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2020 | Book

European Central Banking Law

Name: European Central Banking Law
ISBN: 978-3-030-34563-1

The Role of the European Central Bank and National Central Banks under European Law

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Book Series: Palgrave Macmillan Studies in Banking and Financial Institutions

Author: Prof. Dr. Christos V. Gortsos

Publisher: Springer International Publishing

Print ISBN: 978-3-030-34563-1

Electronic ISBN: 978-3-030-34564-8

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book provides a comprehensive overview of European Union (EU) central banking law, a field of EU economic law which emerged in the late 1990s and has developed rapidly ever since. European central banking law pertains to the rules governing the functions, operation, tasks and powers of the European Central Bank (ECB) and the national central banks (NCBs) of EU Member States. Systematically presenting and analysing the role of the ECB as a monetary and banking supervisory authority, the book discusses its changing and developing responsibilities following the financial crisis of 2007-2009 and the ongoing fiscal crisis in the euro area. The book also highlights the ECB’s significant role in relation to the resolution of credit institutions, as well as, conversely, its relatively limited role in respect of last-resort lending to EU credit institutions exposed to liquidity risk.

The related tasks and powers of the ECB are presented in light of its interaction with NCBs within the Eurosystem, the European System of Financial Supervision, the Single Supervisory System and the Single Resolution Mechanism. Providing a detailed analysis of the legal framework governing (mainly) the ECB’s monetary policy and other basic tasks within the Eurosystem and its specific tasks in relation to banking supervision and macro-prudential financial oversight, this comprehensive book will be of interest to researchers, practitioners and students in the fields of EU monetary and banking law.

Frontmatter

Definition and Evolution of European Central Banking Law

Frontmatter

Chapter 1. The Functions of Central Banks and Definition of European Central Banking Law

Abstract

This chapter provides a definition of European central banking law on the basis of the functions of central banks in the monetary, financial, and payment and settlement systems, discussing, in the first section, in turn, their monetary policy function (including both ‘conventional’ and ‘unconventional’ monetary policy), their financial stability function(s), their functions in relation to payment and settlement systems and their function in promoting financial inclusion and literacy. The second section defines European central banking law as a synthesis of European monetary and financial law (also defined therein), based on the stronger link, since November 2014, between European monetary and banking law, given that, inter alia, the European Central Bank (ECB) is both a single monetary authority within the Eurosystem and a banking supervisory authority within the Single Supervisory Mechanism.

Christos V. Gortsos

Chapter 2. The Establishment of the European System of Central Banks and the Eurosystem

Abstract

This chapter looks into the establishment of the European System of Central Banks (ESCB) and the Eurosystem. While the first section focuses on the Treaty of Maastricht as the foundation of economic and monetary union (EMU) law, the second draws attention to the decision to launch monetary and economic unification concurrently and to their inherent asymmetry. It then discusses the component parts of the definition of the European EMU. The third section examines the provisions of the Treaty on European Union (TEU), the Treaty on the Functioning of the European Union, as well as the related Protocols and Declarations annexed to the Treaties (including the Protocol on the Statute of the ESCB and of the European Central Bank) as sources of EMU law. Finally, the fourth section provides a brief overview of the legal acts of secondary European law, which constitute sources of EMU law, as well as the Intergovernmental Agreements, which were adopted after the onset of the ongoing fiscal crisis in the euro area (also discussed therein).

Christos V. Gortsos

Chapter 3. The Establishment of the European System of Financial Supervision

Abstract

This chapter discusses the establishment of the European System of Financial Supervision (ESFS). The first section looks into the EU Treaties’ provisions on financial stability and, in particular, those of the most relevant article of the TFEU, Article 127(5), while the second provides an overview of the evolution, in four periods, of EU banking law before the establishment of the Banking Union; inter alia, it discusses the adoption, in 2001, of the ‘Lamfalussy process’ on making EU financial law (discussed in more detail in Appendix of Chap. 5) and the 2009 Report of the ‘de Larosière Group’, which was adopted after the recent (2007–2009) international financial crisis (also discussed in this chapter) and laid down the foundations for deepening the institutionalisation of EU arrangements with regard to the financial system’s micro-prudential supervision. Finally, the third section focuses on the establishment of the ESFS, which was based on the De Larosière Report.

