The Administrative Board of Review (ABoR) is a body of the ECB that carries out reviews of the institution’s supervisory decisions. An administrative review may be requested by any person or legal entity directly affected by an ECB supervisory decision. The ABoR members are independent external experts, who are appointed for once-renewable five-year terms. This document describes the ABoR review procedure and sets out the main issues and questions faced by the ABoR in its first ten years (from September 2014 to September 2024).

1 The ABoR review procedure

The ABoR review procedure is governed by the SSM Regulation (the main piece of legislation on the ECB’s role in prudential supervision) and the ABoR Decision (the ECB legal act establishing the review board). Both legal acts specify that the ABoR members and the two alternates are to act independently and in the public interest. The ABoR must adopt an opinion within two months of receipt of a complete request for review, unless the request is found to be manifestly inadmissible^[1]. The ABoR reviews the procedural and substantive conformity of the contested decision with the SSM Regulation. Taking account of the ABoR opinion, the ECB’s Supervisory Board submits a new decision to the ECB’s Governing Council. This new decision may abrogate the contested decision, replace it with an amended decision, or replace it with a decision that has a content identical to that of the contested decision.

1.1 Who can contest a decision before the ABoR?

The ABoR has had to address requests for review filed by credit institutions and other entities or natural persons, such as shareholders, directors or proposed acquirers of a qualifying holding in a credit institution. The ABoR’s jurisprudence and the Union courts’ case law have established that the former management of a bank may request a review of the withdrawal of the bank’s licence^[2], but applications from shareholders were not admissible when filing such a request.

1.2 Confidentiality of the ABoR review procedure

The ABoR review procedure is confidential, in keeping with Article 22(2) of the ABoR Decision.

While the ABoR does not make its opinions public, parts of the ABoR’s arguments may be made known to the public in litigation before Union courts. ABoR review cases and some parts of the ABoR opinions may become public, in the event that the Court of Justice refers to them in subsequent court proceedings. The Court of Justice may take the ABoR opinion into account when deciding the case before it.

Applicants should be aware that any second, post-ABoR decision adopted by the ECB replaces the first decision and, in general, all judicial proceedings started against the original decision may be considered inadmissible^[3]. An applicant contesting the post-ABoR decision should make a request to the Court of Justice for the review of the second, post-ABoR decision. Depending on the specific circumstances of the case, it is possible that an applicant may also have an interest in challenging the original decision as well.

Section 2.11 gives an overview of cases before the Court of Justice that mention an ABoR review.

1.3 How does the ABoR review proceed?

The ABoR review is conducted on the basis of an application by any person or legal entity directly affected by an ECB supervisory decision. This application is called a notice of review and must contain the grounds that the applicant invokes to support the assertion that the contested ECB decision is not in procedural and/or substantive conformity with the SSM Regulation.

There is, in principle, no corresponding written counter-submission by the ECB. However, when reviewing the contested decision, the ABoR may look at the comments table attached to the contested act – the table shows the comments by the addressee of the decision in the hearing phase and how the ECB assessed these^[4] – to establish what has already been discussed in the administrative procedure. The ABoR may examine how the ECB has evaluated and responded to the remarks made by the applicant in the hearing phase leading to the adoption of the contested decision. This is based on the expanded scope of the ABoR review, which allows it to examine both the grounds relied on by the applicant as set out in the notice of review and any possible breaches of essential procedural requirements^[5].

In many cases, the ABoR has considered that an oral hearing is necessary to evaluate the request for review fairly. During the oral hearing, both the applicant and the ECB can present their arguments and the ABoR can ask questions. The oral hearing provides another opportunity for the applicant and the ECB to present their positions.

Having given due consideration to the elements brought before it, the ABoR concludes its review with an opinion and proposes to the Supervisory Board a course of action, which the Supervisory Board has to take into account but it can follow or not ^[6].

