https://orcid.org/0000-0001-5194-9804
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ABSTRACT
The accomplishment of the Banking Union’s common supervisory culture or the implementation of consistent supervisory practices and standards across participating Member States, critically depends on the cooperation of national competent authorities throughout the supervisory process, which takes place primarily in Joint Supervisory Teams (JSTs). Because of their mixed, multilevel composition, JSTs allow the cross-comparison of varying national supervisory approaches and facilitate the identification of best practices as building blocks of a shared supervisory outlook on prudential concerns. This paper unpacks the ‘black box’ of JSTs through the lens of experimentalist governance and with a qualitative examination of data from various sources, including semi-structured interviews with JST-participants. It reveals the importance of NCAs in JSTs experimentalist practice as well as of soft governance tools in fostering a sense of community and highlights specific operational challenges in close cooperation that limit the reach of the common supervisory culture beyond the euro area.
Acknowledgments
The author expresses her sincere gratitude to the organizers and participants of the workshop “Politics, Law and Political Economy of European Banking Union: the first decade of operation” (University of Luxembourg, 12-13 May 2022), as well as to the two anonymous reviewers, for the valuable comments and insights they provided.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1. None of the statements of NCA or CA staff used in this paper represent the official views of their organization but are rather personal views and opinions of interviewees.
2. ‘To give an example: the JST of a smaller significant institution with no subsidiary institution outside Germany may be made up of a few employees from the European Central Bank (ECB), BaFin and the Bundesbank. By contrast, JSTs of international systemically important banking groups can include well over 50 team members. In addition to employees of the ECB, these are representatives of the supervisory authorities of the member states in which the banking group operates.’ See Sporenberg (17 October 2018).
3. Over the years, JSTs have devised various ways of improving their performance, and one of them is to organize themselves by establishing fixed risk teams, called clusters or risk subgroups, which exchange views and relevant prudential information pertinent to that specific cluster; see Sporenberg (17 October 2018).
4. The Supervisory Board ultimately refers the draft decision to the ECB’s Governing Council for the final ECB supervisory decision. Art. 2(26) of the SSMFR Citation2014 defines ‘ECB supervisory decisions’ as a: ‘legal act adopted by the ECB in the exercise of the tasks and powers conferred on it by the SSM Regulation, which takes the form of an ECB decision, is addressed to one or more supervised entities or supervised groups or one or more other persons and is not a legal act of general application.’
5. Overall, the SSM decision-making process should take approximately three to five weeks, depending on the effect of the proposed decision. The deadline of five weeks applies in cases where a decision has adverse effect on a SI and therefore a hearing is required. Conversely, if the decision has no adverse effect, there is no need to hold a hearing and the standard procedure takes three weeks. See European Court of Auditors (2016, p. 27).
6. At the same time, the JST coordinator is responsible for maintaining a continuous supervisory dialogue with concrete SIs at various levels of seniority – not only as a measure of early risk detection, or to explain the reasoning of a concrete SREP-decision, but also as a key measure of SSM’s engagement in fostering inclusivity of all relevant actors in the process of developing the common supervisory culture. For detailed information on SSM’s supervisory dialogue, see: European Central Bank-Banking Supervision (2018, p. 78).
7. Alternatively, if a supervisory decision is to be made through delegation, the JST coordinator’s liaising role is less pronounced. The delegation procedure is far more expedient than the ‘non-objection’ procedure, and it emphasizes the role of ECB heads of work units in decision-making (European Central Bank-Banking supervision Citation2018, 25). Yet, only specific decisions can be adopted under this framework, such as the possibility to include retained earnings in capital or simplified procedures for ex ante supervisory approval of a management board appointment (NCA 1.1.; NCA 1.2., 2022).
8. Unfortunately, the Covid19-pandemic has had an impact on this aspect of JST governance over the last two years, though activities are expected to return to their pre-pandemic schedule soon. Meanwhile, the SSM encouraged greater reliance on the ”SSMnet” digital platform by all JSTs and other supervisory experts involved with the Mechanism.
9. 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 L 287, hereafter the SSM Regulation.
10. Art. 7 (8) of the SSM Regulation provides that: ‘If a participating Member State whose currency is not the euro disagrees with a draft decision of the Supervisory Board, it shall inform the Governing Council of its reasoned disagreement within five working days of receiving the draft decision. The Governing Council shall then decide about the matter within five working days, taking fully into account those reasons, and explain in writing its decision to the Member State concerned. The Member State concerned may request the ECB to terminate the close cooperation with immediate effect and will not be bound by the ensuing decision.’
11. For an exhaustive insight into the regulatory, policy, and institutional implications of close cooperation from the perspective of a recent SSM opt-in NCA, see Božina Beroš, Parać Vukomanović and Bajakić (2022, forthcoming).
12. In Cro. ‘Zakon o kreditnim institucijama’, NN 159/13, 19/15, 102/15, 15/18, 70/19, 47/20, 146/20.
13. In the case of CNB, this required additional fine-tuning of national legislation and administrative procedures in order to accommodate CNB’s new policy responsibilities and competencies.