ( ) That provision, as the Court has held, ‘reflects the principle of institutional balance, characteristic of the institutional structure of the European Union, a principle which requires that each of the institutions exercise its powers with due regard for the powers of the other institutions’. ( )

34. The ECB is, together with the national central banks, part of the European System of Central Banks (ESCB), whose primary objective is to maintain price stability. Without prejudice to that objective, the ESCB is also to support the general economic policies in the European Union, with a view to contributing to the achievement of the objectives of the European Union. ( ) To that end, Article 132 TFEU and Article 34 of the ESCB and ECB Statute empower the ECB to, inter alia ‘take decisions necessary for carrying out the tasks entrusted to the ESCB under the Treaties and the Statute of the ESCB and of the ECB’.

35. Decisions of the ECB, just like any other act of the EU institutions, are in principle presumed to be lawful, and accordingly produce legal effects, until such time as they are withdrawn, annulled in an action for annulment or declared invalid following a reference for a preliminary ruling or a plea of illegality. ( ) It is for the Court of Justice of the European Union, pursuant to Article 19(1) TEU and Article 35 of the ESCB and ECB Statute, to ‘review the legality’ of those decisions.

(b) Preliminary remarks (II): the ECB and prudential supervision

36. One of the basic tasks conferred on the ESCB is to carry out ‘prudential supervision’, ( ) which involves – broadly speaking – the oversight of the financial system as a whole, in order to prevent or mitigate risks to its stability, and the supervision of individual financial institutions, in order to ensure their financial stability and a high level of protection of investors and depositors. In that context, some specific tasks have been conferred on the ECB by Regulation No 1024/2013, including the power to ensure compliance with the acts which impose prudential requirements on credit institutions in the area of, inter alia, leverage. ( )

37. Another fundamental legislative instrument in that respect is Regulation No 575/2013, which is aimed at strengthening the prudential requirements of financial institutions in the European Union. That is achieved, inter alia, by requiring them to keep sufficient capital, loss-absorbing liabilities and liquid assets, in order to ensure their financial soundness. The ultimate objective is to make those institutions more robust and resilient in periods of economic stress. ( )

38. More specifically, Regulation No 575/2013 is aimed at avoiding situations in which financial institutions build up an excessive exposure in relation to their own funds (‘the leverage’). ( ) Indeed, an excessive leverage may increase their vulnerability, since it entails the risk that those institutions may be required to adopt unintended corrective measures to their business plan, including distressed selling of assets, which might result in losses or in valuation adjustments to their remaining assets. ( )

39. For that purpose, Regulation No 575/2013 sets out a binding leverage ratio, preventing banks from financing too large a portion of their activities with debt. However, under Article 429(14) of that regulation, as applicable at the material time, an institution could ask the authorities to be allowed to exclude, from the exposures relevant for the calculation of the leverage ratio, certain exposures meeting the conditions set out in that provision. ( )

40. It is common ground between the parties to the present proceedings that, in respect of such requests, the ECB enjoyed a margin of discretion. Indeed, as applicable at that time, Article 429(14) of Regulation No 575/2013 provided that the ‘competent authorities may permit an institution to exclude …’. ( ) For that reason, in the light of the arguments put forward by the appellant, I shall now focus on the extent of judicial review that the Court of Justice of the European Union is to carry out when the legality of an EU act for the adoption of which the EU institution concerned enjoys a margin of discretion is challenged.

(c) Main principles and concepts on the standard of judicial review

41. Article 263 TFEU sets out the scope of judicial review to be carried out by the Court of Justice of the European Union when the legality of an EU act is challenged: an action for annulment may be brought ‘on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaties or of any rule of law relating to their application, or misuse of powers’.

42. However, the Treaties are silent with regard to the standard of judicial review to be applied by the EU Courts. The concept of ‘standard of review’ refers, generally, to the intensity of review that courts may exercise when reviewing the lawfulness of the challenged acts. Approached from another angle, the standard of review corresponds to the degree of deference accorded by courts to the bodies which adopted the challenged acts. Obviously, the higher the intensity of review, the lower the degree of deference accorded to the body in question and vice versa.

43. In that regard, it appears uncontested that, in the EU system, the intensity of judicial review is the highest ( ) with regard to, first, the establishment of ‘simple’ (or ‘primary’) facts. A fact is either true or false, and a possible error in that regard is subject to full review by the EU Courts. ( ) Second, EU institutions other than the Court of Justice of the European Union may have some leeway in applying the EU rules, but not in interpreting them. Indeed, it is for the Court of Justice of the European Union – as supreme interpreter of EU law – to ‘speak the law’. ( )

44. However, according to well-established case-law, some deference to the EU institutions is granted where they enjoy a degree of discretion in applying the relevant provisions. In this context, I would define discretion as the room for manoeuvre given (expressly or implicitly) by EU primary or secondary law to the EU institutions, to choose between various lawful courses of action when applying a given rule in order to pursue a specific objective.

45. To the best of my knowledge, some form of judicial restraint by the judiciary vis-à-vis the administration in cases where the latter enjoys a margin of discretion exists in every legal system. ( ) I can hardly think of a legal system that could function properly – at least if observed from the vantage point of today’s Western democracies, which are founded on principles such as the separation of powers and institutional balance – if the judiciary were empowered to set aside and replace every decision taken by the administration on any ground.

46. Coming back to the EU system, it seems to me that, generally speaking, two broad categories of discretion can be identified.

(1) Categories of discretion

47. First, some EU provisions expressly give the EU institutions concerned some latitude in choosing whether and/or how to act in certain circumstances, on the basis of some policy considerations. I will give two examples in that respect. Pursuant to Article 107(3) TFEU, the Commission may declare certain forms of State aid to be compatible with the internal market, when certain conditions are satisfied. Under Article 215(2) TFEU, where a decision adopted in accordance with Chapter 2 of Title V of the EU Treaty so provides, the Council may adopt restrictive measures against natural or legal persons and groups or non‑State entities. Under both provisions, the institution in charge is given the ability to decide on the most appropriate course of action on policy grounds. These are the cases that may be referred to as situations of ‘policy’ discretion. ( )

48. Second, there are situations – which may be referred to as those of ‘technical discretion’ ( ) – in which as a consequence of the fact that the relevant EU provisions require a complex technical (for example, economic or scientific) assessment, in order to ensure a given situation is covered by a specific (and relatively undetermined) legal concept, there is room for manoeuvre for the EU institutions concerned. For instance, is a given instance of aid compatible with the internal market because it ‘meet[s] the needs of coordination of transport’ for the purposes of Article 93 TFEU? Does a specific set of circumstances give rise to ‘a risk of an excessive deficit’ in a Member State within the meaning of Article 126(3) TFEU?