Christos V. Gortsos

Chapter 4. The Establishment of the (European) Banking Union

Abstract

This chapter focuses on the establishment of the (European) Banking Union. After briefly discussing, in the first section, its creation in response to the ongoing fiscal crisis in the euro area and the new institutional and regulatory framework set up in this respect, the subsequent three sections briefly present its three main pillars: the Single Supervisory Mechanism, which relates to the authorisation and prudential supervision of credit institutions, the Single Resolution Mechanism and the Single Resolution Fund, which relate to the resolution of credit institutions, and the (single) European Deposit Insurance Scheme, which constitutes the (still pending) third main pillar on deposit guarantee. Each section makes due reference to the legislative, delegated and implementing acts of European Union (EU) institutions which constitute the single rulebook governing substantive aspects on all the above, the relationship between the three main pillars and the single rulebook, as well as the impact of public international banking law on the shaping of EU banking law.

Christos V. Gortsos

Institutional Architecture

Frontmatter

Chapter 5. The Systems and Mechanisms of the European Central Bank and National Central Banks

Abstract

This chapter discusses the institutional aspects governing the systems and mechanisms participated in by the European Central Bank (ECB) and the national central banks (NCBs). The first section elaborates on the composition and legal nature of the European System of Central Banks (ESCB) and the Eurosystem, the objectives, tasks and financial provisions of the ESCB, as well as the role of national central banks therein. The second section presents (in more detail than in Chap. 4) the Single Supervisory Mechanism (SSM), with an emphasis on its two components, while the third briefly discusses the Single Resolution Mechanism (in particular with regard to aspects of relevance to the ECB) and, then the fourth analyses the two components of the European System of Financial Supervision (ESFS), that is the European Banking Authority (EBA) and the European Systemic Risk Board, with specific reference to the SSM as part thereof. Appendix of this chapter contains an analysis of the role of the EBA in the making of European banking (and, in general, financial) law.

Christos V. Gortsos

Chapter 6. Institutional Aspects of the European Central Bank

Abstract

This chapter discusses the institutional aspects of the European Central Bank (ECB). The first section systematically presents the related European Union (EU) framework and then briefly discusses the legal personality, the seat, as well as the privileges and immunities of the ECB. The following section is on the bodies of the ECB, presenting, in turn, its decision-making bodies (Governing Council, Executive Board and General Council) established by virtue of primary EU law, and its internal bodies established by the Single Supervisory Mechanism (SSM) Regulation (Supervisory Board, Administrative Board of Review and Mediation Panel). The third section then sets out the ECB’s regulatory powers under the Treaty on the Functioning of the European Union (TFEU), the Statute of the European System of Central Banks and the ECB and the SSM Regulation, as well as its sanctioning powers, as laid down in secondary EU law. The fourth section addresses its independence, accountability and transparency both under the TFEU and the Statute and under the SSM Regulation. The final section looks into other important institutional aspects, such as communication between the ECB and other EU institutions, the judicial review of the acts and/or omissions of the ECB and the national central banks, as well as the ECB’s aspects of liability.

Christos V. Gortsos

Tasks and Competences of the European Central Bank

Frontmatter

Chapter 7. The Basic Tasks of the European Central Bank Within the Eurosystem and Issuance of Banknotes and Coins

Abstract

This chapter first examines in detail the definition of the single monetary policy, as well as its implementation, with an emphasis on the instruments used, the eligible counterparties, the assets eligible as collateral in the Eurosystem and then, in particular, the implementation of this policy following the recent (2007–2009) international financial crisis and the ongoing fiscal crisis in the euro area. The (recent) introduction of the euro short-term rate is also discussed in this section. The second section analyses the other basic tasks of the European Central Bank (ECB) within the Eurosystem: the exchange-rate policy, holding and managing foreign reserve assets, and promoting the smooth functioning of payment systems. In relation to the latter, the 2014 ECB Regulation on oversight requirements for systemically important payment systems, the Trans-European Automated Real-Time Gross Settlement Express Transfer 2 (TARGET2) payment system and the TARGET2-Securities system are discussed in more detail. Finally, the third section develops on the powers of the ECB in relation to the issuance of euro-denominated banknotes and coins.

