- ECB in focus
ECB strengthens ties with supervisors in six EU Member States not part of the common banking supervision
Dr Alexander Behrens
Frankfurt am Main
Regulatory Practice Prof.
Frankfurt am Main
13 February 2023
The ECB has signed a Memorandum of Understanding (MoU) with the national competent authorities (NCAs) of six EU Member States that are not part of the European banking supervision under the Single Supervisory Mechanism (SSM). The MoU aims to improve the exchange of information and the coordination of supervisory activities between the ECB and the NCAs of the Czech Republic, Denmark, Hungary, Poland, Romania and Sweden.
The MoU is based on Article 3(6) of the SSM Regulation, which requires the ECB to establish a legal framework for cooperation with the NCAs of non-participating Member States. The ECB already cooperates closely with these NCAs, but the MoU provides a more formal and comprehensive basis for future collaboration.
The main objectives of the MoU
- Supervision of cross-border banks: The ECB and NCAs seek to intensify cooperation and information exchange regarding the supervision of institutions that operate cross border with as ECB-supervised banks with subsidiaries in non-SSM Member States or vice versa.
- Information on prudential situation: The parties agree to use best efforts to share relevant information on the prudential situation of banks and/or subsidiaries or branches in case of (i) events that potentially could endanger the safety or soundness of a supervised bank or a relevant financial system; (ii) serious financial difficulties or relevant weaknesses of the management, internal controls or reputation including information that raises a suspicion of a breach or likely breach of supervisory requirements; (iii) a material violation of law, enforcement or sanction against a bank, its shareholder or management; and (iv) a licence revocation or liquidation.
- Efficiency and efficacy of existing regulation: The MoU also facilitates the exchange of information, views and evaluations on the main EU banking supervisory regulations, such as the CRR, the CRD, the BRRD, the SSM Regulation and the SSM Framework Regulation, aiming to ensure the consistent and effective implementation of these rules across the EU.
- Authorisation procedures, qualifying holding assessments, fit and proper assessments: The ECB and the NCAs intend to work more closely together on the authorisation and licensing of banks and their branches or subsidiaries, as well as on the required assessments of proposed acquisitions and withdrawals of licences. They will inform each other of any applications for setting up or buying cross border banks, and consult the relevant authority before granting an authorisation or assessing the acquisition of a ‘qualifying holding’, according to Article 6 of the MoU and in line with the CRD. They will also share information on request about the fitness and propriety of directors, managers, shareholders or key function holders.
- On-the-spot checks and on-site inspections: The ECB and the NCAs intend to cooperate and share information on the timing and modalities of on-site inspections, on-the-spot checks and investigations of cross-border banks, especially as regards internal models. They agree to assist each other with and notify each other of such activities in their respective jurisdictions, as agreed in the MoU. They will also be able to accompany each other on these inspections and share relevant information gained by the supervisory measures.
- Enforcement and sanctions: The ECB and NCAs also agreed on a request-based exchange of information relating to decisions on certain non-public penalties, enforcement or sanctions of cross border banks if these decisions affect the operation of the bank in the jurisdiction of the ECB or an NCA.
- Decisions and measures: The supervisory authorities agree to inform each other of intended decisions and measures if they are significantly important to other affected authorities in performing their tasks. This applies in particular to changes in the shareholder, organisational or management structure that are subject to supervisory approval and significant penalties or exceptional measures, including the imposition of a specific own funds requirement (Article 117(4) of the CRD) and measures affecting the cross-border transfer of own funds or repayment of liabilities.
- Emergency situations and emerging crisis: The parties aim to inform each other immediately in an emergency situation and in situations of emerging crisis, such as any serious financial difficulty that could have an adverse impact on the operation of an institution under supervision by the ECB or an NCA.
- ICT-related incidents: The ECB and the NCAs will endeavour to exchange views and confidential information on request in order to strengthen their cooperation on ICT-related incidents. They recognise that cyber risks and incidents affect the risk management and operational risks of supervised institutions. They also agree, to the extent possible, to notify each other immediately of major ICT related incidents at cross-border institutions that have a material impact on integrity, availability or confidentiality of data, business processes, IT services and systems and applications.