Judgment of the General Court Fourth Chamber, Extended Composition, 7 December 2022, PNB Banka v ECB, T-301/19

• Date: 07 December 2022
• Year: 2022

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Judgment of the General Court (Fourth Chamber, Extended Composition), 7 December

2022, PNB Banka v ECB, T-301/19

Link to the full text of the judgment

Economic and monetary policy – Prudential supervision of credit institutions – Article 6(5)(b) of Regulation

(EU) No 1024/2013 – Need for the ECB’s direct supervision of a less significant credit institution – Request

by the national competent authority – Article 68(5) of Regulation (EU) No 468/2014 – ECB decision

classifying PNB Banka as a significant entity subject to its direct prudential supervision – Obligation to

state reasons – Proportionality – Rights of the defence – Access to the administrative file – Report laid

down in Article 68(3) of Regulation No 468/2014 – Article 106 of the Rules of Procedure – Request for a

hearing lacking a statement of reasons

The applicant, PNB Banka AS, is a credit institution incorporated under Latvian law which, before 1

March 2019, was considered to be a ‘less significant’

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credit institution and was therefore subject to

direct prudential supervision by the Finanšu un kapitāla tirgus komisija (Financial and Capital Market

Commission, Latvia; ‘the FCMC’). In 2017, it was classified as a ‘less significant institution in crisis’,

which entailed it being subject to specific supervision by a crisis management group composed of the

FCMC and the European Central Bank (ECB). On 21 December 2018, the FCMC requested the ECB to

take over the direct prudential supervision of the applicant. On 1 March 2019, the Secretary of the

Governing Council of the ECB notified the applicant of the ECB’s decision to classify it as a ‘significant’

entity subject to its direct prudential supervision

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(‘the contested decision’).

Hearing an action for annulment of that decision, the General Court rules on a number of issues

which have not previously been addressed. First of all, it determines the purpose of, and conditions

for, the adoption of a decision of the ECB to exercise directly itself prudential supervision of a less

significant credit institution in order to ensure a consistent application of high supervisory standards.

Next, it examines the issue of the right of access to the file in the context of a supervisory procedure.

Finally, it clarifies the subject matter of the report accompanying a request from the national

competent authority to the ECB for the latter to decide to exercise direct prudential supervision. The

Court dismisses the action in its entirety.

Findings of the Court

First, the Court rules that, where the ECB decides to carry out itself direct prudential supervision of a

less significant credit institution in accordance with the applicable legislation,

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in order to ensure a

consistent application of high supervisory standards, it must adopt a decision classifying that

institution as significant.

It states that a decision to classify an entity as significant, where the ECB decides to exercise direct

prudential supervision of that entity, relates only to the determination of the competent authority and

does not alter either the prudential rules applicable to that institution or the supervisory powers

which the competent authority has in respect of that entity for the purposes of the supervisory tasks

conferred on the ECB under the Single Supervisory Mechanism (SSM).

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Within the meaning of 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 SSM Regulation’).

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Under Article 6(5)(b) of the SSM Regulation and Part IV of Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014

establishing the framework for cooperation within the Single Supervisory Mechanism between the ECB and national competent authorities

and with national designated authorities (SSM Framework Regulation) (OJ 2014 L 141, p. 1).

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Under Article 6(5)(b) of the SSM Regulation and Article 68(5) of the SSM Framework Regulation.