Executive summary

• Author: Brito Bastos, Filipe; Zeitlin, Jonathan
• Pages: 9-10

SSM and the SRB accountabil ity at European leve l: room f or improvem ents?

PE 64 5.747 9

EXECUTIVE SUMMARY

In this paper, we were asked (a ) to assess whether t he curre nt accoun tability regime an d scrut iny

instruments (ranging from hearings to judicial review) are effective in counterbalancing the powers

given to the SRM and the SRB; and (b) to make proposals of additional scrutiny instruments or

procedures for improvement to increas e accountability a t European level, while respecting the

institutions’ independence and within the current legal framework.

In responding to these questions, the paper begins by distinguishing between two contrasting models

of acco untabilit y. Th e firs t mo del, bas ed on pr incipal-agent relations, is backward-looking, focused on

whether an agent has used its discretion in ways authorised and intended by the principal. Its

effectiveness depen ds on the principal’s capacity t o define goals clearly en ough ex ante to provide

author itative guidance to the agent, as well as to assess a nd where necessary s anction the latter’s

actions in pursuing those goals ex post. The second model is dynamic and forward-loo king , based on

asking actors to explain how they have used the discretion granted to them within a given legal

framework to advance the goals for which the institution in question was established, subject to review

by peers k nowledgeable enough to challenge such explanations, as well as to explain what revisions

they have made to their internal policies and practices in respo nse to problems r evealed by such

reviews. We argue that this second model of dynamic accountability is more appropriate for

independent bodies like the ECB/SSM and the SRB, ope rat ing in t echnica lly com plex, ra pidly evolv ing

environments under conditions of high uncertainty, where parliaments and other political authorities

hav e very limited san ctionin g powe rs.

The paper th en goes on t o review t he natur e and effectiveness o f thre e ma in fo rm s or mec han isms of

accou ntab ility as applie d to t he SSM a nd SRM: ( 1) adm inistrativ e account ability, focusing on the r ole of

internal boa rds of rev iew or appeal panels, and the r ight to be heard of pa rties affected by decisions of

the SSM and the S RB; ( 2) judicial a ccoun tabilit y, fo cusing on the r ole o f cour ts in rev iewing d ecisions of

thes e ins titut ions; a nd (3) polit ical acco unta bility, fo cusing o n the r eporting and in formation-p rov ision

duties of the SSM and the SRB, a nd the role of the European Parliament and the Council, along with

nat ional p arliam ents, in scru tinizin g and inter rog ating th e work of t hese in stit utio ns. It als o exam ines

the contribution of external review bodies, notably the European Court of Auditors and the European

Ombudsman, to the accountability of the SSM and th e SRB at Eu ropean level.

The paper’s assessment of legal accountability within the Banking Union is largely positive. Both the

ECB and th e SRB are judicially accountable to t he EU Courts, which have been faced with i nc re asing

litiga tion. There is no w a growing bo dy of case la w that fa cilitates th e judicial r eview o f decision-m aking

processes in the SSM and SRM, and which shed light on previously disputed questions of division of

judicial competences b etween national and Un ion co urts. Be sides judic ial accou ntability, b oth the ECB

and t he SR B ar e subject to admin istrative acco untability before t he Adminis trative B oard of Re view and

the Appeal Panel respectively. Both bodies perform a quas i-judicial f unction a nd offer an addit ional

remedy, bes ides EU courts, to credit institutions affected by supervisory or resolution measures. Lastly,

the legal framework of the SSM and SRM also provides for some protection of procedural rights of credit

inst itution s and affect ed individuals, such as the right to be hea rd before a supervisory or resolution-

related decision regar ding them is taken and the right to receive a statem ent of r easons for that

decision. Neverth eless, we arg ue that there a re significant accountability issu es in the SSM and SRB

which appear unlikely t o be resolved without legislative reform. Those issues concern, for example, the

exact remit of the ECB’s mandate to apply national law, the dubious mandate of the ABoR to review

ECB decisions taken in applying national law, and t he lack o f clear indica tions in the SRM’s legal

framework as to how the SR B should observe the right to be heard, e.g. of credit institutions concerned

by de cisions on ex ante contributions to the SRF.