1.4 Recognition of the ABoR’s role

The L-Bank case^[7] was the first review that led to post-ABoR litigation in court. The General Court and, on appeal, the Court of Justice, took the ABoR opinion into account when assessing whether the motivation of the ECB’s post-ABoR decision was adequate. The Union courts established that, insofar as the contested ECB decision conforms with the proposal in the ABoR opinion, it is an extension of that opinion and the explanations contained therein may be taken into account to determine whether the contested decision contains an adequate statement of reasons. The L-Bank case saw a clear recognition of the ABoR’s role, and this has subsequently been reiterated in other judgments. One such example is the General Court’s 2017 Arkéa judgment^[8], which was issued after another ABoR opinion and confirmed by the Court of Justice in 2019.

2 Matters considered by the ABoR

Since its establishment in 2014, the ABoR has reviewed numerous ECB decisions examining a variety of matters. Noteworthy issues include the significance of credit institutions for the purpose of the SSM, the perimeter of the consolidated supervision, breaches of prudential rules (for example, large exposure limits), corporate governance rules, the power to adopt supervisory measures based on national law, compliance with supervisory requirements, withdrawal of banking licence, administrative sanctions (including anonymising an ECB sanction), administrative measures prescribed in national law (absorption interest), acquisition of qualifying holdings, the use of internal models to calculate required regulatory capital^[9] and on-site inspections. As a result, the ABoR has had the opportunity to establish its own jurisprudence, elements of which are set out below.

2.1 Reasoning of supervisory measures

A recurring element in ABoR opinions has been the need for the ECB to provide adequate reasoning for its decisions in a manner that is comprehensible for the contesting party. The ABoR has included a standard statement in its opinions on the need for reasoning to be more extensive the more incisive the decision adopted:

“Discretionary measures taken by the ECB need to be consistent and proportionate. The more intrusive the measures, the greater the level of reasoning that is called for.”^[10]

The ABoR has insisted that an ECB decision “respects the business model and specificities of the credit institution” and has asserted that “for supervisory decisions to be effective and considered legitimate, adequate reasoning should be provided”, while for a supervisory measure of an intrusive nature “reasoning is all the more important” and should go “beyond mere reliance on the law and explain the prudential need to adopt the decision”.

2.2 Conformity of the measure with the principle of proportionality

Closely related to the previous point is the paramount role that the principle of proportionality has played in the ABoR’s opinions, as this principle should guide all actions by EU institutions. Proportionality has resurfaced as an issue in many review proceedings. In one early opinion, the ABoR asked the ECB to provide extended argumentation on the proportionality of its decision and to specifically address the impact that the applicant claimed the decision would have.

The ABoR’s assessment of the proportionality of ECB measures, when contested by the applicants, is especially challenging in those cases where the ECB enjoys discretion. The ABoR has considered that when exercising its discretion in any case, the ECB should assess and explain the proportionality of its measures. The proportionality principle has also been considered in relation to deadlines for compliance with an ECB order or request.

In a specific case when national legislation established a flat amount to be levied on credit institutions in the event of breaches of large exposure limits, the ABoR concluded that, when applying such national legislation, the ECB could not simply rely on these flat amounts but was required to provide reasoning as to how it had applied the principle of proportionality. The General Court duly took the ABoR’s opinion into account and concluded that, when the ECB had adopted a decision holding that absorption interest was levied automatically, it had relied on a premise that was legally incorrect. This vitiated its examination of the proportionality of the application of the relevant national law, since it resulted in the ECB failing to examine the circumstances of the case^[11]. The General Court annulled the ECB decision.

2.3 Reading the Single Rulebook

Closely related to the reasoning requirement is the issue of how to interpret Single Rulebook terms. The ABoR has used references to “a lack of motivation” to underline that an ECB decision was based on an interpretation without explaining why this interpretation had been chosen and applied, especially when departing from the official guidance of regulatory agencies. Examples are the ABoR analysis of the ECB interpretation of the term “joint control” in the context of Article 22 of Directive 2013/34/EU on annual financial statements (in cases of dominant influence or control), proportionate consolidation governed by Article 26 of Directive 2013/34/EU in cases of joint ventures and the “integrity” criterion in the Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector^[12] adopted by the European Supervisory Authorities.