49. With regard to the second category of discretion, I would like to take the opportunity to clarify one concept. In my view, an assessment is not ‘complex’ simply because the establishment of the relevant facts is not straightforward, requiring instead a difficult, time-consuming and specific-knowledge-driven process. Indeed, it would be odd to think that judges may refrain from granting effective judicial protection to individuals each time a case is, from a factual point of view, not clear-cut. ( ) Factual complexity is no excuse for inertia or superficiality on the part of the judges.

50. A ‘complex’ assessment is, to my mind, only one where the relevant factual background cannot be established objectively or with absolute certainty, ( ) since reasonable and well-informed persons could, at least to some extent, disagree on the outcome of the fact-finding exercise or the legal qualification of the facts. ( ) That may be the case where the institution in question is required, for example, to make use of some models or assumptions in order to infer, from a set of simple facts, certain complex facts, ( ) or to make some value-judgements to qualify the facts and/or determine the ensuing legal consequences. ( )

51. The identification of the situations in which the institutions in question are shown some deference can be traced back to the early days of the Court’s activity. ( ) In particular, in the seminal judgment in Meroni, the Court actually distinguished the two categories of discretion. ( )

52. That said, I recognise that this distinction is not always easy to make. Indeed, it could be argued that the use by the legislature of particularly undefined and broadly framed concepts amounts, in practice, to an implicit delegation to the institutions in question the ability to make certain policy choices. However, for the reasons illustrated above, I am of the view that there is a conceptual difference between the two categories. As a rule of thumb, I would say that technical discretion concerns mainly the cognitive process of the decision-maker, whereas policy discretion concerns primarily an act of volition on its part. ( )

53. Nevertheless, and importantly for the present case, the EU Courts have adopted a relatively similar approach with regard to the standard of judicial review in both situations. That standard gives rise to what is often referred to as a ‘marginal review’. Two strands of case-law are particularly relevant in that regard.

(2) Marginal review(s) and manifest errors

54. On the one hand, according to settled-case-law, EU institutions are accorded relatively broad discretion in areas where their action involves political, economic and social choices, and where they are called upon to balance out policy considerations. In those situations, the measures adopted can be affected only if they are manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue. ( )

55. On the other hand, in case of complex technical assessments, the Court has consistently held that judicial review is ‘confined to verifying whether the rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment of the facts or misuse of powers’. ( ) In that respect, the Court has also added that the existence of a margin of discretion with regard to technical matters does not mean that the EU Courts must refrain from reviewing the institutions’ evaluation of information of a technical nature. Not only must those courts, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it. ( )

56. Those two strands of case-law, despite some terminological difference –the significance of which I shall come back to later ( ) – have an important element in common. With regard to the merits of the challenged act, the EU judiciary is allowed to censure the institution in question only in the event of manifest errors.

57. Having said that, I would like to add that I find somewhat unfortunate the use of term ‘manifest’ in that context. Indeed, that term might convey the idea that errors that are not sufficiently evident will not be censured by the EU Courts. ( ) In my view, that would be an erroneous understanding of the term. Such an approach to judicial review would hardly be compatible with, first and foremost, Article 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’), which does not limit the right to an effective remedy to instances of blatant violations of individuals’ rights and freedoms.

58. To my mind, the term ‘manifest’ must instead be understood with reference to the duty of the applicant to prove, to the required standard, ( ) that the analysis carried out by the institution in question was unreasonable or the conclusions reached implausible. ( ) As mentioned in point 43 above, at least in theory, an error committed by an institution when stating simple facts or interpreting the law is a ‘black or white’ (that is, correct or incorrect) situation. By contrast, where the competent institution enjoys some discretion as to how a rule should be applied, there is a (larger or narrower, depending on the circumstances) range of options which that institution can legitimately choose from. Therefore, an error of assessment exists only where the institution choses a course of action that falls outside the range of permissible applications of the law.

59. These considerations bring me to the next point I wish to make.

(3) No ex novo review

60. Pursuant to Articles 263, 267 and 277 TFEU, the EU Courts ‘review the legality’ of EU acts, which implies a review of lawfulness thereof, not of their expediency. The EU Courts merely review whether the challenged act was adopted in compliance with the relevant procedural and substantive rules, in the light of the pleas submitted by the party challenging the lawfulness of that act, and the evidence adduced by it. ( )

61. The judges do not re-hear the whole case in order to determine what would have been, in their view, the best course of action for the institution concerned under the given circumstances. Not only are judicial proceedings ill-suited for any form of ex novo review ( ) but, more crucially, there is a constitutional reason militating against full judicial review of discretional choices made by the administration. In those cases, the power to make those choices has been expressly entrusted to an institution other than the Court of Justice of the European Union. ( ) A too intrusive form of judicial review would encroach upon the margin of discretion given to the institutions in order to exercise their powers effectively, thus conflicting with the principle of conferral of powers to the institutions, and upsetting the principle of institutional balance. ( )

62. Therefore, as Advocate General Kokott aptly stated, it is not sufficient, in order to establish a manifest error of assessment, for the judges merely to take a different opinion to the institution responsible for the act under review. If the factual and evidential position reasonably allows different assessments, there can be no legal objection if that institution adopts one of them, even if it is not the one which the EU judiciary considers to be preferable. A manifest error of assessment exists only where the conclusions drawn by the institution in question are no longer justifiable in the light of the factual and evidential position. That is, when, despite the institution’s margin of discretion, no reasonable basis for its decision can be discerned. ( )

(4) Determination of the specific standard in each case

63. That said, it must be acknowledged that determining in each case the exact boundaries of the permissible discretion of an institution – and, as a consequence, of the intensity of judicial review – may, at times, be a difficult task. The latitude enjoyed by an institution when taking a given decision obviously varies from case to case, depending on a number of variables. The most important of those variables are, in my opinion, the following.

