Sanctions are intended to punish misconduct by a supervised bank and serve as a deterrent to the bank concerned and also to the whole banking sector. Sanctioning proceedings can be initiated not only during on-going breaches but also after the breach has ceased, as long as the limitation period is respected.
Allocation of sanctioning tasks
The ECB can impose pecuniary penalties on significant banks that breach directly applicable Union law or ECB decisions or regulations.
In the event of breaches of national law implementing EU directives, breaches committed by natural persons or when a non-pecuniary penalty has to be imposed, the ECB may request the relevant NCA to open the appropriate proceedings. The NCA conducts these proceedings and decides on the resulting penalties in accordance with applicable national law.
What sanctions can the ECB impose?
The ECB can impose pecuniary penalties on banks for non-compliance with EU prudential requirements.
Calculating the fines
In general, penalties are calculated at up to twice the amount of the profits gained or losses avoided because of the breach, or up to 10% of the bank’s total annual turnover in the preceding business year.
Principle of proportionality
When determining the appropriate amount of the sanctions the ECB is guided by the principle of proportionality. The ECB will assess the severity of the infringement and also any aggravating and mitigating circumstances of the case (e.g. duration of the breach, degree of responsibility, cooperation during the investigation, remedial actions adopted by the bank, and previous breaches committed). Penalties imposed must be effective, proportionate and dissuasive.
Investigations and sanctioning proceeding
The ECB’s independent Investigatory Unit (IU) is in charge of investigating alleged breaches of directly applicable Union law and of ECB supervisory decisions or regulations committed by significant supervised banks.
The IU can exercise the powers granted to the ECB by the SSM Regulation (request for documents, examination of books and records, request for explanations, interviews and on-site inspections). The IU can also request information internally and from the NCAs. In addition, the IU can instruct the NCAs to make use of their investigatory powers under and in accordance with national law.
Once it has completed its investigation, the IU may initiate a sanctioning proceeding by addressing a statement of objections to the supervised bank concerned. The bank will have the possibility to comment on the facts and objections raised by the IU and also on the proposed amount of the penalty.
If, on the basis of its initial analysis of the facts, the evidence collected and the written submissions of the bank concerned, the IU considers that an administrative penalty should be imposed it submit a proposal for a complete draft decision to the Supervisory Board.