Judgments nº T-122/15 of The General Court, Fourth Chamber, Extended Composition, May 16, 2017

• Resolution Date: May 16, 2017
• Issuing Organization: Fourth Chamber, Extended Composition
• Decision Number: T-122/15

(Economic and monetary policy - Prudential supervision of credit institutions - Article 6(4) of Regulation (EU) No 1024/2013 - Article 70(1) of Regulation (EU) No 468/2014 - Single supervisory mechanism - Competences of the ECB - Decentralised exercise by the national authorities - Assessment of the size of a credit institution - Need for direct supervision by the ECB)

In Case T-122/15,

Landeskreditbank Baden-Württemberg - Förderbank, established in Karlsruhe (Germany), represented initially by A. Glos, K. Lackhoff and M. Benzing, and subsequently by A. Glos and M. Benzing, lawyers,

applicant,

v

European Central Bank (ECB), represented initially by E. Koupepidou, R. Bax and A. Riso, and subsequently by E. Koupepidou and R. Bax, acting as Agents, assisted by H.-G. Kamann, lawyer,

defendant,

supported by

European Commission, represented by W. Mölls and K.-P. Wojcik, acting as Agents,

intervener,

ACTION pursuant to Article 263 TFEU for annulment of Decision ECB/SSM/15/1 of the ECB of 5 January 2015, taken pursuant to Article 6(4) and Article 24(7) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63), by which the ECB refused to recognise the applicant as a less significant entity within the meaning of Article 6(4) of that regulation,

THE GENERAL COURT (Fourth Chamber, Extended Composition),

composed of M. Prek (Rapporteur), President, I. Labucka, J. Schwarcz, V. Kreuschitz and F. Schalin, Judges,

Registrar: S. Bukšek Tomac, Administrator,

having regard to the written part of the procedure and further to the hearing on 28 September 2016,

gives the following

Judgment

1. Background to the dispute

   1 The applicant, the Landeskreditbank Baden-Württemberg - Förderbank, is the investment and development bank (Förderbank) of Baden-Württemberg (Germany). Created by Paragraph 1(1) of the Law on the Baden-Württemberg regional credit bank, it is a legal person governed by public law and wholly owned by the Land (State) of Baden-Württemberg.

   2 On 25 June 2014, the European Central Bank (ECB) informed the applicant, in essence, that on account of its size it was subject solely to its supervision rather than shared supervision under the single supervisory mechanism (SSM), pursuant to Article 6(4) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63) (‘the Basic Regulation’) and invited it to submit its observations.

   3 On 10 July 2014, the applicant disputed that analysis, arguing inter alia the presence of particular circumstances within the meaning of Article 6(4) of the Basic Regulation and Articles 70 and 71 of Regulation (EU) No 468/2014 of the ECB of 16 April 2014 establishing the framework for SSM cooperation between the ECB, the national competent authorities and the national designated authorities (OJ 2014 L 141, p. 1) (‘the SSM Framework Regulation’).

   4 On 1 September 2014, the ECB adopted a decision classifying the applicant as a significant entity within the meaning of Article 6(4) of the Basic Regulation.

   5 On 6 October 2014, the applicant requested review of that decision pursuant to Article 24(1), (5) and (6) of the Basic Regulation, read in conjunction with Article 7 of Decision [2014/360/EU of the European Central Bank] of 14 April 2014 concerning the establishment of an Administrative Board of Review and its Operating Rules (OJ 2014 L 175, p. 47). A hearing was held on 23 October 2014 before the Administrative Board of Review.

   6 On 20 November 2014, the Administrative Board of Review gave an Opinion finding the ECB’s decision to be lawful.

   7 On 5 January 2015, the ECB adopted Decision ECB/SSM/15/1 (‘the contested decision’), which repealed and replaced the decision of 1 September 2014, whilst maintaining the applicant’s classification as a significant entity. The ECB emphasised, in essence, the following:

   - the applicant’s classification as a significant entity was not in contradiction with the objectives of the Basic Regulation;

   - an entity’s risk profile was not a relevant question at the stage of its classification and Article 70 of the SSM Framework Regulation could not be interpreted as including criteria that had no basis in the Basic Regulation;

   - even if it did take the view that there were particular circumstances in the applicant’s case, it would also have to ascertain whether such circumstances justified reclassifying the applicant as a less significant entity;