64. First, the two strands of case-law mentioned in points 54 and 55 above suggest that the institutions are granted more leeway when they act in their legislative capacity, than when they act in the context of their administrative functions. ( ) As Advocate General Léger rightly stated in Rica Foods, when adopting acts of general application, the institutions ‘must generally reconcile divergent interests and thus select options within the context of the policy choices which are their responsibility. Discretion which is “political” in nature thus corresponds to the political responsibilities which [an EU] provision confers upon an institution’. ( )

65. According to Article 10(1) TEU, ‘the functioning of the Union is founded on representative democracy’. ( ) It thus cannot be for the EU judiciary to second-guess the political choices made by the EU institutions which, because of their democratic legitimacy, have been entrusted with the power to adopt legislative acts. By contrast, when an act is mainly executive in nature, and is intended to deploy its effects only vis-à-vis one or more specific individuals, there is a greater need, for the EU Courts, to protect the rights of those individuals from possible unlawful administrative action.

66. Second, that case-law also suggests that policy discretion should generally imply greater latitude for the institution concerned. ( ) That too is, in my view, reasonable. Indeed, in case of policy discretion, the institution concerned is expressly given the power to choose between different courses of action, which are all legitimate, on the basis of its own evaluation of the relevant circumstances. On the contrary, technical discretion is generally narrower since it is merely the (intended or unintended) consequence of the fact that an institution is, in order to apply the law, required to assess complex situations in which some of the relevant elements are inherently uncertain, speculative or subjective. ( ) Furthermore, I observe that, in most cases, the exercise of policy discretion implies also the exercise of some technical discretion, ( ) but the opposite is not (necessarily) true. ( )

67. Third, and more importantly, the margin of discretion accorded to the EU institutions depends especially on the wording and objective of the relevant provisions. It is indeed the EU (constitutional or ordinary) legislature that, through the adoption of the relevant legal provisions, delegates certain powers to the institutions and determines the limits within which they can exercise those powers. ( )

68. A cursory look at various EU provisions shows the profoundly different choices made by the EU legislature in that respect. With regard to policy discretion, provisions at times give the institution in charge unfettered discretion, ( ) whereas in other circumstances that discretion is constrained, in varying degrees, by setting out the factors that the institution has to take into consideration. ( ) As far as technical discretion is concerned, the latitude that the institution is to enjoy is, in particular, a function of, on the one hand, the complexity of the situation to be established or evaluated and, on the other hand, the degree of abstraction or openness of the legal concept under which that situation has to be subsumed. Once again, those two aspects can vary greatly. For example, the Court has pointed out ( ) that prospective analyses ( ) are by their nature different from assessments of past or current events. ( ) In addition, the task of providing a legal qualification of facts may require a mostly empirical assessment, ( ) or also certain value-judgements. ( )

69. Fourth, the intensity of review of the exercise of discretion must also depend on the nature of, and level of interference with, the right invoked by the applicant. As the Court held in Digital Rights Ireland, ‘where interferences with fundamental rights are at issue, the extent of the [relevant EU institution’s] discretion may prove to be limited, depending on a number of factors, including, in particular, … the nature of the right at issue guaranteed by the Charter, the nature and seriousness of the interference and the object pursued by the interference’. Serious interferences with crucial aspects of fundamental rights imply that ‘[the institution’s] discretion is reduced, with the result that review of that discretion should be strict’. ( )

70. Last but not least, it seems to me that the legal and factual context in which an act is adopted may also have an influence on the margin of discretion enjoyed by the institution in question and, consequently, on the EU Courts’ review of the actual exercise of that discretion.

71. As regards the first aspect, I can think of, notably, the precautionary principle in the field of public health or environmental protection, ( ) or the principle of the presumption of innocence in the field of competition law. ( ) In my view, the application of those principles could, in certain cases, tip the balance towards action or inaction, or give the institution concerned more leeway for a given type of intervention than for another.

72. With regard to the second aspect, it stands to reason that the manner in which institutions make use of their discretion is influenced by the conditions which prevail at the time of the adoption of their acts. For example, the relevant landscape for the choices to be made in the field of EU energy policy may have suddenly and significantly changed since 24 February 2022, when the Russian Federation invaded Ukraine.

73. The above considerations lead me to take the view that there is no single and specific intensity of judicial review that is valid in all circumstances where the EU institutions enjoy some degree of (policy or technical) discretion as to how a particular rule should be applied. ( ) Nor do I think that an easy test or formula could be devised in that respect. ( ) The ‘marginal’ review that the EU Courts have generally alluded to may be more marginal or less marginal, depending on the specific circumstances of each case. It is thus for the EU Courts to determine, on a case-by-case basis, in the light of all relevant circumstances, the specific intensity of review to be applied when reviewing an institution’s use of discretion. ( )

74. Naturally, the lack of a clear-cut test might be considered by some to be a source of legal uncertainty. Yet, as mentioned earlier in this Opinion, the proper intensity of review may be determined by examining the margin of discretion enjoyed by the institution in question; and some guidance in that regard may be derived from the general rules and principles of EU institutional law.

75. It is against those rules and principles that I shall now assess the arguments put forward by the parties in the context of ECB’s first ground of appeal.

(d) Assessment

76. In essence, in the judgment under appeal the General Court found that the ECB had committed a manifest error of assessment in refusing Crédit Lyonnais’ request to exclude the entirety of its exposure to CDC from the calculation of its leverage ratio.

77. In order to address the ECB’s first ground of appeal, it is thus necessary to examine whether, in reaching that conclusion, the General Court applied a correct standard of review. Did the General Court – as alleged by the ECB – carry out an ex novo assessment of the situation at issue, disregarding the margin of discretion which the EU legislature entrusted to that institution on prudential matters? Or did the General Court merely ascertain – as contended by Crédit Lyonnais – that the ECB had not adopted the contested decision on the basis of factually accurate, reliable and consistent information?

78. I have some sympathy for the arguments put forward by Crédit Lyonnais. At first sight, the text of the judgment under appeal may indeed be read to the effect that the General Court carried out its task of reviewing the lawfulness of the contested decision in accordance with the well-established case-law mentioned in point 55 of this Opinion, which was duly recalled in paragraph 98 and 99 of the judgment under appeal. Taken at face value, the General Court simply found that: (i) in its analysis, the ECB disregarded or failed properly to assess certain elements that were relevant to the situation (the ‘safe investment’ nature of regulated savings, the mandatory transfer of the funds to CDC, the existence of a dual State guarantee), and (ii) the main elements referred to in the contested decision (the liquidity of regulated savings and the example concerning recent banking crises) did not support the conclusion reached by the ECB.

