The Administrative Board of Review provides the addressees of the European Central Bank supervisory decisions with effective protection of their rights within the Banking Union framework. Indeed, appealing to the Board is convenient compared to appealing to the Court of Justice of the European Union. However, the opinions of the Administrative Board of Review typically influence future judgments by the Court of Justice of the European Union, which is unlikely to diverge from what was decided at the administrative level. Therefore, instead of serving as a further instrument of protection, the Administrative Board of Review either shifts protection from the jurisdictional to the administrative level, if an individual decides to appeal to the Board; or it risks remaining a dead letter, if an individual prefers to appeal directly to the Court. Currently, the decision to appeal to the Administrative Board or directly to the Court of Justice depends on the authoritativeness and substantial independence of the members of the Administrative Board of Review. A further way to improve addressees’ protection would be to publicize the opinions of the Administrative Board of Review, which could also increase the accountability of the Board without entailing high costs.

Keywords: Administrative Board of Review – ECB – European Central Bank

Sommario/Summary:

1. Introduction. - 2. The regulatory strategies used by the European lawmaker. - 3. The problems inherent to the traditional forms of protection for the addressees of the authorities’ decisions. - 4. The Administrative Board of Review. - 5. The benefits of the new tool. - 6. Practical implications and possible limits of the new system. - 7. A policy suggestion: the publication of ABoR’s opinions. - 8. Conclusions. - NOTE

1. Introduction.

Within the framework of the Banking Union [1] and through the Single Supervisory Mechanism (SSM), [2] specific tasks are conferred on the European Central Bank (ECB) – in its composition as Single Supervisory Board (SSB) – concerning the supervision of credit institutions in order to “bolster the [European] Union, restore financial stability and lay the basis for economic recovery”. [3] Indeed, “a single supervisory mechanism should ensure that the Union’s policy relating to the prudential supervision of credit institutions is implemented in a coherent and effective manner, that the single rulebook for financial services is applied in the same manner to credit institutions in all Member States concerned, and that those credit institutions are subject to supervision of the highest quality, unfettered by other, non-prudential considerations”. [4] Some of these tasks are less discretionary and more rarely exercised, such as authorising credit institutions and withdrawing authorisations of credit institutions. [5] Others, instead, are more discretionary, frequent and potentially more pervasive, such as the ECB’s task of ensuring compliance with the acts which impose “requirements on credit institutions to have in place robust governance arrangements, including the fit and proper requirements for the persons responsible for the management of credit institutions”. [6] More in detail, for example, the ECB verifies that each member of the board of directors of the banks subject to its supervision have the “fit and proper” requirements; thus, it can exclude a potential candidate from the role to be filled. An excessive discretion left to the ECB could entail the risk of arbitrariness and increase the inherent reputational risk, with a possible infringement of the rights of the addressees of the decisions or, better, an unjustified compression of their freedom to conduct a business. This discretion cannot be unchallenged. Hence, it is crucial to allow the addressees of the ECB’s decisions to effectively protect their rights. On the one hand – and in general terms – “the ECB is an institution of the Union as a whole”; therefore, “it should be bound in its decision-making procedures by Union rules and general principles on due process and transparency”. [7] Indeed, the Union is “based on the rule of law, [...]

2. The regulatory strategies used by the European lawmaker.

In order to prevent the ECB from wielding an excessive margin of discretion in exercising its powers the legislator has adopted a multitude of accountability strategies. [15] Traditionally [16] the typical ex ante mechanism consists of indicating the objectives of the supervisory activity. Indeed, “an effective system of banking supervision has clear responsibilities and objectives for each authority involved in the supervision of banks and banking groups”. [17] In fact, the ECB is required to base its decisions [18] on the objectives set by the legislator, [19] which maintains control over its work; in other words, the supervisor “is accountable through a transparent framework for the discharge of its duties in relation to those objectives”. [20] Moreover, there are further ex post obligations for the ECB. In order to fill the so called “democratic deficit”, vis-à-vis the institutions of the European Union – in fact, “the European Parliament and the Council as democratically legitimised institutions representing the citizens of the Union and the Member States” [21] – and national parliaments, [22] the ECB is obligated to report annually on its activities and to reply orally or in writing to questions put to it. In addition, the Chair of the Supervisory Board of the ECB may share information on the execution of the institution’s supervisory tasks. Furthermore, it is possible to have access to the ECB’s files. [23] Even if dictated with the main purpose of guaranteeing the independence of the ECB, the special discipline of removal of a member of the SSB can also contribute to the protection of rights, preventing, in the most serious cases, the spreading of situations detrimental to the Union; the Chair of the Supervisory Board can in fact be removed from his office only when she “no longer fulfils the conditions required for the performance of his duties or has been guilty of serious misconduct”. [24] However, there are reasons that raise the urgency of identifying a different approach. First, the current strategies could be inadequate to challenge the discretion, because they serve different functions – as already mentioned, the functions of filling the “democratic deficit” or of guaranteeing the independence of the ECB. Second, they do not ensure effective protection for the addressees of [...]

