Frankfurt on Steroids: How European Court of Justice's Decisions Are Empowering the ECB as a Supervisor

«Recent European Court of Justice (ECJ)'s decisions on the European Central Bank (ECB)'s role in banking supervision work as evolutionary interpretations of European legislation, paving the way for the ECB to absorb competences and powers that, up to now, still seemed to lie with national authorities or even other European agencies», says Filippo Annunziata, Associate Professor of Financial Institutions and Markets Law at Bocconi University, commenting his own research.

On 17 May, 2017, in a landmark decision, the ECJ's Court of First Instance rejected the request of a German bank (Landeskreditbank Baden-Württemberg-Förderbank) to be supervised by German authorities instead of the ECB. In principle, the 2014 Single Supervisory Mechanism Regulation, states that «significant» banks (with more than €30bln in total assets) should be supervised by the ECB and the rest by national authorities. Significant banks should, though, be subject to national authorities, if «particular circumstances» exist.

The case is so important because the ECJ didn't restrict itself to establishing the inexistence of such circumstances, but declared that - even for less significant banks – supervision, within the Euro area, is to be considered ECB's competence and national authorities are only called to its «decentralized implementation». This reinforces the ECB's role in the system, and sets forth a new interpretation of the European banking supervision architecture. «If yesterday the stress was on cooperation and integration between different tiers, the ECJ's decision envisages a hierarchical structure with the ECB on top of it», Prof. Annunziata says.

Other ECJ decisions seem to confirm Prof. Annunziata's position on the ECB's increasing role over national authorities. In April 2018, in the Crédit Agricole case, the ECJ ruled on a case in which the ECB, in its supervision activities, enforced not only EU legislation, but also national legislation that transposes European directives. This is done on the basis of a unique provision contained in the Single Supervisory Mechanism Regulation that represents «the only known case of a European authority that enforces national laws», Prof. Annunziata says.

In December 2018, again, in deciding about Silvio Berlusconi's requisites to be a qualifying shareholder of Banca Mediolanum, the ECJ denied the right to appeal – in front of Italian Courts - against the draft decision by Bankitalia, that advised the ECB against his eligibility, on the ground that only the ECB's final decision is to be considered relevant and subject to judicial review in front of the ECJ.

On a wider scale, strengthening the role of the ECB as a supervisor, also calls into question the issue of its role vis-à-vis the EU authorities, and in particular the European Banking Authority (EBA), a topic widely debated in the context of recent proposals for reform. In the meantime, the ECB's increasing production of guidelines and standards setting might seem to step into the sphere of EU regulators, and of the EBA as well.

Filippo Annunziata, European Banking Supervision in the Age of the ECB, forthcoming in European Business Organization Law Review.