79. However, a closer scrutiny of the judgment under appeal reveals that, as the ECB argues, the General Court went beyond a mere review of legality of the contested decision, de facto carrying out an autonomous review of the situation at issue, eventually substituting its own view for that of the ECB.

80. In the following sections, I shall first explain why, in a case such as that at issue in the main proceedings, a particularly intrusive form of judicial review on the substance of the ECB’s decision was, in my view, not appropriate. Then, I shall turn to the specific passages of the judgment under appeal which show, to my mind, the erroneous standard of review applied by the General Court in the present case.

(1) The wide margin of discretion granted to the ECB

81. It is my firm conviction that the EU legislature intended the ECB to enjoy broad discretion under Article 429(14) of Regulation No 575/2013 (as applicable at the material time).

82. First, it is undisputed that that provision grants the ECB both policy discretion and technical discretion when deciding whether and, if so, to what extent, an exemption should be granted in a given situation.

83. Second, the wording of the relevant provisions indicate a wide margin of manoeuvre in both respects. On the one hand, the ECB is given the discretionary power to authorise the exemption (‘may’), without that power having been constrained by specific factors or parameters that the institution is required to take into consideration when making its assessment. It is thus for the ECB to determine the appropriate level of protection of the interests involved (in particular, the level of risk that may be considered acceptable), and to devise the analytical framework that it deems most appropriate to that end.

84. On the other hand, as far as the technical discretion is concerned, the ECB is required to carry out not only a prospective analysis, but also an analysis based on a number of value-judgements and predictions that are highly speculative and uncertain. In case of a bank run, what amount of deposits could be expected to be withdrawn and within what time frame? Would that bank be able to honour those withdrawals without having to resort to emergency corrective measures? What is the amount of own funds for that bank that may be reasonably required to cover unexpected losses in those situations? ( )

85. Third, the objective pursued by the legislation in question (to ensure, in the first place, the soundness of credit institutions and to protect investors and depositors and, by extension, the stability of the financial system as a whole) ( ) is of the greatest general significance. By contrast, the interference in the economic freedoms of the banks concerned flowing from a refusal under Article 429(14) of Regulation No 575/2013 is relatively limited since those banks could freely adopt a variety of business measures to reduce an excessive leverage.

86. Fourth, it follows from the above that Type I errors made by the ECB (that is, false positives leading to excessive strictness) would be far less consequential than Type II errors (that is, false negatives leading to excessive leniency). It thus stands to reason that, in situations of particular uncertainty or where it appears to be a ‘close call’, the ECB is given more latitude when it decides to stay on the safe side and thus to apply the relevant provisions strictly. This is consistent with the fact that the legislation in question is part of the package of measures adopted in response to the 2007-2009 financial crisis, with the very aim of preventing, as far as possible, the occurrence of similar situations in the future. ( )

87. The above considerations lead me to take the view that, when adopting a decision under Article 429(14) of Regulation No 575/2013, the ECB enjoyed a rather broad margin of discretion, both in assessing the relevant circumstances, and in determining the an and quantum of an exemption. ( ) If that is true, the consequence is that judicial review cannot be too intrusive with regard to the substantive elements of the contested decision (appropriate level of protection from the risks of excessive leverage, identity and weight of the elements taken into consideration to establish such a risk, choices made in borderline situations, etc.), on the pain of encroaching upon that margin of discretion.

88. The paragraphs of the judgment under appeal which will now be considered show why, to my mind, the General Court has erred in law in that regard.

(2) The ‘safe investment’ nature of regulated savings

89. Both in the present appeal proceedings and during the proceedings at first instance, Crédit Lyonnais placed significant emphasis on the ‘safe investment’ nature of regulated savings, an element which the ECB allegedly overlooked. The General Court agreed with Crédit Lyonnais in that regard. In paragraphs 107 to 110 of the judgment under appeal, the General Court criticised the ECB for not mentioning that characteristic of regulated savings in the contested decision. The General Court held that the Crédit Lyonnais had demonstrated to the requisite legal standard that, during banking crises, rather than decreasing due to withdrawals by depositors, the volumes invested in regulated savings in France tended to increase, as depositors consider it a safe investment. ( )

90. However, there is a certain mismatch between the reasoning followed by the General Court in the judgment under appeal, and the logic of the decision reviewed by it.

91. In the contested decision, the ECB did not make an assessment of the prudential risks posed by regulated savings in the abstract. The ECB examined, concretely, the specific situation of Crédit Lyonnais. A case-specific assessment appears indeed required under Article 429(14) of Regulation No 575/2013. ( )

92. As the ECB stated in point 2.2. of the contested decision, ‘the ECB grants an exemption in the light of the overall prudential risks related to the specific situation of the institutions subject to prudential oversight and the specificities of regulated savings’. ( ) In fact, the ECB took into account, inter alia, the magnitude and growth over time of Crédit Lyonnais’ exposure to CDC, and the fact that that bank was not covered by the solidarity mechanism of the Crédit Agricole group.

93. The ‘safe investment’ nature of regulated savings – which the ECB did not deny either before the General Court ( ) or before this Court – may very well lead to a general increase in the deposits during periods of economic and/or financial crisis, as the General Court found. Yet, in and of itself, that does not exclude the possibility that a particular bank may suffer massive withdrawals, for example, a bank whose situation deteriorates to such an extent that its depositors become afraid that it may soon become insolvent.

94. The ECB pointed to that aspect when it observed that nothing precludes depositors worried about the correct functioning of a specific bank from withdrawing their monies invested in regulated savings from that bank, and making a new deposit, still in regulated savings, in another bank that is perceived to be ‘more healthy’. Nevertheless, the General Court did not entertain such an argument.

95. More generally, the General Court failed to carry out a thorough examination of how the perception by depositors of the safe nature of regulated savings could actually influence their conduct during a period of particular stress for Crédit Lyonnais. It is not self-evident that the General Court’s findings regarding the safe investment nature of regulated savings would necessarily render the ECB’s considerations concerning the risks for Crédit Lyonnais, in the light of its specific situation, implausible or unreasonable. Nor does the evidence referred to in the judgment under appeal on this matter ( ) appear to provide any additional element in that regard.

