ECB reports on sanctioning activity for 2020
10 February 2022
The ECB published an annual report on sanctioning activities in the Single Supervisory Mechanism (SSM) for the year 2020. The report is the first of its kind. It presents aggregate statistics on the sanctioning activity of the ECB and national competent authorities (NCAs) of the Member States whose supervisors participate in the SSM.
The publication of the annual report (the Annual Report) forms part of the ECB’s ongoing effort to increase transparency of its processes for supervised entities and depositors and investors.
Also in 2020, the ECB published a guide on its method for setting administrative pecuniary penalties, following a series of decisions of the General Court in actions brought by members of the Crédit Agricole group. In these judgments, the Court reproved the ECB for its failure to disclose the methodology by which it arrived at the amount of the pecuniary penalty imposed.
The Annual Report sheds light on the areas of prudential supervision in which the ECB and the NCAs are most active. In 2020 the focus of sanctioning proceedings was on breaches relating to internal governance (45.5% of all proceedings), a trend which the ECB expected to continue given it was one of the SSM Supervisory Priorities 2021.
Interestingly, of the 262 proceedings pending at the start of the year, about 15.5% were opened at the request of the ECB under Article 18(5) of the SSM Regulation which is the basic regulation on the ECB’s supervisory powers.
However, the ECB made no such new requests in 2020. This is in line with a general decline in sanctioning activity at ECB level in 2020 likely due to the Covid-19 pandemic and therefore not indicative of a more general trend. To allow banks to keep lending during the pandemic, the ECB adopted measures of supervisory forbearance, including delaying the implementation of supervisory measures based on on-site inspections and investigations of internal models. On 10 February 2022, the ECB announced an end to the pandemic-induced regulatory forbearance.
From a total of 183 proceedings that were completed in 2020 about half of these resulted in the imposition of an administrative penalty. 57% of penalties were of a pecuniary nature, the remaining penalties were non-financial in nature. The overall aggregate amount of fines imposed amounted to EUR 12.15 million.
The largest penalty of EUR 4.6m was levied by the ECB on Crédit Agricole, a significant institution, for breach of capital requirements (the imposition of the penalty – albeit not the decision that the bank had breached prudential requirements – was annulled by the General Court of the European Union). This penalty was not the highest ever imposed by the ECB: in previous years, two fines had been even higher.
Overall, it was less significant institutions that were the subject of most of the sanctioning proceedings (42%), followed by natural persons (36%), with significant institutions only making up about 12% of proceedings.
Of the 88 proceedings concluded without a penalty, the main reason was that no breach had been committed (in 65% of cases) or that the breach in question was not severe enough to warrant a penalty.
While it is unclear whether similar sanctioning reports will be published for subsequent years, such reports would allow an assessment of the development in the supervisory approach to the imposition of penalties.