On this page, the terms “bank” and “credit institution” are used interchangeably.
In European banking supervision the ECB is the authority in charge of banking authorisations. This covers:
When deciding on authorisations, the ECB applies the EBA's Single Rulebook and, where relevant, national law.
National competent authorities (NCAs) play an important role: for example, as the entry point for authorisation applications, as members of the Joint Supervisory Teams (JSTs) for significant banks and as direct supervisors of less significant banks. The ECB works together with staff in NCAs to ensure a consistent approach for authorisations across countries and high standards in the key operational and policy issues in this field. Supervisory expectations are laid down in public guides.
The licensing process establishes confidence in the financial system because it ensures that banks are fit to operate. Furthermore, licensing ensures that only robust banks which comply with all legal requirements can enter the market. However, licensing should not hinder competition, financial innovation or technological progress.
When the ECB, in cooperation with the relevant national supervisor, assesses a bank licence application, it considers four main areas:
The areas considered are the same for all banks, whether they have a more traditional business model or a fintech business model.
It usually takes between six and twelve months from the applicant providing a complete licence application for a decision to be taken. European law states that a decision must be taken within 12 months; some national legal deadlines are shorter.
* where applicable
** or rejection by the national supervisor
The ECB must authorise the acquisition of a participation in an existing institution if this participation counts as a “qualifying holding”, in others words if the acquirer reaches one of the relevant thresholds of 10, 20, 30 or 50%, or if it makes it possible to exercise a significant influence. The approval process aims to ensure that only suitable shareholders enter the banking system, therefore ensuring the smooth functioning of the banking system.
The criteria assessed by the ECB in cooperation with the relevant national supervisor are the following:
A qualifying holding must be authorised or objected to within 60 working days, with a maximum extension to 90 working days.
* where applicable
** or senior management, if delegated
Both the ECB and the relevant national supervisor have the right to initiate the withdrawal of a banking licence in certain circumstances. A licence may be withdrawn if a credit institution ceases its activities or no longer meets the applicable prudential requirements.
The timing depends on the circumstances of the case, for instance whether a winding down of activities is required or whether the credit institution has ceased its activities.
Withdrawal initiated by the ECB
* where applicable
Withdrawal initiated by the national supervisor
* often at the request of the bank
** where applicable
*** or senior management, if delegated
The management body of a credit institution must be suitable to carry out its responsibilities and be composed in a manner that contributes to effective management and balanced decision-making. Ensuring that institutions’ management bodies are “fit and proper” not only enhances the safety and soundness of the institution concerned, it also strengthens the banking sector as a whole by increasing public trust in the people managing the euro area’s financial sector.
The ECB considers five criteria within the fit and proper assessment:
When appointments are part of a licensing or qualifying holding procedure, the fit and proper assessment forms part of the assessment for granting the licence or for the acquisition of the qualifying holding.
National legal deadlines are applied.
* or senior management, if delegated