Sanctions are intended to punish misconduct by a supervised bank. They 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 European Union (EU) 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 national supervisory authority (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 failures to comply with EU prudential requirements.
Maximum level of penalties
The ECB may impose penalties of up to 10% of a bank’s total annual turnover in the preceding business year, or twice the amount of profits gained or losses avoided as a result of the breach, where those can be determined.
Effective, proportionate and dissuasive penalties
The ECB ensures that the penalties it imposes are effective, proportionate and dissuasive. When determining the level of such penalties, the ECB considers all relevant circumstances relating to the breach and assesses its severity on the basis of its impact and the bank’s misconduct. The ECB also considers all aggravating and mitigating circumstances (e.g. a reluctance to cooperate with the ECB in the exercise of its investigatory powers, or the existence of remedial actions adopted by the bank on its own initiative).
Find out more about the principles the ECB applies in the ECB Guide to the method of setting administrative pecuniary penalties.
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 banks supervised by the ECB.
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.SSM Regulation
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 submits a proposal for a complete draft decision to the Supervisory Board.
If an ECB decision imposing penalties is adopted after administrative review or if the ECB’s decision is not contested before the Administrative Board of Review, it will be published on the ECB’s banking supervision website .Administrative Board of Review