ECB SSM publishes changes to delegated decision making of supervisory powers

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In July 2020,1 we provided our analysis on the European Central Bank’s (ECB) changes (July 2020 Changes) to the internal organization of the Single Supervisory Mechanism (SSM). These changes,  which are to be implemented from October 1, 2020, aim to better reflect the types of Banking Union Supervised Institutions (BUSIs)2 within the ECB-SSM’s growing mandate. The ECB-SSM has long used the delegation of authority3 from the Executive Board to heads of the work units4 to “address the considerable number of decisions that the ECB-SSM is to adopt for the performance of its supervisory tasks.” Irrespective of the delegation, the ECB’s Supervisory Board maintains its competence for planning, execution and preparatory work and the power to proposed draft decisions to the Governing Council, as ultimate decision-making authority in respect of BUSIs.5

On September 24, 2020, five ECB-SSM Decisions (i.e., a formal rulemaking instrument) were published in the Official Journal of the European Union. These five Decisions6 address the following thematic areas and confer powers of delegated decision-making authority to one or more heads of the work units to take supervisory decisions (delegated decisions) in respect of:

  • Fit and proper assessments7 in respect of management and key function holders;
  • Assessment of significance of BUSIs – allocation as Significant Credit Institutions (SCIs) under direct ECB-SSM supervision or as Less Significant Institutions (LSIs), which are under direct supervision by national competent authorities and indirect supervision by ECB-SSM. 
  • Own funds decisions i.e., for prudential regulatory purposes; 
  • Delegated decisions and supervisory powers under national law; and 
  • Decisions on passporting, acquisition of qualifying holdings and withdrawal of authorizations.

These recent rule changes follow the ECB-SSM’s new organizational set-up and mean that delegated decisions will now be taken as follows: 

1. Fit and proper delegated decisions are adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Fit and Proper Division and one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it);

2. On the assessment of significance of BUSIs:

  • Delegated decisions that classify or cease to classify or alter the name of a SCI within a significant group are adopted by one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it);
  • Delegated decisions that cease to classify a SCI or a significant group as significant are adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Authorization Division and one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or by the Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or the Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it);

3. Delegated decisions on (i) own funds and/or (ii) regarding supervisory powers granted under national law are adopted by one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it);

4. Delegated decisions on qualifying holdings are adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Authorization Division and one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it). Delegated decisions that do not involve SCIs and thus LSIs shall be adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Authorization Division;

5. Delegated Decisions on withdrawal of licenses are adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Authorization Division and one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it). Delegated decisions that do not involve SCIs and thus LSIs shall be adopted by the Director General or the Deputy Director General of the DG SSM Governance and Operations – or if unavailable the Head of the Authorization Division; and

6. Delegated decisions on passporting shall be adopted by one of the following heads of the work units Director General or Deputy Director General of the DG General Systemic and International Banks (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG Universal and Diversified Institutions (if the relevant BUSI or group is supervised by it); or Director General or Deputy Director General of the DG General Specialized Institutions and Less Significant Institutions (if the relevant BUSI or group is supervised by it).

Outlook

While the changes introduced by the five Decisions are administrative and technical in nature, they do cement and advance the July 2020 Changes in a new look and feel to the SSM’s supervisory engagement. Equally, even if these changes are ECB internal, they will impact Banking Union NCAs but also more broadly those NCAs, as well as the other European Supervisory Authorities (EBA, ESMA and EIOPA), that form the European System of Financial Supervision (ESFS) in their interactions with the ECB-SSM related to their respective supervisory mandates and areas of responsibility.

If you would like to discuss the strategic options in light of the developments discussed above, in particular how to plan ahead for any operational impact from meeting compliance requirements and/or in respect of impact on policies and procedures or how these priorities may affect your business or your clients more generally, please contact our Eurozone Hub key contacts.