(3) The likelihood that regulated savings may contribute to the build-up of an excessive leverage

96. Next, in paragraphs 111 to 113 of the judgment under appeal, the General Court found that regulated savings are unlikely to contribute to the build-up of an excessive leverage. According to the General Court, this is because those deposits are not put at the (free) disposal of the credit institution, which could invest them as it sees fit, including in non-liquid or risky assets, but have necessarily to be transferred to CDC.

97. Yet, once again, I fail to see how such a finding invalidates the ECB’s reasoning. The fact that Crédit Lyonnais’ exposures in question arise from deposits that must be transferred to a public-sector entity is one of the conditions that must be satisfied in order for Article 429(14) of Regulation No 575/2013 to become applicable in the first place. Nevertheless, as already mentioned, there is no automaticity in the application of that provision: the ECB is not obliged to grant the exemption each time those conditions are satisfied, having a discretionary power in that regard.

98. At any rate, the fact that the sums transferred to CDC may not be freely invested in non-liquid or risky assets – a point emphasised by the General Court – is of relative importance in this context. Indeed, for the calculation of the leverage ratio, exposures are not individually risk-weighted, but are all included in the exposure measure. ( ) The default position is that all exposures should be taken into account, regardless of their risk profile. It is only exceptionally that some exposures may be exempted from the calculation of the leverage ratio, ( ) where those exposures are deemed to have a particularly low risk, ( ) in the specific circumstances of the case. ( ) A different reading of the provision would run counter to the inherent logic and purpose of the leverage ratio, and disregard the fact that, being an exception to a general rule, Article 429(14) of Regulation No 575/2013 had to be given a strict interpretation.

99. However, as mentioned above, there is no indication in the judgment under appeal that the General Court assessed whether regulated savings, in the specific situation of Crédit Lyonnais, could be deemed to have a particularly low risk.

100. Therefore, in respect of the significance of this element (the fact that deposits are obligatorily transferred to CDC), the General Court appears to have made its own appraisal, without explaining how its findings in that regard fit into the scheme of the contested decision. That is perplexing, especially since the correctness of the overall methodology adopted by the ECB to examine Crédit Agricole’s request for exemptions appears to have been endorsed by the General Court. ( )

(4) Existence of a dual State guarantee

101. In paragraph 114 of the judgment under appeal, the General Court observed that, unlike normal deposits, regulated savings enjoy a dual State guarantee.

102. That is undisputed and, in fact, it was expressly mentioned in the contested decision. ( ) Nevertheless, again the General Court stopped short of explaining how that element contradicted the ECB’s analysis. If I understand paragraph 114 of the judgment under appeal correctly, the General Court intended merely to bring to the fore another element which, in its view, made the possibility of a bank run with regard to regulated savings unlikely: because of the dual State guarantee, there would be no reason to withdraw funds even in a situation of crisis for Crédit Lyonnais. ( )

103. If that is so, the General Court should have, arguably, explained the reasons why the view may be taken that most depositors having invested in regulated savings can be expected to act rationally in a situation that, at least for ordinary depositors, could have given rise to a bank run. My instinct is that recent experience, both in Europe and elsewhere, has shown that such rational behaviour is far from certain. ( ) In situations of growing panic among savers, with the media showing images of long queues of people waiting to withdraw their deposits, there appears to be some risk of an uncontrolled snowball effect. Nevertheless, regardless of my personal instinct – probably shaped by my first-hand experience with the 2012-2013 Cypriot financial crisis – to the extent that this element had not been considered by the ECB, it was incumbent on the General Court to deal with it expressly and to support its findings with the necessary evidence.

104. In addition, I believe that some explanation should have been included as to how the dry statement of the General Court in paragraph 114 of the judgment under appeal can be reconciled with its previous findings concerning the fact that, in the contested decision, the ECB had duly considered the risk of default of the central administration, noting that France’s credit rating was not the highest possible and that, in the context of credit default swaps, its risk of default was considered low but not non-existent. ( )

105. Admittedly, the General Court could have taken the view that the ECB had erroneously evaluated that risk of default. However, despite Crédit Lyonnais’ having submitted some arguments on that point, the General Court did not take any position in that respect. ( )

106. Thus, on this element too, the General Court appears to have carried out an autonomous assessment of the characteristics of regulated savings and their significance for the purposes of Article 429(14) of Regulation No 575/2013, one that is somewhat detached from the text and logic of the contested decision.

(5) The ‘liquidity’ of regulated savings

107. In paragraphs 115 and 116 of the judgment under appeal, the General Court concludes that, in the light of its findings with regard to the characteristics of regulated savings, the liquidity of regulated savings could not, by itself, adequately justify the ECB’s conclusion regarding the risk of fire sales of assets. The General Court stated that, while enabling savers to withdraw their deposits, liquidity also contributes to making them consider regulated savings as a safe investment.

108. In that respect, I agree with the General Court that the fact that depositors can freely and immediately withdraw their funds from the bank is, by itself, not a conclusive element to establish the existence of a risk of a fire sale of assets. However, as explained above, I am not convinced by the General Court’s criticism of the other elements which the ECB had or had not taken into account.

109. More importantly, the manner in which the General Court characterised and summarised the reasoning followed by the ECB in the contested decision is quite puzzling. When reading the judgment under appeal, one may have the impression that the liquidity of regulated savings had been a key element for the ECB to justify its conclusion.

110. Yet, that would be a rather inaccurate reading of the contested decision. The reasoning followed by the ECB in that decision is, in essence, that in case of massive withdrawals from savers, such as in a situation of a bank run, Crédit Lyonnais could find it difficult to honour withdrawals, without having to adopt emergency measures, because a significant part of its deposits are transferred to CDC, which has a 10‑day adjustment period during which the bank remains liable for the withdrawals.

111. Within that context, the fact that regulated savings are particularly liquid, and thus can be easily and immediately withdrawn by savers, is certainly an aspect which is relevant to the analysis. Obviously, the risk of emergency sales would be far lower if there were legal or practical obstacles to the immediate withdrawals of funds by depositors. However, that is not a central element of the analysis. Put simply, I would say that liquidity is not one of the sources of the risk, but an enabler of the risk. The (relatively in passing) reference to liquidity in point 2.2.2 of the contested decision is quite telling in that respect.

112. In addition, the General Court may well be correct in that the liquidity of regulated savings is one of the reasons which makes them attractive to savers during periods of financial uncertainty. ( ) Nevertheless, on this point too there seems to be an element missing in the reasoning of the General Court: would that general feeling of ‘safety’ by depositors concerning regulated savings be enough to prevent them from rushing to withdraw their funds if, for example, some specific problems relating to the financial stability of Crédit Lyonnais were to emerge?