The ABoR has often been confronted with the guidelines of the European Banking Authority (EBA), notably on fit and proper requirements for members of a bank’s management body (EBA/GL/2012/06), the supervisory review and evaluation process (SREP) (EBA/GL/2014/13) and the scoring of institutions as “other systemically important institutions” (EBA/GL/2014/10). The abovementioned Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings (JC/GL/2016/01) have also featured in the ABoR’s deliberations. The EBA’s Guidelines on probability of default estimation, loss given default estimation and the treatment of defaulted exposures (EBA/GL/2017/16) have played a role in some ABoR assessments. Finally, the EBA’s Guidelines adopted pursuant to Article 396(3) of the Capital Requirements Regulation (CRR) (EBA/GL/2021/09) have also been invoked. Like all competent authorities, the ECB is to comply with guidelines issued by an EU regulatory authority, and to justify any deviation therefrom.

2.4 Insufficiently harmonised national law

Differences in national rules for supervision have posed a challenge for the ECB and the ABoR. This has been specifically mentioned in the ECB’s Annual Report 2015^[13] and repeated in the ECB’s Annual Report 2016^[14]. The status of national “law” is sometimes also an issue of diverse views, for example, when a circular or other less formal method of communication by a national authority is at issue.

2.5 Rights of defence in the case of licence withdrawal: standing of shareholders and the board of directors

As indicated above, it has been decided by the Court of Justice that the shareholders of a bank cannot act to defend the interests of that bank (and indirectly their own interests) by requesting a review. This question arose in cases in which the entity concerned was already in the process of liquidation or its management had been dismissed through liquidation or the appointment of a special administrator.

The withdrawal of Trasta’s licence led to an ABoR review and subsequent court proceedings pitting the shareholders against the ECB and the European Commission. The Court of Justice, overturning an earlier finding of admissibility of the shareholders by the General Court^[15], found in accordance with the ABoR’s initial approach^[16] to accept the originally mandated attorney in his challenge on behalf of the bank, and rejected the admissibility of the bank’s shareholders in their contestation of the withdrawal of the bank’s licence^[17]. At the same time, in a different case not preceded by an ABoR review, the Court of Justice emphasised that residual representation powers for the former management board may not persist in all cases. In that particular instance, a competent person had been appointed to represent the bank and there was no proven conflict of interest to prevent that person from representing the bank; therefore the court did not recognise the former management board as representing the bank ^[18].

In the Nemea case, the ABoR received a request for review filed jointly by bank directors and shareholders^[19].

In another case also concerning the withdrawal of a bank’s licence and an ABoR review, the General Court confirmed the lack of standing of shareholders to challenge the ECB decision^[20]. This approach is consistent with the findings of lack of standing of shareholders to challenge the Single Resolution Board’s no resolution decisions in the ABLV cases^[21].

2.6 New developments and new facts

A particularly challenging issue has been the emergence of new developments after the contested decision, or of new facts during the review process. While an administrative review needs to assess that the legal act conforms with the legal framework at the time of the contested measure being adopted, the ABoR has not shied away from new facts that arise during the hearing, and the ABoR did not disregard a material change in the applicant’s situation. When there was a relevant change “in real life”, the ABoR acknowledged this and proposed to the Supervisory Board that it take this change into account.

When the Supervisory Board receives the ABoR opinion, it re-examines the case and is competent to take all relevant considerations into account, as confirmed by the General Court in the Versobank case^[22].

2.7 The right to be heard

The ABoR has established that in order to ensure the effective right to be heard, the full scope of a contemplated supervisory measure should be discussed with the applicant within a reasonable time frame before a decision is finalised. Following the amendments to the ABoR Decision in 2023, it has now been explicitly confirmed that the ABoR can review whether the right to be heard was respected in the administrative procedure, even when the applicant failed to put forward this ground^[23].

2.8 Level playing field

In some review cases, the ABoR was confronted with arguments stating that an ECB decision did not respect the level playing field, as the decision would affect the applicant adversely on the banking market. The ABoR has assessed such pleas on the basis of the principle of equality and in the context of ECB Banking Supervision’s role in furthering consistent prudential standards across the euro area. In such cases, the ABoR has underlined that to ensure a level playing field, the ECB should use its prudential powers in a consistent manner across the participating Member States, in accordance with all general principles established by the Union legal framework.