  1. See coverage from our Eurozone Hub available here.
  2. Which includes “credit institutions”, i.e., banks, and from the second half of 2021 certain additional investment firms undertaking bank-like activity (see our coverage on the Investment Firms Regulation and Investment Firms Directive available here) and two categories of holding companies: ‘financial holding companies’ (in the context of consolidated supervision of banking groups) and ‘mixed financial holding companies’ (in the context of supplementary supervision of financial conglomerates). Those three types of financial market participants, together with branches operating in the Banking Union of credit institutions established in non-Banking Union Member States, are included in the scope of ‘supervised entities’ within the meaning of the SSM Regulation.
  3. As discussed in  the ECB’s Legal Working Paper Series No. 17 from July 2018: The  Governing Council, as the ECB’s supreme decision-making body, has exclusive constitutional responsibility for decision-making in respect of supervisory tasks conferred on the ECB under Article 127(6). Such a design may, however, create challenges for the functioning of the overall ECB decision-making process for at least two reasons: operational efficiency and the primacy of the ECB’s monetary policy mandate over the supervisory policy one. The exercise of the ECB’s supervisory decision-making powers by the Governing Council requires, on a daily basis, the adoption of a very large number of supervisory decisions under very tight deadlines. This is also true for routine and executive supervisory decisions. These decisions are addressed to individual supervised BUSIs, which have a fundamental right to good administration under the Treaties. The Governing Council adopts supervisory decisions under a special, non-objection procedure foreseen in Article 26(8) of the SSM Regulation and laid down in detail by Article 13g of the Rules of Procedure of the ECB. Under the non-objection procedure, the Supervisory Board submits to the Governing Council complete draft supervisory decisions and the latter either approves or objects to them but cannot change them. Compliance with the obligation to respect the fundamental right to good administration of supervised entities requires the Governing Council, as the ECB’s final decision-making authority, to ‘examine carefully and impartially all the relevant aspects of each individual [supervisory] case’ when deciding whether to approve or object to draft supervisory decisions. Ensuring that the fundamental right to good administration is respected in each and every case might, however, be challenging in the view of very high number of draft supervisory decisions submitted by the Supervisory Board and might create potential legal and liability risks for the ECB.  In principle, only the Governing Council and the Executive Board may adopt decisions of behalf of the ECB that produce legal effects vis-à-vis third parties.
  4. To implement the ECB’s right to delegate its supervisory powers, Decision ECB/2016/40 (the ‘general framework decision’) develops a dedicated framework allowing for the transfer of decision-making competence in supervisory matters from the Governing Council to lower administrative levels (heads of ECB working units). The general framework decision recognizes the internal allocation of competence between the Governing Council, as the supreme decision-making body, and the Executive Board, which is responsible for the ECB’s current business, the set-up of its internal structure and its staff. See Article 11.6 of the Statute of the ESCB, which establishes the Executive Board’s responsibility for the ECB’s current business. In addition, Articles 10.1 and 10.2 of the Rules of Procedure of the ECB further specify this competence by establishing that all ECB work units fall under the managing direction of the Executive Board. Furthermore, Article 13m.1 of the Rules of Procedure provides that the Executive Board's competence in respect of the ECB’s internal structure and the staff also extends to the ECB’s supervisory function. 
  5. The delegation by the Governing Council of decision-making authority to heads of ECB working units does not entail a loss of responsibility for the delegated powers for the Governing Council as a constitutionally responsible actor set by the Treaties. In this respect, the general framework decision explicitly states that delegated decisions are taken on behalf of, and under the responsibility of, the Governing Council. Furthermore, under Article 26(8) of the SSM Regulation, the Supervisory Board may submit, at any time, a proposal for a complete draft decision to the Governing Council, proposing the abrogation or the amendment of a specific delegation decision.
  6. Comprised of: 
  7. Please see our coverage on recent changes to fit and proper assessments, as they apply across the EU-27 available here and equally our coverage on the SSM’s rules available here.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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