113. Logically speaking, the General Court’s consideration on this point appears to be the classic ‘double-edged sword’. If the liquidity of regulated savings contributes to making savers feel safe because it enables them freely to withdraw their funds at any time, does that not imply that those savers would want to actually withdraw those funds when the situation of their bank becomes worrying?

114. The General Court’s assessment on this point appears, therefore, incomplete. That shows once again that, rather than reviewing the statement of reasons contained in the contested decision, the General Court carried out its own assessment of the situation.

(6) The example concerning the experience of recent banking crises

115. In paragraphs 117 to 122 of the judgment under appeal, the General Court took issue with the ECB’s statement according to which the experience of recent banking crises shows that massive withdrawals may take place within five days. The General Court found that the ECB relied on only one example in that regard (‘the example’), and that example concerned ordinary deposits, which were thus different from regulated savings in several aspects. On that basis, the General Court came to the conclusion that the alleged risk of massive withdrawals potentially triggering a fire sale of assets by Crédit Lyonnais was not adequately supported by evidence.

116. I can agree with the General Court that the contested decision is certainly not a model of clarity and precision in that regard. However, the General Court’s criticism on this point appears to stem from a misreading of that decision.

117. The ECB did not intend to draw a comparison between the example and the situation of Crédit Lyonnais. The reference to recent experience was simply intended to illustrate the speed with which massive withdrawals may take place when serious doubts concerning the stability of a bank arise and, consequently, the reason why the 10‑day potential delay between withdrawals by savers and the reimbursement of the sums by CDC could, in certain circumstances, be problematic.

118. As a matter of fact, in the contested decision the ECB recognised that no bank run with regard to similar forms of savings had recently occurred. That said, the ECB emphasised that it was not required to confine its prudential concerns to types of risks that had already materialised in the past. ( )

119. Therefore, the General Court may well be correct regarding the limited comparability of the two situations. Yet, that is not enough to invalidate the ECB’s considerations on the point. Indeed, the General Court did not (i) contest the correctness of the data provided by the ECB; (ii) explain why, in its view, the five‑day time frame could not apply in case of Crédit Lyonnais; and (iii) call into question the matrix used by the ECB in this context, differentiating the percentage of exemption according to the time-lags for the reimbursement from the relevant public entity (less than 5 days, between 5 and 10 days, between 10 days and one month, and more than one month). ( )

120. Furthermore, the judgment under appeal includes no explanation as to why a cautious approach and increased vigilance on the part of the ECB would not be justified. Actually, it seems to me that, in the light of the overarching aim of the EU legislation in question (to prevent the occurrence of new financial crises) as well as of the objective of the specific provisions in question (to ensure the soundness and stability of financial institutions by limiting their leverage), not limiting prudential assessment to only risks that materialised in the past is a sensible application of the law.

(7) The lack of basis for refusing a total exemption

121. Finally, I find well founded the ECB’s criticism of paragraph 126 of the judgment under appeal in which the General Court first stated that, ‘having regard to the methodology used by the ECB’, the grounds ‘concerning the creditworthiness of central government and the level of concentration of exposures to [CDC] respectively, assuming they are not unlawful, do not amount to grounds for the refusal issued to the applicant’. The General Court then added that ‘on the basis of that methodology, had those grounds alone been taken into consideration the ECB would not have refused to grant the applicant the full benefit of the derogation under Article 429(14) of Regulation No 575/2013’. ( )

122. Those resolute and blunt statements are perplexing. First, nowhere does the General Court state the overall consequence of its individual evaluation of the various elements which, in its view, the ECB had overlooked or failed properly to assess, with regard to the (low, particularly low, negligible, de facto inexistent?) level of risk of fire sales of assets by Crédit Lyonnais. Second, even assuming that the General Court had done that, the judgment under appeal lacks any concrete explanation as to how its findings regarding the risk of fire sales of assets should have been reflected in the ECB’s methodology. The silence of the judgment under appeal in that regard is remarkable, since the statements made in paragraph 126 thereof constitute the basis for the annulment of the contested decision. ( ) Third, the General Court appears to take a position on what the ECB would have done – and not on what the ECB should have or should not have done – had those elements been assessed correctly. The difference is not a question of terminology. The General Court does not identify the limits of the ECB’s administrative action, but appears to ‘step in the shoes’ of the ECB, ignoring that institution’s broad margin of discretion with regard to substantive assessments under Article 429(14) of Regulation No 575/2013.

(8) Conclusion on the first ground

123. It is normally to be expected that, in the system of ‘review of legality’ established by the EU Treaties, the point of departure of the analysis carried out by the court hearing a case such as the present one would be the very text of the contested act. That analysis would generally take into account the logic and structure of that act, and then engage with the sequence of arguments put forward by the institution in question to support the conclusion eventually reached. The key question should be whether the institution which adopted the contested decision made, in the light of the margin of discretion enjoyed, a reasonable application of the relevant provision.

124. For the reasons explained in the sections above, I find it hard to find elements of such an approach in the present case.

125. The criticism of the ECB’s analysis is mostly expressed in a few brief passages of the judgment under appeal, which at times overlook the complexity of the issues involved. The General Court then replaces that analysis with one of its own, based on an alternative evaluation of certain elements of fact, often relying on unsupported statements or evidence the probative value of which is far from obvious. Importantly, the General Court appears to have evaluated those elements in isolation, without really ‘connecting the dots’: not assessing the interaction between those elements and, even more importantly, not explaining how its evaluation of those elements would reflect on the final outcome, when integrated in the methodology used by the ECB which – it may be worth stressing again – was not criticised by the General Court.

126. In particular, as the ECB correctly points out, the General Court focused exclusively on the assessment of the probability of massive withdrawals occurring within a short period of time, without taking into account the consequences which the materialisation of that risk could have on the financial situation of Crédit Lyonnais, given the level of its exposure to CDC. In that respect, one could say that, at best, the General Court did ‘half of the job’ by looking at the characteristics of regulated savings in general, but – unlike the ECB in the contested decision ( ) – it missed the other ‘half of the job’, which was to examine the specific situation of Crédit Lyonnais.

