Case T‑745/16
BPCE
v
European Central Bank
(Economic and monetary policy — Prudential supervision of credit institutions — Article 4(1)(d) and (3) of Regulation (EU) No 1024/2013 — Calculation of the leverage ratio — ECB’s refusal to authorise the applicant to exclude exposures meeting certain conditions from the calculation of the leverage ratio — Article 429(14) of Regulation (EU) No 575/2013 — ECB’s discretion — Errors of law — Manifest errors of assessment)
Summary — Judgment of the General Court (Second Chamber, Extended Composition), 13 July 2018
1. Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Single supervisory mechanism — Competences of the European Central Bank — Decentralised implementation by the national authorities — Assessment of the significance of an institution — Exclusive competence of the ECB
(Council Regulation No 1024/2013, Arts 4(1)(d) and 6(4))
2. EU law — Interpretation — Methods — Interpretation of secondary law in conformity with the TFEU and with the general principles of Union law
(Art. 277 TFEU)
3. EU law — Interpretation — Methods — Literal, systematic and teleological interpretation
4. Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Prudential requirements for credit institutions and investment firms — Liquidity requirements — Leverage ratio — Calculation — Possibility to exclude certain exposures to public sector entities — The competent authorities’ power of discretion
(European Parliament and Council Regulation No 575/2013, as amended by Regulation No 2015/62, Art. 429(14))
5. Economic and monetary policy — Economic policy — Supervision of the EU financial sector –Prudential requirements for credit institutions and investment firms — Liquidity requirements — Leverage ratio — Calculation — Possibility to exclude certain exposures to public sector entities — Decision of the European Central Bank refusing to grant the derogation — Judicial review — Limits
(European Parliament and Council Regulation No 575/2013, as amended by Regulation No 2015/62, Art. 429(14))
6. Economic and monetary policy — Economic policy — Supervision of the EU financial sector –Prudential requirements for credit institutions and investment firms — Liquidity requirements — Leverage ratio — Calculation — Possibility to exclude certain exposures to public sector entities — Decision of the European Central Bank refusing to grant the derogation — Refusal based on considerations inherent to the exposures affected by the derogation and the possibility of a failure to pay by the State concerned without examining the likelihood of the risk — Unlawful
(European Parliament and Council Regulation No 575/2013, as amended by Regulation No 2015/62, Art. 429(14))
7. Economic and monetary policy — Economic policy — Supervision of the EU financial sector –Prudential requirements for credit institutions and investment firms — Liquidity requirements — Leverage ratio — Relevance of the period of adjustment of the positions of credit institutions to those of a public financial institution — Limits
(European Parliament and Council Regulation No 575/2013, as amended by Regulations No 2015/62, Recital 90 and Arts 4(1), point 94, and 412(1); Council Regulation No 1024/2013, Art. 4(1)(d); Commission Regulation No 2015/61, Art. 26)
8. Economic and monetary policy — Economic policy — Supervision of the EU financial sector — Prudential requirements for credit institutions and investment firms — Liquidity requirements — Leverage ratio — Calculation — Possibility to exclude certain exposures to public sector entities — Decision of the European Central Bank refusing to grant the derogation — Refusal based on the risk posed by the period of adjustment of the positions of credit institutions to those of a public financial institution — Lack of examination of the characteristics of regulated savings — Unlawful
(European Parliament and Council Regulation No 575/2013, as amended by Regulation No 2015/62, Arts 4(1), point 94, 412(1) and 429(14))
1. See the text of the decision.
(see para. 27)
2. A provision of secondary European Union law should as far as possible be given the interpretation which renders the provision consistent with the Treaty and the general principles of EU law. However, as shown by the use of the expression ‘as far as possible’, such an interpretation cannot be applied in the case of a provision whose meaning is clear and unambiguous and which therefore requires no interpretation. In the case of a provision whose meaning is clear and unambiguous, it is for the Court alone, where a plea of illegality within the meaning of Article 277 TFEU is raised, to review its consistency with the provisions of the Treaty and the general provisions of EU law.
(see paras 32, 33)
3. See the text of the decision.
(see para. 36)
4. Article 429(14) of Regulation No 575/2013 on prudential requirements for credit institutions and investment firms, as amended by Regulation No 2015/62, must be interpreted as conferring on the competent authorities a discretion to refuse to grant the derogation which it establishes even when the conditions set out in that provision are met.
By that derogation, the Commission, with the prior authorisation of the legislature, envisaged the possibility that a credit institution’s exposures to public-sector entities which, because of a State guarantee, present the same low risk level as exposures to that State and which do not correspond to an investment choice by the credit institution — in that the credit institution is under an obligation to transfer the sums concerned — are not relevant for the calculation of the leverage ratio and may therefore be excluded. The only exposures affected by Article 429(14) of Regulation No 575/2013 are those which, in application of the standard approach to the calculation of minimum own funds requirements, would be assigned a risk weight of 0%.
Consequently, the implementation of Article 429(14) of Regulation No 575/2013 entails the reconciliation of two objectives: first, compliance with the logic of the leverage ratio, which requires that the calculation of that ratio include the overall exposure measure of a credit institution, without weighting by reference to the risk, and, second, consideration of the objective of the Commission, authorised in advance by the legislature, that, if necessary, certain exposures with a particularly low risk profile which are not the result of an investment choice made by the credit institutions are not relevant for the calculation of the leverage ratio and may therefore be excluded. It must be stated that the recognition in favour of the competent authorities of a discretion when they implement Article 429(14) of Regulation No 575/2013 allows them to decide between those two objectives in the light of the particular characteristics of each individual case.
(see paras 52-56)
5. In so far as the European Central Bank has a discretion and, consequently, a wide power of assessment in choosing whether or not to grant the benefit of Article 429(14) of Regulation No 575/2013 on prudential requirements for credit institutions and investment firms, as amended by Regulation No 2015/62, the judicial review which the Court must carry out of the merits of the grounds of the contested decision must not lead it to substitute its own assessment for that of the Bank, but focuses on whether the contested decision is based on materially incorrect facts, or is vitiated by an error of law, manifest error of assessment or misuse of powers.
(see para. 66)
6. See the text of the decision.
(see paras 74, 76-78, 81, 82, 86, 88)
7. See the text of the decision.
(see paras 95-98, 102, 103)
8. See the text of the decision.
(see paras 105-109)