3. The problems inherent to the traditional forms of protection for the addressees of the authorities’ decisions.

A typical form of protection is the possibility of appealing to the Court of Justice of the European Union (hereinafter “CJEU”). In fact, the CJEU shall review the legality of acts of the European Central Bank, other than recommendations and opinions, intended to produce legal effects vis-à-vis third parties. [29] Specifically provided for the second pillar of the Banking Union, “proceedings for failure to act may be brought before the Court of Justice in accordance with Article 265 TFEU”; [30] being a general principle, the provision is also extensible to the first pillar. Finally, the authorities are responsible for damage caused by themselves or by their members in the performance of their duties. [31] However, these general rules find some limitations in the case of decisions with a high degree of technicality and for which the subject allows discretion. Nevertheless, according to settled jurisprudence, the Court has extended the perimeter of its judgment. In fact, even if the decision is the result of complex economic assessments, “not only must those Courts establish, among other things, whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it”. [32] In conclusion, the intensity of judicial review in the supervisory field does not depend on the topic, but on the scope of discretion granted by the legislator for challenging the decision and the complexity of the subject matter. The less discretion the ECB has (e.g. when it simply implements the law), the more intensive the Court’s review will be; conversely, when the ECB’s decision implies a complex technical assessment, the Court may choose to exercise some self-restraint with respect to any appraisal of the facts. [33] Nevertheless, the protection of individuals who are affected by the decisions of the authorities presents structural problems. On the one hand, the existence of high transaction costs can make the use of this instrument inefficient (for example, the cost of lawyers and consultants could overcome the possible benefits). [34] Moreover, the delays that characterize the judicial process could cause a situation of unsustainable uncertainty for the banks, which would undermine [...]

4. The Administrative Board of Review.

As already stipulated in other sectors, [38] the European lawmaker has set up an Administrative Board of Review in order to “provide natural and legal persons with the possibility to request a review of decisions taken under the powers conferred on it by [the SSM Regulation] and addressed to them, or which are of direct and individual concern to them”. [39] In any case, it is “without prejudice to the right to bring proceedings before the CJEU in accordance with the Treaties”. [40] The ABoR is composed of “five individuals of high repute, from Member States and having a proven record of relevant knowledge and professional experience, including supervisory experience, to a sufficiently high level in the fields of banking or other financial services”. It “shall have sufficient resources and expertise to assess the exercise of the [supervisory] powers of the ECB” and it “shall decide on the basis of a majority of at least three of its five members”. [41] The ABoR has to carry out “an internal administrative review of the decisions taken by the ECB,” the scope of which “shall pertain to the procedural and substantive conformity with this Regulation of such decisions”, [42] “while respecting the margin of discretion left to the ECB to decide on the opportunity to take those decisions”. [43] Consequently, in addition to checking whether the relevant procedural rules were complied with and whether the facts on which the disputed decisions were based were accurately stated, the ABoR’s review has been limited “to establishing whether the contested decision was impaired by a manifest error or misuse of powers and whether or not it clearly exceeded the bounds of the ECB’s discretion”. [44] Moreover, the review “shall be limited to examination of the grounds relied on by the applicant as set out in the notice of review”, [45] without the possibility of further investigations or of taking ex officio evidence. [46] “Any natural or legal person” may petition the ABoR to “request a review of a decision of the ECB … which is addressed to that person, or is of a direct and individual concern to that person”, [47] using the modalities prescribed by the regulation, [48] except for cases involving a “decision of the Governing Council” as referred [...]

5. The benefits of the new tool.

The approach adopted by the legislator makes it possible to address the structural limitations highlighted above (see supra, paragraph 3). The new system aims to reduce transaction costs associated with recourse to justice, [56] which is an explicit objective of the SSM Regulation. [57] In fact, compared to the CJEU, appeal to the ABoR is cheaper; except for “any disproportionate costs incurred by the applicant in submitting written or oral evidence and in respect of legal representation”, indeed, “no cost shall be borne by the applicant in cases in which the Governing Council abrogates or amends the initial decision as a consequence of the notice of review”. [58] Moreover, it takes place in a short time. The person requesting the review has to submit the request for review “within one month of the date of notification of the decision to the person requesting the review, or, in the absence thereof, of the day on which it came to the knowledge of the latter as the case may be”. The ABoR then expresses an opinion “within a period appropriate to the urgency of the matter and no later than two months from the receipt of the request”. “The Supervisory Board”, on its side, “shall promptly submit a new draft decision to the Governing Council” that “shall be deemed adopted unless the Governing Council objects within a maximum period of ten working days”. [59] In addition, it does not present the problems of deference typical of judgments against decisions of authorities with technical discretion because those who judge are experts in the subject; as it has been already described, the ABoR, indeed, “shall be composed of five individuals of high repute, from Member States and having a proven record of relevant knowledge and professional experience, including supervisory experience, to a sufficiently high level in the fields of banking or other financial services”. [60] At the same time, the ABoR members must embody the traditional third-party position that characterizes judges. They must respect the independence requirement, to avoid a possible conflict of interests with the “belonging” authority. In addition to the fact that members “shall not be bound by any instructions”, “current staff of the ECB, as well as current staff of competent authorities or other national or Union institutions, bodies, offices and [...]

