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: The Sanctioning Power of the ECB: From One to Several Regimes

THE SANCTIONING POWER OF THE ECB:

FROM ONE TO SEVERAL LEGAL REGIMES

Frédéric Allemand *

ABSTRACT: The European Central Bank is the only non-judicial institution of the Union with a power to impose sanctions based directly on the EU treaties. Einked to the implementation of the ECB regulations and decisions, this sanctioning power has so far remained little exercised. In 2013 the Regulation establishing the single supervisory mechanism conferred on the ECB a new specific sanctioning power to enforce European directly applicable prudential rules. Two complementary but separate legal regimes regulate the use of sanctioning power by the ECB in monetary and in supervisory matters respectively. The duality of the applicable legal bases, their cross-referencing and the decentralisation of the implementation of the ECB’s powers make the legal framework as a whole highly complex and non-transparent. The increasing use by the ECB of its sanctioning especially in the prudential supervision area requires clarification of the specific features of each legal regime from a substantive and procedural perspective.

KEYWORDS: european central bank - monetary policy - prudential policy - sanctions

SUMMARY: 9.1. Introduction. - 9.2. The distinct philosophy of the ECB’s monetary and prudential tasks. - 9.2.1. Monetary policy: favouring the market approach. - 9.2.2. Prudential policy: improving the regulatory approach. - 9.3. The duality and complexity of the two legal regimes. - 9.3.1. General power to sanction. - 9.3.2. The specific sanctioning power of the ECB in the prudential supervision area. - 9.4 The convergence of sanctioning procedures. - 9.4.1. Initiation and investigation phase. - 9.4.2. The decision on sanction and its administrative review. - 9.5. Concluding remarks.

: Introduction

The sanction is “one of the best and simplest means of ensuring effective compliance with obligations”.[1] It is a legal norm whose function is to guarantee the effective application of another so-called ‘primary norm’, according to Hart’s typology. This finding does not preclude the primary norm from being complied with regardless of the existence of a sanction. Other legal and non-legal means exist to ensure that the behaviour of the addressees complies with legal requirements,[2] e.g. the establishment of a system of liability for fault or the nullity of contrary acts, political procedures relating to the legitimacy of the authority issuing the legal norm, or economic procedures based on a cost-benefit analysis of compliance with the rule of law.

Economic and Monetary Union (EMU) law is an area where the effectiveness of legal obligations depends partly on sanctions. The discipline of the Member States’ budgetary policies is based on a mixed system where market surveillance is supported by a coordination procedure of administrative and political nature, which provides for the adoption of fines by the Council.4 No sanctions have ever been applied to a Member State for budgetary or macroeconomic indiscipline.1 In the monetary pillar, the ECB may “impose fines and periodic penalty payments on undertakings for failure to comply with its regulations and decisions” , especially in the case of non-compliance by credit institutions with the obligation to hold minimum reserves. ' The limits and conditions of this sanctioning powers are laid down in Council Regulations. In the context of the establishement of the European Banking Union (‘BU’), the ECB is vested with specific sanctioning powers to carry out new supervisory tasks conferred on by a Council Regulation adopted in 2013. Unlike the Council in the Economic Union, the ECB makes full use of its sanctioning power, although a distinct practice can be observed depending on the monetary or prudential area where this power is exercised. Between 1999 and 2013, few pecuniary sanctions were imposed by the ECB; the total amount of the fines reached EUR 7 millions. In the majority of the breaches noted, the fines were less than EUR 500.[3] In the supervisory field, the ECB sanctioned ten credit institutions over the July 2017-October 2019 period; the total amount of administrative pecuniary penalties is EUR 21 millions, with a record total sanction of EUR 11.2 millions against the Italian bank Banco di Popolare di Vicenza in September 2017, while the minimum amount of sanctions imposed to date is EUR 200,000. In addition, seven other credit institutions were sanctioned by national supervisors, following an infringement procedure initiated at the request of the ECB.

The discrepancies between the number and amount of sanctions imposed by the ECB in the monetary field and in the prudential field may seem surprising at first. They reflect the profound differences in law enforcement approaches implemented in each area and, incidentally, their clear distinct ‘philosophies’ (Section 2). This dual legal situation deeply affects the definition of the legal regime of ECB’s sanctioning power. The ECB shall exercise its sanctioning powers not in accordance with one single legal regime, but two (Section 3). The differences between these regimes do not preclude a high degree of convergence with regard to procedural aspects (Section 4).

  • [1] Associate Researcher, Robert Schuman Initiative, University of Luxembourg; Lecturer in EU Law, SciencesPo, ENA. 2 M. Virally, La pensée juridique (LGDJ 1960), 68. 3 H. Hart, Le concept de droit (LGDJ 2006), 105.
  • [2] 4 Article 126(11) TFEU. For an analysis of the sanctioning regime applicable in the Economic Union area, see F. Allemand, F. Martucci, ‘La nouvelle gouvernance économique européenne’ (2012) 48 Cahiers de Droit européen 17, and the chapter by F. Costamagna and A. Miglio in this book. 5 See Article 8 of Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area, OJ L 306/1, 23.11.2011. However, Spain was has been fined by the Council for its “serious negligence” following an undeclared expenditure amounted to EUR 4.5 billion in its 2011 budget deficit. In its judgment of 20 December 2017 (case C-521/15, Spain v Council, ECLI:EU:C:2017:982), the Court of justice dismissed the action for annulment brought by Spain against the Council decision. 2 Article 132(3) TFEU, and Article 34(3) of the Statute of the ESCB and of the ECB. 3 Article 19 of the Statute. 4 Article 132 TFEU, Articles 5(4) and 19(2) of the Statute. See Council Regulation (EC) No 2532/98 of 23 November 1998 concerning the powers of the European Central Bank to impose sanctions, OJ L 318/4, 27.11.1998, amended by Council Regulation (EU) 2015/159 of 27 January 2015, OJ L 27/1, 3.2.2015; Council Regulation (EC) No 2531/98 of 23 November 1998 concerning the application of minimum reserves by the ECB, OJ L 318/1, 27.11.1998, amended by Council Regulation (EC) No 134/2002 of 22 January 2002, QJ L 24/1, 26.1.2002; and Council Regulation (EC) No 2533/98 of 23 November 1998 concerning the collection of statistical information by the ECB, OJ L 318/8, 27.11.1998, last amended by Council Regulation (EU) 2015/373 of 5 March 2015, OJ L 64/6, 7.3.2015. 5 ’Council Regulation (EU) No 1024/2013 of 15 October 2013 entrusting the ECB with specif-
  • [3] ic tasks concerning policies relating to the prudential supervision of credit institutions, OJ L 287/63,29.10.2013. 2 Author’s estimates based on ECB Annual Reports. 3 ECB, 24 August 2017, Imposition of administrative penalties on Banco Popolare di Vincen-za S.p.A. in liquidazione coatta amministrativa. Available at: https:// www.bankingsupervision.eu ropa.eu/banking/sanctions/shared/pdf/ssm. 17091 l_publication_template.en.pdf, accessed on 02.12.2019. 4 ECB, Supervisory sanctions. Available at: https://www.bankingsupervision.europa.eu/banking/ sanctions/html/index.en.html, accessed on 02.12.2019. 5 Article 3 ( 1 ) c) TFEU. 6 Article 282(2), 2nd sentence, TFEU, repeated in Article 1., 2"d sentence, of the Statute.
 
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