Christos V. Gortsos

Chapter 8. The Specific Supervisory Tasks of the European Central Bank and Its Cooperation with National Competent Authorities

Abstract

This chapter analyses the specific supervisory tasks of the European Central Bank (ECB) and its cooperation with national competent authorities within the Single Supervisory Mechanism (SSM). The first section presents individual specific tasks as laid down in Article 4(1) of the SSM Regulation (including granting and withdrawing authorisations and ensuring compliance with micro-prudential regulations), and Article 5 thereof, which governs macro-prudential tasks and tools used by national authorities and the ECB. The second section is on the cooperation between the ECB and national competent authorities within the SSM, discussing, in particular, the general principles and obligations on the operation of this mechanism, the dichotomy between significant and less significant supervised entities, and the criteria and procedure for classifying supervised entities as significant, as well as the micro-prudential supervision of significant and less significant supervised entities and groups.

Christos V. Gortsos

Chapter 9. Other Specific Tasks and Competences of the European Central Bank Relating to Financial Stability

Abstract

This chapter elaborates on the other specific tasks and competences of the European Central Bank (ECB) relating to financial stability. Its specific tasks in the context of the European Systemic Risk Board are discussed in the first section, while the second deals with the limited, albeit important competences of the ECB within the Single Resolution Mechanism, drawing attention to its role in relation to resolution planning and early intervention, the conditions for resolution within the resolution procedure and, in particular, its role in determining that a credit institution is ‘failing or likely to fail’, as well as to the write-down or conversion of relevant capital instruments. Finally, the third section discusses the (still) limited role of the ECB in the emergency liquidity assistance (ELA) mechanism in respect of last-resort lending to credit institutions in the euro area, which permits the conclusion that the provision of ELA is not considered to be part of the single monetary policy in the euro area and falls under the main responsibility of the national central banks concerned.

Christos V. Gortsos

Conclusion

Frontmatter

Chapter 10. Concluding Remarks

Abstract

This chapter contains the book’s concluding remarks, which are classified in four sets. The first set of conclusions refers to the evolution of European central banking law step by step since the beginning of Stage Three of EMU with the establishment of the European System of Central Banks and the Eurosystem, subsequently the European System of Financial Supervision and, finally, the mechanisms of the Banking Union (analysed in Chaps. 1, 2, 3 and 4). The second set summarises, in turn, the institutional aspects of these systems and mechanisms, as participated in by the European Central Bank (ECB) and the national central banks of the EU Member States (analysed in Chap. 5). The following set of concluding remarks refers to the institutional aspects of the ECB (analysed in Chap. 6), and finally, conclusions are drawn in respect of the tasks and powers of the ECB and the national central banks (analysed in Chaps. 7, 8 and 9) and the allocation of objectives between the ECB, the European Banking Authority and the European Systemic Risk Board.

Christos V. Gortsos

Chapter 11. Assessments and Proposals

Abstract

Finally, this chapter contains the author’s assessments and proposals. Assessments (in the first section) pertain to the basic tasks of the European Central Bank (ECB) within the Eurosystem and some institutional aspects governing its operation, the necessary link between a more robust EMU and a well-functioning and financial stability-enhancing Banking Union (BU), as well as the positive effects and the concerns from the dual role of the ECB as monetary and banking supervisory authority. In the second section, specific modest proposals are put forward for an improved European bank safety net, which in the author’s view contains several elements of fragmentation (described as ‘partial Europeanisation of the bank safety net’), even after the establishment of the BU and even with regard to significant credit institutions. In this respect, apart from indicating that an important missing element in the architecture is harmonisation at EU level of the rules on winding up credit institutions, it proposes an enhanced role for the ECB in the provision of last-resort lending within the Emergency Liquidity Assistance mechanism and assigning it with powers relating to the provision of liquidity in resolution.

Christos V. Gortsos

Backmatter

Title: European Central Banking Law
Publisher: Springer International Publishing
Print ISBN: 978-3-030-34563-1
Electronic ISBN: 978-3-030-34564-8
DOI: https://doi.org/10.1007/978-3-030-34564-8
Author:: Prof. Dr. Christos V. Gortsos

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