Regulation (EU) No 1024/2013 establishes a framework for the prudential supervision of credit institutions within the European Union, assigning specific missions to the European Central Bank (ECB). This framework aims to enhance the integration of banking supervision to ensure financial stability and support economic growth. It emphasizes the importance of a coordinated and integrated approach to address the…
The document is Regulation (EU) No 1024/2013 of the Council, adopted on 15 October 2013, by the European Parliament and the Council of the European Union. It entrusts the European Central Bank (ECB) with specific tasks regarding the prudential supervision of credit institutions in the European Union, notably in the euro area. The regulation covers prudential policies, cooperation between authorities, the ECB’s powers, supervisory modalities, as well as relations with national and European authorities. The scope includes credit institutions of participating Member States, the phased implementation period starting in 2013, and applicable European regulatory frameworks (notably Directive 2013/36/EU and Regulation 575/2013). The document contains 27 pages, of which about 15 are provided here.
Regulation (EU) No 1024/2013 establishes a legal framework to entrust the ECB with specific prudential supervision tasks for credit institutions in the participating Member States, mainly those of the euro area, to strengthen financial stability and the integration of the European banking market (p. 1-2). This transfer of powers responds to the need for more integrated and coherent supervision, revealed by the financial crisis, which showed the limits of purely national coordination (p. 1-2). The ECB thus becomes the single competent authority to license, supervise, and sanction significant credit institutions, in coordination with national authorities for less significant institutions (p. 12-14). The Single Supervisory Mechanism (SSM) combines the ECB and national authorities, ensuring loyal cooperation and effective information exchange (p. 13-14). The ECB applies the single European regulatory framework, notably capital, governance, liquidity, and risk management requirements, and may impose stricter measures in case of systemic or macroprudential risks (p. 12-13). It also performs consolidated supervision tasks over banking groups and financial conglomerates (p. 12). The regulation provides safeguards for Member States whose currency is not the euro participating in the SSM, as well as cooperation protocols with non-participating States (p. 5-6). The ECB acts with full operational independence, with a clear separation between its monetary policy and supervisory tasks, and is endowed with financial resources ensured by annual fees paid by supervised institutions (p. 7-8). An internal supervisory board within the ECB, composed of representatives from the ECB and national authorities, prepares supervisory decisions (p. 8). The ECB cooperates closely with European authorities (EBA, ESMA, EIOPA, SRB) and national authorities, as well as with resolution and financial assistance mechanisms (p. 11-12). Finally, the regulation guarantees transparency, democratic accountability, and respect for fundamental rights, notably the right to an effective remedy and a fair trial (p. 7-9). In conclusion, this regulation establishes a robust institutional and legal framework for integrated banking supervision, aiming to prevent systemic risks, ensure the soundness of credit institutions, and protect the financial stability of the Union. It recommends phased implementation and close cooperation between the ECB and national authorities, while maintaining a balance between integration and respect for national specificities.
The regulation was drafted in a context of major economic and financial crisis which revealed the weaknesses of fragmented national banking supervision within the European Union, particularly in the euro area (p. 1-2). The fragmentation of the financial sector threatened the integrity of the single currency and financial stability, hindering economic growth and recovery (p. 1). The document responds to the need for increased integration of prudential supervisory powers to guarantee coherent and effective supervision of transnational banking groups, reduce risks of divergent interpretations, and strengthen the stability of the financial system (p. 1-2). It fits within the roadmap towards a banking union and a strengthened economic and monetary union, in line with the conclusions of the 2012 European Council (p. 2). The objective is to entrust the ECB with specific prudential supervision tasks, in coordination with national authorities, within a Single Supervisory Mechanism (SSM), to ensure the safety and soundness of credit institutions and the stability of the financial system (p. 2-3). The scope is limited to credit institutions, excluding other entities such as central counterparties (p. 10). The regulation also specifies safeguards for non-euro Member States participating in the SSM and cooperation modalities with non-participating States (p. 5-6). Limitations include no modification of applicable accounting standards and retention of national responsibilities for certain tasks not transferred to the ECB (p. 3, 10).
1. Integration and coordination of banking supervision:
- Banking supervision has historically been national, but the crisis showed that coordination alone is insufficient (p. 1).
- The SSM, composed of the ECB and national authorities, aims to ensure coherent, effective, and integrated supervision of credit institutions in the euro area and participating States (p. 6, 13).
- The ECB is responsible for overseeing the functioning of the SSM and coordinating national authorities (p. 13).
2. Specific tasks entrusted to the ECB:
- Licensing and withdrawal of licenses of credit institutions (p. 12).
- Assessment of acquisitions and disposals of qualifying holdings (p. 12).