2.9 Suspension of the contested decision

The ABoR has established that an extraordinary situation such as the coronavirus (COVID-19) pandemic could justify – balancing the relevant interests – suspending the application of an ECB prudential decision.

2.10 Sanctions

The ABoR has examined several requests for review of ECB decisions imposing sanctions in the form of pecuniary penalties. In particular, applicants have contested the proportionality of penalties imposed and whether the ECB had taken all relevant circumstances into consideration. In one specific case the ABoR considered that the principle of proportionality must be taken into account in applying the various elements in the ECB methodology for imposing administrative penalties, including when determining the degree of misconduct and the severity of the relevant breach. This led the ABoR to propose to the ECB that it should amend its original decision.

With regards to publication of sanctions, the ABoR has considered that an anonymised sanction can be justified only if the publication thereof would likely have significant negative consequences on the applicant. Publication in anonymised form was found to be allowed only in specific cases. The publication of a sanctioning decision was neither a penalty itself nor an accessory element to the penalty, but a requirement imposed by the legislator aimed at ensuring the general deterrent effect of a sanction by informing the public. The ABoR has considered that assessing whether publication would cause disproportionate damage to the applicant^[24] would be limited to establishing the possible consequences of the publication. That assessment did not revisit the elements previously considered to determine the proportionality of a penalty. Finally, the ABoR has considered that the proportionality of the decision to publish the sanction would be ensured by assessing the exceptions provided for by the legislator in Article 68(2) of the Capital Requirements Directive and Article 132(1) of the SSM Framework Regulation under which anonymisation should take place. This approach has also been adopted by the General Court^[25].

2.11 Overview of ABoR reviews in the public domain

Below is an overview of ABoR cases that have been submitted for further review to the Union courts. These cases have raised several issues: notably, the withdrawal of a banking licence together with the preliminary question of shareholder standing in Trasta (Case T-247/16 and Case T-698/16), Niemelä and Others v ECB (Case T‑321/17) and Ukrselhosprom PCF and Versobank v ECB (Case T-351/18 and Case T-584/18). The judgments in L-Bank (Case C-450/17 P) on significance, Arkéa (Case C-152/18 P and Case C-153/18 P), concerning a SREP decision and finding wide powers for the ECB under Article 16 of the SSM Regulation (Case T‑150/18 and Case T‑345/18) should also be mentioned. The Crédit Agricole cases (Case T-133/16 to T-136/16) involved the combination of executive and non-executive functions: the General Court came to the same conclusions as the ABoR while following a separate line of reasoning, as seen in this summary. The imposition of sanctions was brought before the court in VQ v ECB (Case T-203/18), and publicly available information on the fine shows that the case concerns Banco Sabadell, on which the ABoR had issued an opinion^[26]. The Sberbank cases (Case T‑647/21 and Case T-99/22) concern the rules governing the ECB’s imposition of absorption interest – a non-harmonised administrative measure within the meaning of Article 65(1) of the Capital Requirements Directive.

The ABoR issued an opinion for several cases in which the application for judicial review does not mention previous administrative review, or for which proceedings are ongoing without a judicial decision. These ABoR reviews are therefore not yet in the public domain.

In addition to the judgments by the Union courts, the ABoR reported these general topics as the subject of review requests:

• “significance” cases (Annual Report 2014);
• corporate governance;
• compliance with supervisory requirements;
• withdrawal of a licence (Annual Report 2016, Annual Report 2017, Annual Report 2018 and Annual Report 2019);
• administrative sanctions, including anonymising ECB decisions (Annual Report 2017 and Annual Report 2019);
• acquisition of qualifying holdings (Annual Report 2018 and Annual Report 2019);
• internal models (Annual Report 2019 and Annual Report 2020);
• on-site inspections (Annual Report 2020);
• power to adopt supervisory measures based on national law (Annual Report 2021).