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: The convergence of sanctioning procedures

The adoption of a pecuniary sanction by the ECB is not subject to a single procedure but to two separate procedures depending on the area where the infringement or the breach is committed. The general procedural rules applicable to the sanctions which the ECB may impose in respect of the performance of its basic tasks are laid down in Regulation (EC) No 2532/98, as supplemented by ECB Regulation (EC) No 2157/1999. The procedure applicable to administrative pecuniary penalties is governed by the SSM Regulation and detailed in the SSM Framework Regulation (Articles 123 to 127). The Rules of Procedure of the ECB provide further details on the organisation of meetings and voting modalities of the Governing Council, the Executive Board and the Supervisory Board, ie. an internal ECB body responsible for the planning and execution of prudential supervision tasks. The 1998 and 1999 Regulations were amended following the assignment of new specific tasks to the ECB in the field of prudential supervision, as to align them on the latest developments in case law of the ECJ, as regards the protection of the rights of the defence, especially the separation of the investigation and decision-making phases. The procedural rules they laid down needed also to be complemented as to take into account fines and periodic penalty payments imposed by the ECB when carrying out its supervisory tasks. To avoid procedural differences with administrative pecuniary penalties, the substance of the relevant provisions of the SSM Framework Regulation is embedded in Regulation (EC) 2532/98, as much as possible. Two specific cases to be mentionned: infringements of minimum reserve requirements are subject to procedural rules derogating from the general rules in Regulation 2157/99, and a simplified procedure is foreseen for minor infringements in the case of sanctions imposed by the ECB in the performance of its monetary tasks.

: Initiation and investigation phase

The decentralised execution of the Eurosystem’s basic tasks by the ECB places the NCBs concerned at the forefront of detecting evidence that an infringement is being committed or has been committed. The initiation of the infringement procedure is therefore shared between the ECB and the NCB of the Member State where the alleged infringement has been committed. No more than one infringement procedure may be initiated against the same undertaking for the same facts.[1] The ECB and the NCBs shall keep each other informed of the procedures they initiate. Both the ECB and the relevant NCB may act either on their own initiative or following a motion to that effect by the other central bank. If an infringement relates exclusively to a tasks entrusted to the Eurosystem or the ECB by EU primary law, the infringement procedure may be governed only by Regulation (EC) No 2532/98, as supplemented by Regulation (EC) No 2157/1999, irrespective of whether the procedure is initiated by the ECB or an NCB. Only the infringement procedure initiated by the ECB is described below.

The ECB’s responsibility to initiate an infringement procedure in the exercise of its prudential tasks is linked to the scope of its power to impose sanctions in this field. In accordance with Article 18(1), the ECB shall have exclusive competence to initiate a procedure where it considers that there is reason to suspect that one or more breaches under relevant directly applicable Union law or of an ECB regulation or decision are being or have been committed by a significant supervised institution. This task is without prejudice to the competence of the NCAs to initiate infringement procedures in cases not covered by Article 18(1) SSMR. The procedure is initiated by the ECB on its own initiative, e.g. on the occasion of direct day-to-day supervision of significant institutions, of on-site inspections, after a positive evalution of a report of breaches submitted by a natural person directly to the ECB or through an NCA. In accordance with the principle of sincere cooperation, the NCAs must also inform the ECB whenever they are aware of alleged infringement of ECB regulations and decisions by the credit institutions under their direct supervision. It should be noted that in the event of a change in the division of competence between the ECB and a national supervisor, the authority whose competence ends shall undertake efforts to complete any pending supervisory procedure which requires a decision prior to the date on which the change in the supervisory competence is to occur. If the supervisory procedure cannot be completed prior to this date, the authority whose competence ends shall remain competent to complete such pending supervisory procedure.

Without prejudice to the simplified procedure for minors breaches, the investigation of infringements shall be referred to an independent internal investigation unit. Introduced first in supervisory matters by the SSM Regulation,[2] this arrangement has been replicated in comparable terms for infringement procedures initiated in monetary' matters. The creation of an independent unit guarantees a separate exercise of investigative and decision-making powers. The unit is composed of investigators appointed by the ECB from among its own staff, duly mandated external experts, or staff of an NCB in the specific case of a breach of the prudential requirements for systemically important payment systems. In addition to the general regime of independence which they enjoy as staff of the ECB, investigators are independent in the performance of their duties vis-à-vis the bodies responsible for adopting decisions. For the purpose of their investigations, the investigating units may exercise the powers granted to the ECB under relevant Union law. The investigating officers may request the undertakings to submit documents, examine/take copies of the books and records of the undertaking, obtain written or oral explanations. They also have access to all documents and information gathered by the ECB and, where appropriate, by the relevant NCAs in the course of their supervisory activities.