127. In conclusion, I am of the view that the General Court carried out a particularly intrusive form of review of certain elements of the analysis made by the ECB (level of acceptable risk, identity and nature of the elements taken into consideration to evaluate that risk, etc.), without its findings in that respect being supported by adequate reasoning and appropriate evidence.

128. Instead of showing that, in the contested decision, the ECB had made an unreasonable application of Article 429(14) of Regulation No 575/2013, the General Court carried out an ex novo assessment of Crédit Agricole’s request for exemption, substituting its own view for that of the ECB, and thus encroaching upon the margin of discretion which, in that matter, the ECB was granted by the EU legislature.

129. Since the General Court applied a wrong standard of review with respect to the contested decision, the first ground of appeal should be considered well founded and the judgment under appeal set aside.

B. Adequacy of the statement of reasons (second ground)

1. Arguments of the parties

130. By its second ground of appeal, the ECB argues that the General Court breached its duty to state reasons. In its view, the judgment under appeal does not adequately explain in what way it erred in assessing the impact of the dual State guarantee which regulated savings enjoy.

131. Crédit Lyonnais claims that the reasoning followed by the General Court in that regard is clearly set out in the judgment under appeal. In particular, Crédit Lyonnais refers to paragraphs 59 and 114 to 122 of that judgment. In a nutshell, the ECB’s view that the existence of a dual State guarantee over regulated savings did not prevent a risk of massive withdrawals by savers within a short period of time was found to be unsubstantiated by the General Court.

2. Analysis

132. I am of the view that this ground of appeal is unfounded.

133. The statement of reasons included in the judgment under appeal with regard to the significance of the dual State guarantee with respect to the risk of fire sales of assets by Crédit Lyonnais is indeed short and to some extent non-explicit. However, as mentioned in point 102 above, the thrust of the General Court’s argument on this point becomes clearer when the relevant passages of the judgment under appeal are read in their broader context. In essence, the General Court took the view that the existence of a dual State guarantee with regard to regulated savings made bank runs in respect of those savings unlikely.

134. The General Court’s reasoning is thus clear enough. Whether that view is supported by the necessary evidence concerns the substance of the General Court’s analysis, not its adequacy.

C. Distortion of evidence (third ground)

1. Arguments of the parties

135. By its third ground of appeal, the ECB contends that the General Court distorted the evidence that had been submitted to it in the course of the proceedings. In its view, the General Court manifestly misread certain passages of the contested decision, and distorted the methodology applied to assess Crédit Agricole’s request for exemption.

136. In particular, the ECB maintains that it did take into account the ‘safe investment’ nature of regulated savings and the existence of a dual State guarantee. As regards the distortion of the methodology used in the contested decision, the ECB alleges that the General Court failed to take into account the consequences which the materialisation of that risk could have on the financial situation of Crédit Lyonnais, given the high level of concentration. Put simply, the risk itself may well be quite small but, should that risk materialise, the consequences could be very serious for the bank.

137. Furthermore, according to the ECB, the General Court distorted the example used in the contested decision by making it a condition for the assessment of the risk of massive withdrawals in the short term, whereas the sole purpose of that example was to illustrate the potential consequences of the materialisation of such a risk. Finally, the ECB claims that the General Court wrongly carried out an individual examination of the criteria which it took into account in its methodology, whereas those criteria had to be read as being interdependent.

138. Crédit Lyonnais takes the view that the allegations put forward by the ECB in support of its third ground of appeal should be dismissed as unfounded. Crédit Lyonnais emphasises that, in the contested decision, no mention is made of the ‘safe-investment’ nature of regulated savings. As regards the criticism made vis-à-vis the General Court’s findings on the methodology used by the ECB, Crédit Lyonnais maintains that the General Court has correctly applied the condition laid down in the 2018 judgment, which required the ECB to consider the possibility of massive withdrawals in the light of the characteristics of regulated savings.

139. Crédit Lyonnais also argues that the allegedly illustrative nature of the example in question does not relieve the ECB of the obligation to take as its basis factors subject to judicial review. In addition, paragraph 126 of the judgment under appeal shows – according to Crédit Lyonnais – that the General Court did not fail to consider the interdependence of the criteria employed by the ECB in its methodology.

2. Analysis

140. I am not convinced by this ground of appeal.

141. I share some of the ECB’s criticisms with regard to the General Court’s reading of the contested decision, and to the manner in which the General Court examined the evidence adduced by the parties in the context of the proceedings at first instance. Nevertheless, I detect no distortion of the clear sense of evidence.

142. According to settled case-law, such a distortion consists of an interpretation of a document that is contrary to the content of that document. Such a distortion must be obvious from the documents in the case file, without there being any need to carry out a new assessment of the facts and the evidence. In that regard, it is not sufficient to show that a document could be interpreted differently from the interpretation adopted by the General Court: the latter must have manifestly exceeded the limits of a reasonable assessment of the evidence.( )

143. That is not the case in the present proceedings. The problem with the judgment under appeal lies, in my view, not in the end result of the General Court’s review. Indeed, there is no substantive finding which appears obviously incorrect on the basis of the information and documents included in the case file.

144. The errors made by the General Court follow from the manner in which the General Court carried out such a review. As previously explained, the General Court made an ex novo assessment of various elements of the analysis, and of the consequences thereof, with regard to the case before the ECB. It did so by paying little attention to the evaluations made and the methodology employed by the ECB and, more generally, the logic underpinning the contested decision.

D. Article 4(1)(94) and Article 429(14) of Regulation No 575/2013 (fourth ground)

1. Arguments of the parties

145. Finally, in its fourth ground of appeal, the ECB submits that the General Court has erroneously interpreted Article 4(1)(94) and Article 429(14) of Regulation No 575/2013.

146. With regard to the first provision, the ECB argues that the General Court erred in adding, to the definition of the risk of excessive leverage, some criteria that are not set out in the relevant provisions (namely, the freedom to use any deposits or the possibility of investing in illiquid or risky assets). As regards the latter provision, the ECB maintains that the General Court’s interpretation has the effect of depriving the ECB of the margin of manoeuvre granted to it by the legislature concerning the evaluation of whether certain exposures may be exempted from the calculation of the leverage ratio.

147. Crédit Lyonnais contests the arguments put forward by the ECB. As far as Article 4(1)(94) of Regulation No 575/2013 is concerned, Crédit Lyonnais dismisses the argument according to which the General Court added criteria that are not set out in that provision: in its view, that court has merely found that the ECB had ignored certain characteristics of regulated savings, indicating that those savings have a particularly low risk level.

