The ECB is the authority in charge of all banking authorisations in the euro area, whether banks are large or small. It is also the direct supervisor of the biggest entities, indirect supervisor of the smaller ones, and ensures consistency and high supervisory standards throughout the whole system.
National competent authorities have an important role – for example as the entry point for authorisations, as members of the JSTs, and as direct supervisors of the smaller institutions. We are coordinating with our colleagues in the NCAs to ensure a consistent approach and high standards in the key operational and policy issues relating to Brexit.
These are the procedures which apply to both significant and less significant institutions. They also apply to subsidiaries of non-euro area banks within the euro area.
The common procedures enable the ECB to apply the single European rulebook and ensure consistency in terms of how Member States transpose EU rules into national law.
Common procedures include:
- Granting a banking licence to a new company or extending an initial licence
- Authorising an acquisition of a participation in an existing institution
- Withdrawing a banking licence
Acquisition of qualifying holdings
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%.
The criteria assessed by the ECB are the following:
- reputation of the proposed acquirer
- fitness and propriety of the board members to be appointed by the proposed acquirer
- financial soundness of the proposed acquirer
- ability of the target to continue to comply with prudential requirements following the acquisition
- whether the transaction involves, or increases the risk of, money laundering or the financing of terrorism
A qualifying holding must be authorised or objected to within 60 working days, with a maximum extension to 90 working days.
Withdrawal of authorisations
Both the ECB and the relevant national supervisor have the right to initiate the withdrawal of a banking licence in certain circumstances. A licence will be withdrawn if a credit institution ceases its activities or no longer meets the applicable prudential requirements.
A change in supervisory status can mean a change in the amount of the annual supervisory fees to be paid to the ECB.
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.
“Fit and proper” assessment
The ECB only takes fit and proper decisions for significant banks. When assessing the fitness and propriety of the members of a management body, it applies the relevant national and EU law.
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:
- Conflicts of interest and independence of mind
- Time commitment to duly perform the functions
- Collective suitability of the board
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.