Accountability in the SSM

AuthorBrito Bastos, Filipe; Zeitlin, Jonathan
IPOL | Economic Gove rnance Support Unit
14 PE 645.747
2.3. Forms of accoun tabil ity
In this paper, we examine the nature and effectivenes s of thr ee main form s or mechanisms of
accountability as applied to the SSM and the SRM:
administr ative accountabilit y, focusing on the ro le o f in ter nal bo ard s of review or appeal
panels, and t he right to be heard of par ties affected by decision s of the SSM and the SRB;
judicial accountabilit y, focusing on the role of cour ts in rev iewing d ecisions o f these
inst itut ions ;
politica l accoun tabilit y, fo cusin g on the report ing and in formatio n-provision du ties o f the SSM
and the SRB, and the role of the European Parliament and the Council, along with national
parliaments, in scrutinizing and interrogating the work of these institutions.
We also examine th e role and contribution of external review bodies, n otably the European Court of
Auditors an d the European Ombudsman, to the accountability of the SSM and SRB at Eu ropean level.
3.1. Purpose and architecture
The legal bas is for the cr eation of the S ingle Superv isory Mechan ism (SS M) is Ar ticle 127(6) TFEU. That
pro vision a llows t he Cou ncil, purs uant t o a special legisla tive pr ocedure , and a fter consu lting the
European Parliament and the ECB, to confer “s pecific tasks” for prudential supervision of credit
institutions on the ECB. In the aftermath of the financial crisis, it was considered that the creation of a
uniform fr amework for the s upervision of credit inst itutions in the eurozon e would be necessary to
address problems such as home bias greater forebearance of national supervisors towards national
banks and the “diabolic loop” between s overeign and ba nk debt (Veron 2015).
The SSM ar chitectu re prov ides the ECB, and the nation al auth orities th at ass ist it in its super visory
man date, with s ignificant enforcement powers. Those enforcement powers are intended to ensure that
the regulat ory st andards contained, for insta nce, in the Capital Requ irements Directive (CRD) and the
Capital Requirem ents Regulation (CRR), are effectively followed. To this end, financial penalties may be
impos ed by way o f admin istr ativ e sanctio ns on t he cre dit ins titutio ns tha t violat e the applicab le rules.
Those pena lties must be effective, proport ionate, and dissuasive, bu t the sum s demanded from fined
supervised institutions may amount to up to twice the amounts of the profits gained or losses avoided
because of the unlawful behaviour, or up to 10% of the total annual turnover, if those profits or losses
cannot be det ermined (Art icle 18 SSMR). The SSM Regu lation (SSMR) confers on the ECB an imp ort ant
set of superv isory powers. To n ame just a few, un der Article 16, t he ECB en joys the po wers to require
institutions to hold own funds in excess of the capital requirements set out in the CRD and CRR; to apply
a sp ecific pro vision ing po licy; t o require the reduction of the risk inherent in certain activities; to require
addit iona l disclos ures; and t o restrict or pro hibit dist ributions to a cr edit ins titut ion’s sha reholders. The
ECB may als o exercise sign ificant investigatory power s, includin g req uirin g su perv ised ent ities to
provide information and to conduct on-site inspections in business premises ev en withou t prior
announ cement to affected par ties if required by t he need for efficiency and proper con duct (Article
12). In s um, in exercis ing its mandat e under th e SSM, the ECB is equipped with fa r-reaching powers to
enfo rce th e applica ble legis lati on. W ithin t his le gal fr amework, mor eover, th e ECB/SS M has su bstantial
discr etion to define super viso ry policies and pr iorities; develop manuals and methodologies for
carr ying out it s ta sks; an d exercise s upervisory judgemen t in apply ing EU r ules to credit ins titution s, for
example in we ighing up differen t ris ks in reaching an overall decision on additio nal capital
requirements in the annual Supervisory Review and Evaluation Process (SREP). Adequate

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