6. Practical implications and possible limits of the new system.

The considerations carried out on the enforcement of the decisions adopted by the ABoR (see supra, paragraph 4) and the analysis of the first cases show, however, a different picture from the one conceived by the legislator – instead of a further instrument of protection, the introduction of the ABoR de facto risks to shift the protection from the jurisdictional to the administrative level. In particular, from 2014 to 2019, there were 38 requests for re-exa­mi­nation, 2 of which resulted in an ECB decision being abrogated and replaced with new decisions after ABoR Opinion (whereas, only 9 resulted in an ECB decision being amended or its reasoning being improved). [62] Despite the difficulty of assessing the effectiveness of the ABoR’s opinions (it is in fact impossible to distinguish between “decision amended” and “reasoning improved”), the ECB argued that the ABoR “continued to be effective in helping to reduce the cost and time of reviewing supervisory decisions for all parties involved” on the basis that “in most cases in 2017, applicants chose not to proceed with a judicial review following the review by the Administrative Board”. [63] The reason is not difficult to find – an ABoR opinion contrary to the ECB decision increases the legal risk for the latter, in the same way an opinion confirming the choice of authority reduces its legal risk and increases that of the addressee, who is thus disincentivised to bring proceedings before the CJEU. This does not pose a problem of compliance with the provisions of the Treaties. The new system, in fact, respects all of the jurisdictional protections, the addressee of the ECB’s decisions being able to appeal the CJEU after the ‘experts’ opinion’ regardless of the prior recourse to the board of review, since this appeal to the ABoR is not a condition of procedure before the CJEU. However, for a complete analysis of this instrument, it seems reasonable to observe that the new system substantially limits the protection of the decisions’ addressee to the sole opinion of the ABoR. From this point of view, the degree of protection the addressee receives in the current system depends to a large extent on the authoritativeness and substantial independence of the members of the ABoR, thus raising the urgency of protection verification. In fact, even if – as it has been said – there are several [...]

7. A policy suggestion: the publication of ABoR’s opinions.

In order to solve this problem and promote ABoR accountability, the lawmaker has provided that “the new draft decision submitted by the Supervisory Board and the decision adopted by the Governing Council [of the ECB] shall be reasoned and notified to the parties”. [65] The fact that “the effectiveness of the recourse mechanism against decisions of the ECB” is the subject of a review report on the application of the SSM Regulation by the European Commission [66] also allows the interpreter to help improve the system through policy indications. In this regard, requiring the ABoR to publish its decisions [67] (as it happens, for example, in Italy for the Arbitro bancario finanziario [68] and the Arbitro per le controversie finanziarie [69]) would increase both the protection for addressees of the ECB’s decisions and the accountability of the Board, without entailing high additional costs. In fact, a public control (i.e. made by the “market”) on what has been decided encourages the ABoR to operate correctly. [70] In addition, knowledge of prior decisions allows for better protection of subjects involved in future cases, possibly also before the Court of Justice, since they would have case law that they could use to their advantage. The publishing of decisions could also become a sort of ‘guide’ for intermediaries that want to prevent litigation. At the same time, this regulatory strategy would allow the ABoR to reduce the discretion of the ECB, thus increasing legal certainty. Addressing specific cases, the ABoR could give opinions on particular situations. In this way, it would specify the legal rules that give the supervisory power to the ECB, ensuring that addressees of the ECB’s decisions are more aware of how the standards that give the power to the authority should be interpreted. [71] In this last sense, it is the system that would benefit from the proposal. The data collected so far (0.16% of the ECB’s decisions are subject to review), in fact, show a prudent use of appeal by the addressees; the interest in a good relationship with the supervisory authority – which, in any case, continues to carry out its supervisory tasks – makes it difficult to choose to request a review of its decision. [72] The knowledge of the ‘jurisprudential’ orientation (meaning both that of the internal Commission and that of the CJEU) could [...]

8. Conclusions.

In one of its recitals the SSM Regulation stated that “the right of the addressees of the ECB’s decisions to be heard should be fully respected as well as their right to request a review of the decisions of the ECB”. [74] From this point of view, the establishment of the ABoR is to be welcomed, as the benefits are not difficult to identify. ABoR review is cheaper than appealing to the CJEU, and the decision takes place in a shorter time. In addition to reasons of procedural economy, it should present fewer problems of deference when decisions by authorities with technical discretion are involved. In other words, it improves access to justice. However, the consideration carried out on the enforcement of the decisions adopted by the ABoR suggests that instead of a further instrument of protection, the introduction of the ABoR either shifts the protection from the jurisdictional to the administrative level (if it is considered reliable), or risks to remain a dead letter (if it is considered unreliable). Hence, the degree of protection the addressee of the ECB’s decisions receives under the current system depends to a large extent on the authoritativeness and substantial independence of the members of the ABoR. If one of the European Commission priorities is to evaluate “the effectiveness of the recourse mechanism against decisions of the ECB” [75] this paper is an attempt to contribute to the discussion, suggesting the publication of the ABoR’s opinions.

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