148. As regards the ECB’s argument relating to Article 429(14) of Regulation No 575/2013, Crédit Lyonnais states that the interpretation of that provision retained by the General Court by no means deprives the ECB of its margin of discretion. According to Crédit Lyonnais, the ECB would have been entitled to refuse the application of the exemption (in whole or in part) where, for example, the regulated savings had no State guarantees, or had it proven the likelihood that the State could actually default.

2. Analysis

149. In respect of this ground of appeal, I again agree with Crédit Lyonnais.

150. Article 4(1)(94) of Regulation No 575/2013 defines the ‘risk of excessive leverage’ as ‘the risk resulting from an institution’s vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets.’

151. I fail to see how the General Court would have misapplied the concept of ‘risk of excessive leverage’ in the present case. In the judgment under appeal, the General Court simply held that, in its view, the ECB had wrongly examined the circumstances that were relevant for the granting of the exemption, by overlooking or failing properly to assess certain characteristics of regulated savings.

152. Moreover, the General Court’s interpretation of Article 429(14) of Regulation No 575/2013 does not deprive the ECB of its margin of manoeuvre. Indeed, the General Court’s findings concerned one specific type of deposit which, in that court’s view, was unlikely to give rise to massive withdrawals because of a number of features thereof, which induce savers to consider those deposits to be particularly safe. Nothing in the judgment under appeal suggests that the ECB does not enjoy leeway when taking decisions with regard to other types of deposits.

VI. Consequences of the assessment

153. The first ground of appeal is, in my view, well founded. As a consequence, the judgment under appeal should be set aside.

154. In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, the Court of Justice may, after setting aside a decision of the General Court, refer the case back to the General Court for judgment or, where the state of the proceedings so permits, it may itself give final judgment in the matter.

155. In the present case, I am of the view that the state of the proceedings permits the Court to take a final position in the case.

156. The judgment under appeal rejected as unfounded the first and second parts of the first plea, and the second plea. Crédit Lyonnais has not appealed against that judgment, with the consequence that the General Court’s findings on those matters have become res judicata.

157. It remains for the Court of Justice to examine, on the one hand, the third part of the first plea, and the first part of the third plea, by applying a correct standard of judicial review (A). On the other hand, it is also for the Court of Justice to examine the second and third parts of the third plea, on which the General Court did not rule (B).

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

158. I do not find the arguments put forward by Crédit Lyonnais in the context of the third part of the first plea and of the first part of the third plea to be persuasive.

159. First, it is clear to me that, in its assessment of Crédit Agricole’s request for exemption, the ECB took into account the specific characteristics of regulated savings. The overall methodology adopted for that purpose, and the evaluation carried out in respect of the specific elements taken into account within that context, show that ECB’s assessment considered how the specificities of regulated savings could affect prudential considerations.

160. In particular, the ECB did take into account, in the contested decision, the existence of a double State guarantee, the risk of default of the French State, and whether massive withdrawals would be ‘sufficiently large and sudden’ to justify the risks alleged.

161. I am therefore of the view that Crédit Lyonnais did not adduce any convincing argument to the effect that the ECB failed to draw the necessary consequences from the 2018 judgment and, in particular, from paragraph 81 thereof. In addition, for the reasons set out above, I do not detect any manifest error in the assessment made by the ECB with regard to the circumstances that are relevant for its decision to grant only a partial exemption under Article 429(14) of Regulation No 575/2013. Crédit Lyonnais failed to establish that the conclusion reached in that regard falls outside the margin of discretion that the ECB ought to enjoy on that matter. The ECB’s decision does not appear, in the light of the circumstances of the case, and in view of the objective pursued by the provisions in question, to be unreasonable or implausible.

162. Accordingly, I conclude that the third part of the first plea and the first part of the third plea should be rejected.

B. Second part and third part of the third plea

163. In its application before the General Court, Crédit Lyonnais argues that the ECB had made a manifest error of assessment with regard to the creditworthiness of central government (point 2.2.1 of the contested decision), and of the level of concentration of its exposures to CDC (point 2.2.3 of the contested decision).

164. These pleas do not warrant, in my view, a lengthy examination.

165. As regards the second part of the plea, in a brief passage of its application to the General Court, Crédit Lyonnais criticised the ECB for not having adduced any element to substantiate the existence of a possible risk of default by the French State. Subsequently, in its reply, Crédit Lyonnais reformulates its argument by stating that it does not deny the existence of a minimal risk of default by the French State, but claims that such a risk cannot justify a refusal under Article 429(14) of Regulation No 575/2013.

166. In any event, regardless of the precise formulation of the argument, it appears manifestly unfounded.

167. First, as mentioned, in the contested decision the ECB noted that the external credit rating bodies had not given the French State the highest possible rating and that the five-year credit default swaps traded by the French State had a non-negligible probability of default. Second, the likelihood of default by the French State is obviously not the reason (or one of the reasons) justifying a partial refusal of exemption vis-à-vis Crédit Lyonnais. Indeed, the other credit institutions belonging to the Crédit Agricole group obtained a full exemption with regard to regulated savings. Third, to the extent that one of the main arguments on which Crédit Lyonnais insisted was the safe investment nature of regulated savings because of the dual State guarantee, the fact that the French State’s risk of default was considered non-negligible appears to be an element of some relevance.

168. As far as the third part of this plea is concerned, I fail to see in Crédit Lyonnais’ submissions at first instance or on appeal any argument which is additional and distinct from those that the General Court examined and rejected in paragraphs 73 to 88 of the judgment under appeal.

169. On the basis of the above, I take the view that the application for annulment brought by Crédit Lyonnais should be dismissed.

VII. Costs

170. Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to costs.

171. Article 138(1) of those rules, applicable to appeal proceedings pursuant to Article 184(1) thereof, provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

172. In the present case, the ECB has applied for costs. Since the appeal should be upheld, and the action dismissed, Crédit Lyonnais should be ordered to pay the costs of these proceedings, both at first instance and on appeal.

VIII. Conclusion

173. In the light of the above consideration, I suggest that the Court of Justice:

– set aside the judgment of the General Court of 14 April 2021, Crédit lyonnais v ECB (T‑504/19, EU:T:2021:185);

– dismiss the action for annulment brought by Crédit Lyonnais;

– order Crédit Lyonnais to pay the costs of proceedings both at first instance and on appeal.