- Supervision of compliance with European prudential requirements (capital, liquidity, governance, etc.) (p. 12-13).
- Prudential controls, stress tests, and imposition of specific measures (p. 12-13).
- Consolidated supervision of banking groups, financial holding companies, and mixed holding companies (p. 12).
- Early intervention and supervision of recovery plans (p. 12).
3. Allocation of powers between ECB and national authorities:
- The ECB directly supervises significant institutions according to precise criteria (size, economic importance, cross-border activities, etc.) (p. 13-14).
- National authorities retain supervision of less significant institutions, under the control and instructions of the ECB (p. 13-14).
- The ECB may decide to directly supervise a less significant institution if necessary (p. 14).
4. Cooperation and memoranda of understanding:
- The ECB cooperates closely with the EBA, ESMA, EIOPA, SRB, national authorities, and resolution and financial assistance mechanisms (p. 11-12).
- Memoranda of understanding are concluded with authorities of non-participating States for supervision of transnational institutions (p. 6, 11).
5. Internal governance and ECB independence:
- Strict separation between monetary policy tasks and supervisory tasks (p. 7-8).
- Creation of a supervisory board within the ECB, composed of representatives from the ECB and national authorities, responsible for preparing supervisory decisions (p. 8).
- Guaranteed operational independence, with rules on transparency, due process, and remedies (p. 7-9).
6. Resources and funding:
- The ECB has sufficient resources financed by annual fees paid by supervised credit institutions (p. 7).
- Possibility to collect fees from branches of non-participating institutions (p. 7).
7. Sanctions and coercive measures:
- The ECB may impose fines and periodic penalty payments on credit institutions and financial holding companies in case of breaches (p. 6).
- National authorities may continue to apply sanctions under national law (p. 6).
8. Respect for fundamental rights and transparency:
- Guarantee of the right to an effective remedy, fair trial, and personal data protection (p. 7-9).
- Obligation to report to the European Parliament, the Council, and national parliaments (p. 7-8).
9. Criteria for significance of institutions:
- Precise definition of criteria to distinguish significant and less significant institutions: assets > €30 billion, asset/GDP ratio > 20%, national interest, cross-border activities (p. 13-14).
- The three largest institutions of each participating Member State are systematically supervised by the ECB (p. 14).
10. Practical modalities and implementation framework:
- The ECB adopts a public framework, in consultation with national authorities, to organize the implementation of tasks (p. 14).
Established facts:
- Banking supervision was mainly national before the regulation, which showed its limits during the financial crisis (p. 1-2).
- The ECB is now the single competent authority for supervising significant credit institutions in participating Member States (p. 12-14).
- The SSM is operational and relies on close cooperation between the ECB and national authorities (p. 6, 13).
- The ECB applies the single European regulatory framework and may impose stricter measures in case of systemic risks (p. 12-13).
Hypotheses:
- Integrated supervision by the ECB will strengthen financial stability and the integration of the European banking market (p. 1-2).
- Cooperation and memoranda of understanding with non-participating States will allow effective supervision of transnational institutions (p. 6, 11).
Interpretations:
- The transfer of supervisory tasks to the ECB is a key element towards creating a more integrated and resilient banking union (p. 2-3).
- The organizational and functional separation of monetary policy and supervisory tasks is essential to avoid conflicts of interest (p. 7-8).
Uncertainties:
- The phased implementation and practical modalities remain to be specified in some areas (p. 14).
- The effective participation of non-euro Member States and management of disagreements in decision-making present challenges (p. 5-6).
- The long-term impact on financial stability will depend on the ECB’s and national authorities’ capacity to cooperate effectively and apply rules uniformly (p. 1-2, 13).
The regulation concludes on the necessity of a Single Supervisory Mechanism (SSM) led by the ECB to ensure coherent, effective, and integrated prudential supervision of credit institutions in the euro area and participating Member States (p. 1-3). It recommends phased implementation, with a clear framework for the allocation of powers between the ECB and national authorities, and robust cooperation and information exchange procedures (p. 14). The ECB must have full operational independence, sufficient resources funded by supervised institutions, and appropriate internal governance, notably through a supervisory board (p. 7-8). The regulation emphasizes respect for fundamental rights, transparency, and democratic accountability, with regular reporting to the European Parliament, the Council, and national parliaments (p. 7-9). It also provides for remedy mechanisms for the institutions concerned (p. 8). Finally, it highlights the importance of close cooperation with European authorities (EBA, ESMA, EIOPA, SRB) and resolution and financial assistance mechanisms (p. 11-12). The regulation calls for rigorous application of prudential standards and the capacity to impose stricter measures in case of systemic or macroprudential risks (p. 12-13).
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