Consultations and the ECB as prudential regulator: enhancing legitimacy?

ABSTRACT

This paper examines whether the ECB’s consultations, imposed by the SSM Regulation, enhance legitimacy in terms of openness, transparency, inclusiveness, efficacy and judicial accountability. The paper argues that the ECB has, in general, established a solid consultation practice. However, although there is a need for efficacy, the lack of a profound feedback statement, the low participation rate of groups other than the sector actors, and weak judicial review can be considered to constitute its Achilles’ heel. Thus, while in theory the consultation obligation leads to more throughput legitimacy, reality has turned out to be far more complex.

KEYWORDS:

• Consultations
• ECB
• legitimacy
• prudential policy
• prudential regulation

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The Eurozone crises consisted of a banking, sovereign debt and macro-economic crisis, hereafter “crises”.

2. The literature on “democratic deficit” is extensive: see e.g. Hix 2008; Bellamy 2006; Majone 1998.

3. Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institution of 15 October 2013, (29 October 2013) OJ L 287, 63 (SSM Regulation).

4. Art. 26 SSM Regulation.

5. Art. 289 TFEU.

6. The EU has introduced three ESAs: the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA).

7. Regulation (EU) No 1093/2013 of the European Parliament and of the Council establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC of 24 November 2010, (15 December 2010) OJ L 331, 12 (EBA Regulation). The EBA also conducts consultations. However, these consultations go beyond the scope of this paper.

8. Art. 4(3), section 2 SSM Regulation. See infra.

9. Recital 32; Art. 4(3) SSM Regulation.

10. Art. 4(3), section 2 SSM Regulation.

11. Art. 30(1) SSM Regulation.

12. Kohler-Koch and Finke (2007) distinguish between a principled and a functional conception of participation.

13. On the concept of civil society, see e.g. Curtin 2003; Kohler-Koch 2009; Kohler-Koch et al. 2013.

14. Art. 10(3); Art. 11 TEU.

15. “Deliberative” is a widely discussed concept, but there is a “minimal common denominator” (Mendes 2013), namely, inclusion, transparency and reasoned weighing of interests are keystones agreed upon by deliberative theorists (Gutmann and Thompson 2003).

16. Contra: Labitzke advocates that consultations are not categorized within participatory democracy (Labitzke 2012, 326–330).

17. Kohler-Koch et al. (2013) use “openness”, “transparency” and “inclusiveness” in their research on the European Commission’s consultation regime in light of Dahl’s (2006) concept of “democracy”.

18. This overview is up to date to 7 June 2017 and is based on the information available on the ECB’s website – banking supervision: https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/index.en.html.

19. https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/index.en.html.

20. Some of the results and proposals are based on a questionnaire sent to, and on interviews with, the ECB consultations’ participants. Unfortunately, only a limited number responded; nevertheless, these insights are valuable (Questionnaire).

21. In the second and third consultation the ECB refers to the general public in the feedback statement. However, since the fourth consultations, the ECB states that industry participants and interested parties had the opportunity to provide additional input at the public hearing. Furthermore, one might question whether a citizen would do the effort to go to Frankfurt.

22. Consultation no. 1, 2, 3, 4, 7.

23. https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/npl/feedback_statement.en.pdf.

24. Available at https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/npl/comparison.en.pdf.

25. On the SSM Framework Regulation. First, the draft Regulation was read, then the comments of all participants were considered. Subsequently, the comments were compared to the final changes in the Regulation, as indicated in the scheme at the end of the feedback statement.

26. This presumption was confirmed by the respondents interviewed.

27. German Banking Industry Committee (17), Dutch Banking Association (5), European Banking Federation (21a) (https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/framework.en.html).

28. E.g.: Associazione Bancaria Italian (ABI), 4, https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/framework/CP1-FrameworkRegulationConsultation-012.pdf.

29. These participants could challenge the final Act on the basis of the ECB’s incompetence (Article 263, paragraph 2 TFEU).

30. Deutsche Bank (28), HSCB (34a) and Unicredit (32), https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/framework.en.html.

31. Interviews with some of the respondents revealed that they thought consultation did not always make a difference.

32. This overview is based on the information available in the feedback statement (including the second consultation under article 30 SSM Regulation), available at https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/index.en.html.

33. Consultation no. 1, 2, 4, 5 and 8.

34. See http://www.eba.europa.eu/about-us/organisation/banking-stakeholder-group/members.

35. European Commission: Art.10(3); Art. 15(3) EBA Regulation. EBA: Art. 10(1); Art. 16(2) EBA Regulation.

36. Art. 10(3); Art. 10(1); Art. 15(3); Art. 16(2); Art. 37(5) EBA Regulation.

37. Questionnaire.

38. ECB consultation no. 9.

39. EBA, “Consultation”, https://www.eba.europa.eu/news-press/calendar?_8_eventId=1639839&p_p_id=8&_8_struts_action=%2Fcalendar%2Fview_event.

40. Questionnaire.

41. The so-called Aarhus cases are not taken into account, because the ECJ considers environmental matters and applies the Aarhus Convention. Moreover, the cases occurred in the light of preliminary rulings.

42. Court of First Instance, 17 June 1998, UEAPME, T-135/96, OJ II-2335, no. 89–90.

43. ECJ, 8 July 2010, Afton Chemical, C-343/09, Conclusion Kokott, no. 28.

44. Court of First Instance, 16 July 1998, Bergaderm, T-199/96, OJ I-2805, no. 60–61.

45. Art. 263(2) TFEU.

46. ECJ, 9 October 2001, The Netherlands, C-377/98, OJ I-7149, no. 30–33.