EU General Court’s stern judgement: Decisions relating to banks must have clearly stated reasons

The General Court of the European Union has annulled the SRB decision on the calculation of three German banks’ ex-ante contributions. The Single Resolution Board (SRB), an EU agency established in the context of the Single Resolution Mechanism (SRM) of the Banking Union, set the ex-ante contributions of about 3,500 credit institutions in 2017. Three German banks each brought an action for annulment on the SRB’s decision before the General Court. The General Court annulled the decision, stating that it did not contain an adequate statement of reasons for the amounts of the contributions.

This ruling highlights how important it is for authorities to state the reasons and authentication for all of their official decisions clearly and unambiguously. A bank subject to this kind of decision must to be able to calculate and verify the amount of its contributions on its own on the basis of the statement of reasons and, if necessary, dispute the amount before the Court.

“It’s not enough for authorities to formally fulfil their obligation to state reasons. There needs to be factual justification, which means clear requirements for the statement of reasons”, says FFI’s Head of Bank Regulation and Resolution Olli Salmi.

The General Court not only annulled SRB’s decision but also declared that the Delegated Regulation 2015/63 concerning the ex-ante contributions is unlawful in part. This means that the Delegated Regulation must be amended before ex-ante contributions can be lawfully determined in the future.

This judgement underlines the right of banks to get clear justification for any obligations authorities’ decisions set upon them. Ex-ante contribution payments weaken banks’ profitability and thus their capacity to finance their own customers.

“The General Court’s decision must be taken in a broader context than merely that of stability contributions. It sets an important precedent for the actions of other authorities as well. Authorities cannot have unlimited discretion. Ex-ante contributions and other requirements that cost money must be based on a real need that has been calculated and justified”, Salmi emphasises.

Press release of the General Court’s judgement

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Financial and Prudential Regulation

Olli Salmi

Head of Banking Regulation