Judicial rights and procedural safeguards are protected in a very similar way in the different infringement procedures even though some differences remain. Access rights to the ECB’s files are guaranteed, except for confidential information. In prudential supervisory matters, the undertakings concerned have the right to submit written observations in response to the notification of the initiation of an infringement procedure. The investigating unit may also invite the supervised entity concerned to attend an oral hearing. On completion of an investigation and before a proposal for a complete draft decision is prepared and submitted to the Supervisory Board, the investigating unit shall notify' the supervised entity' concerned in writing of the findings under the investigation carried out and of any objections raised thereto. In monetary matters, the investigating unit shall notify the undertaking concerned in writing of the factual results of any inquiry carried out and of the objections raised against the undertaking concerned before any decision is taken on the imposition of a sanction. The undertaking may object within 30 working days.[3] In addition, the untertaking concerned has the right to be heard by the ECB to present its defence. In the case of proceedings for infringement of minimum reserve requirements, the objective nature of the infringement (i.e. resulting from the difference between the amount of reserves to be held by the credit institution and the amount measured by the NCB with which the reserves are held) does not require investigative measures.

Where, on completion of the investigation, the investigating unit (or, where appropriate, the competent NCB) considers that a sanction should be imposed on the undertaking, it shall submit a proposal for a decision to the Executive Board or, in prudential supervisory matters, a proposal for a complete draft decision to the Supervisory Board. The proposal shall be based only on facts and objections on which the undertaking concerned has had the opportunity to comment during the investigating phase. The proposal determines the infringement(s) or breach(es) committed and specifies the pecuniary penalties to be imposed.

The ECB initiated 27 sanctioning proceedings in the supervisory field in 2018 and handled a total of 51 sanctioning proceedings - 24 proceedings were still ongoing at the end of 2017. Of the 51 sanctioning proceedings handled in 2018, 22 were related to suspected breaches of directly applicable EU law (ECB decisions and regulations included) committed by 13 significant institutions. They led to 16 ECB decisions.

  • [1] Article 2(1) Regulation (EC) No 2157/1999. 2 Article 3(1) Regulation (EC) No 2532/98. 3 Article 3(10) Regulation (EC) 2532/98. 4 Article 124(1) SSMFR. 5 Article 23 SSMR, and Articles 36-38 SSMFR. 6 “»Article 48 SSMFR.
  • [2] ‘"Article 123 SSMFR. 2 See Article lb(l) Regulation 2157/1999. 3 Recital 5 SSMFR. See ECtHR, Dubus v. France, App. No 5242/04, 11 June 2009; Menarini v Italy, App. No 43509/08, 27 September 2011; Grande Stevens, App. No 18640/10, 4 March 2014. 4 "■•See Article lb(la) Regulation2157/1999. 5 113 Article 123(3) SSMR, Article lb(l) Regulation 2157/1999. 6 Article 3 Regulation (EC) No 2532/98; Article 11 SSMR. In that case, the EU regulations are everything but clear about the right of the persons heard to remain silent. 7 Article 4b(3) Regulation (EC) No 2532/98; Article 32 SSMFR. See Decision (2004/257/EC) of the ECB of 19 February 2004 adopting the Rules of Procedure of the European Central Bank (‘ECB RoP’), OJ L 80/33, 18.3.2004, as last amended by Decision (EU) 2016/1717 of the ECB of 21 September 2016, OJ L 258/17, 24.9.2016. In prudential supervisory matters, confidential information include internal documents of the ECB and of the NCAs, and correspondence between the ECB and an NCAs or between NCAs. See Article 32(5) SSMFR.
  • [3] Article 5(1) Regulation 2157/1999. 2 Article 11 Regulation 2157/1999. 3 Article 3(4) Regulation (EC) No 2532/98, and Article 7a Regulation (EC) 2157/1999. 4 Article 127(1) SSMFR. 5 ECB, Annual Report on supervisory activities 2018, spec. Section 3.2. Available at: https:// www.bankingsupervision.europa.eu/press/publications/annual-report/html/ssm.ar2018~927cb99de4. en.html, accessed on 02.12.2019.
 
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