   - under Article 70(2) of the SSM Framework Regulation, the concept of ‘particular circumstances’ had to be interpreted restrictively and, therefore, it was only when direct supervision by the ECB was inappropriate that a ‘significant’ entity could be reclassified as ‘less significant’;

   - taking into account the principle of proportionality for the purpose of interpretation does not require it to ascertain whether the application of the criteria laid down in Article 6(4) of the Basic Regulation to an entity was proportionate and the examination whether it was ‘inappropriate’ to classify an entity as significant did not amount to conducting such an examination of proportionality;

   - the adequacy of national supervisory frameworks and their ability to apply a high supervisory standard did not lead to a finding that the exercise of direct prudential supervision by the ECB was inappropriate, since the Basic Regulation did not make it subject to proof that the national supervisory frameworks or national supervisory standards were inadequate.

2. Procedure and forms of order sought

   8 By application lodged at the Registry of the General Court on 12 March 2015 the applicant brought the present action.

   9 By document lodged at the Registry of the Court on 23 July 2015, the European Commission applied for leave to intervene in support of the form of order sought by the ECB.

   10 By decision of 27 August 2015 the President of the Fourth Chamber granted the Commission leave to intervene in support of the form of order sought by the ECB.

   11 On 9 October 2015, the Commission lodged its statement in defence.

   12 Acting upon a proposal of the Fourth Chamber, the Court decided, pursuant to Article 28 of the Court’s Rules of Procedure, to refer the case to a formation sitting with a greater number of Judges.

   13 Acting upon a proposal of the Judge-Rapporteur, the General Court (Fourth Chamber, Extended Composition) decided to open the oral part of the procedure.

   14 The parties presented oral argument and replied to questions put by the Court at the hearing on 28 September 2016.

   15 The applicant claims that the Court should:

   - annul the contested decision whilst ordering the maintenance of the effects attaching to the replacement of the decision of 1 September 2014;

   - order the ECB to pay the costs.

   16 The ECB and the Commission contend that the Court should:

   - dismiss the application;

   - order the applicant to pay the costs.

3. Law

   17 In support of its application for annulment of the contested decision, the applicant puts forward five pleas in law: (i) infringement of Article 6(4) of the Basic Regulation and Article 70 of the SSM Framework Regulation in the choice of criteria applied by the ECB; (ii) manifest errors of assessment of the facts; (iii) infringement of the obligation to state reasons; (iv) misuse of powers arising from the ECB’s failure to exercise its discretion; and (v) infringement by the ECB of its obligation to take into consideration all the relevant circumstances of the case.

   1. The first plea: incorrect legal criteria applied by the ECB

      18 Under the present plea, the applicant puts forward, in essence, three complaints.

      19 The first complaint alleges incorrect interpretation of the condition of what makes the classification of an entity as significant ‘inappropriate’ under Article 70(1) of the SSM Framework Regulation. By its second complaint, the applicant criticises the ECB for having found that its classification as significant entity was appropriate, irrespective of the examination of the specific factual circumstances and without account being taken of the objectives and principles of the Basic Regulation. By its third complaint, the applicant criticises the ECB for having erred in law in its interpretation of the concept of ‘particular circumstances’ in Article 70(1) of the SSM Framework Regulation.

      1. Relevant provisions of the Basic Regulation and of the SSM Framework Regulation

         20 Article 4 of the Basic Regulation, entitled ‘Tasks conferred on the ECB’, states in paragraph 1 that, ‘[w]ithin the framework of Article 6, the ECB shall … be exclusively competent to carry out, for prudential supervisory purposes, the following tasks in relation to all credit institutions established in the participating Member States’, followed by a list of nine tasks.

         21 Article 6 of the Basic Regulation, entitled ‘Cooperation within the SSM’, states in paragraph 1 that ‘[t]he ECB shall carry out its tasks within a single supervisory mechanism composed of the ECB and national competent authorities’ and that ‘[t]he ECB shall be responsible for the effective and consistent functioning of the SSM’. Within the SSM, the overall scheme of Article 6(4) to (6) of the Basic Regulation establishes a differentiation between prudential supervision of ‘significant’ entities and that of entities classified as ‘less significant’ in relation to seven of the nine tasks listed in Article 4(1) of that regulation.

         22 It follows therefrom, firstly, that the exclusive competence for the prudential supervision of ‘significant’ entities falls to the ECB. The same holds true for the prudential supervision of ‘less significant’ entities in relation to the tasks listed in Article 4(1)(a) and (c) of the Basic Regulation.

         23 Secondly...