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Whistleblower-System

Banking Union

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One aim of the European Banking Union is to achieve greater transparency and stability in the European banking sector as well as to decouple sovereign debt from bank debt.

European Banking Union consists of several mechanisms. They are the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), as well as the European Deposit Insurance System (EDIS) that is expected to be established in the future.

 

The legal basis for the Single Supervisory Mechanism (SSM) is Regulation (EU) No 1024/2013 (SSM Regulation). On the basis of this regulation, the European Central Bank (ECB) took over direct supervision of banks within the euro area (currently 19 EU Member States) on 4 November 2014. Significant credit institutions (SIs) are subject to direct supervision by the European Central Bank. Less significant credit institutions remain subject to supervision on a national basis. In Austria, the Financial Market Authority is responsible for supervising these credit institutions. Common uniform procedures now apply for both significant and less significant institutions in relation to licencing issues and qualifying holdings. These procedure are known as Common Procedures.


Banking supervision in the euro area is carried out in a decentralised system under the direction and responsibility of the European Central Bank in close cooperation with the national competent authorities. This ensures that banks in the participating Members States will be supervised using unified criteria and methodologies while observing the principle of proportionality.

The more precise organisation of collaboration between the European Central Bank and the national competent authorities is set out in Regulation (EU) No 468/2014 of the European Central Bank (SSM Framework Regulation).

In Austria, the division of duties in banking supervision are split between the Financial Market Authority and the Oesterreichische Nationalbank. This is set out in Article 77d BWG.

The banks are split up throughout Europe into significant and less significant credit institutions or groups of credit institutions. The significant credit institutions are directly supervised by the European Central Bank with the Single Supervisory Mechanism (SSM). The less significant institutions remain under the supervision of the national supervisory authorities and are only indirectly supervised by the European Central Bank.

In Austria the less significant institutions and groups of credit institutions remain under the supervision of the Financial Market Authority.

Classification as significant credit institutions or groups of credit institutions

In any case, at least the three largest banks in every euro area Member State are classified as significant. Moreover, a credit institution can also be classified as being significant by the European Central Bank based on its significant cross-border activity. If a credit institution is classified as being a significant credit institution, and this classification also applies to all of its subsidiary credit institutions. The receipt of direct financial assistance from the European System of Financial Supervisors (ESFS) or the European Stability Mechanism (ESM) also results in classification as a significant credit institution.

Other criteria that exist for the classification as a significant credit institution are:

  • Total value of assets exceeding EUR 30 billion; or
  • The total value of assets exceeds 20 % of the national Gross Domestic Product (GDP)
    and the total value of assets exceeds EUR 5 billion; or
  • the national supervisory authority has notified the European Central Bank that the credit institution is significant in terms of the country’s national economy and its significance has been confirmed by the European Central Bank.
    This classification is checked by the European Central Bank on an annual basis.

Currently there are 123 groups of credit institutions (consisting of around 1,200 credit institutions in total) which are classified as significant. They have been directly supervised by the European Central Bank since 4 November 2014. The list of all the significant credit institutions and groups of credit institutions provides an overview.

The following Austrian credit institutions (as well as their subsidiary credit institutions) have been classified as significant institutions and groups of credit institutions:

  • BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft
  • Erste Group Bank AG
  • Österreichische Volksbanken-Aktiengesellschaft
  • Raiffeisen Zentralbank Österreich Aktiengesellschaft
  • RAIFFEISEN-HOLDING NIEDERÖSTERREICH-WIEN registrierte Genossenschaft mit beschränkter Haftung
  • Raiffeisenlandesbank Oberösterreich Aktiengesellschaft
  • Sberbank Europe AG
  • VTB Bank (Austria) AG

The European Central Bank takes all binding decisions under supervisory law for the significant credit institutions and groups of credit institutions. Within the European Central Bank, the Directorates General “Microprudential Supervision I” and “Microprudential Supervision II” are responsible for the supervision of significant credit institutions and groups of credit institutions depending on their size.

How both of these Directorates General fit into the ECB organisation as a whole can be seen from the Organigram of the ECB.

 

Cooperation within Joint Supervisory Teams (JSTs)

Every individual significant credit institution is supervised by a Joint Supervisory Team (JST). The team is made up of employees of the European Central Bank and the national supervisory authorities. Every team is headed by a JST Coordinator from the European Central Bank. The employees of the national supervisory authorities bring national supervisory practices and experience to the attention of the team.

The planning of supervisory activities is a two-stage process: strategic planning as well as operational planning. The strategic planning is coordinated by the ECB’s “Planning & Coordination of SEP” division. The setting of strategic priorities and the focus of supervisory activities for the next 12 to 18 months are covered. The strategic plan forms the framework for the strategic nature, detail and frequency of the activities, which are contained in the individual “Supervisory Examination Programmes”; SEPs. An annual SEP is conducted for every significant institution.

The operational planning is undertaken by the JSTs. The JSTs draw up individual SEPs, which define the significant tasks and activities for the following 12 months, including rough timeframes and aims, as well as the necessary of conducting on-site inspections and investigations of internal models.

The JST Coordinator is responsible to the implementation of the relevant supervisory tasks and activities in accordance with the respective SEP. The coordinator is the point of contact for the credit institutions, coordinates the Joint Supervisory Team’s activities, allocates tasks to the respective team members and organises the team’s meetings or telephone conferences.

In addition to the JST Coordinator, there is also a sub-coordinator for every national supervisory authority. The sub-coordinators support the JST Coordinator in the ongoing supervision and while also introducing the perspective of the national supervisory authorities. In the case of particularly large Joint Supervisory Teams a core supervision team is established, which consists of the JST Coordinator and all the sub-coordinators.

The JST Coordinator distributes tasks to the members of the Joint Supervisory Team. All the members of the team work closely with the JST Coordinator and with one another on their daily work, and advise one another with regard to specific steps to be taken across all stages of a procedure. The members of the team who come from the national supervisory authorities draw up the draft decisions, which are then voted upon within the team. These activities place exceptionally high demands on the resources of the national supervisory authorities. Further information can be found in the sections on the “Organisational structure and the decision-making process of the European Central Bank and the Single Supervisory Mechanism (SSM)”.

 

Legislative acts applying to supervisory activities

The European Central Bank applies the relevant provisions under Union law in its supervision activity over significant credit institutions or groups of credit institutions. In addition to the “Level I EU Legislation” (European Regulations and Directives) this also includes the binding regulatory and implementing technical standards drawn up by the European Banking Authority and adopted by the European Commission.

If Union law exists in the form of Directives (e.g. CRD IV), the ECB applies the national legislation with which the Directive is implemented; in Austria for example the Banking Act (BWG – Bankwesengesetz). Where the relevant Union law exists in the form of Regulations (e.g. CRR) and where Member States are currently explicitly granted discretions under those Regulations, the European Central Bank also applies the national legislation in which these discretions are exercised.

 

The increased role of the national supervisory authorities in the supervision of significant credit institutions

The role of the national supervisory authorities has increased in special procedures. Such procedures address, for example, Fit & Proper assessment of directors and members of the supervisory board (”joint procedures”) and procedures about the freedom to provide services and freedom of establishment (”passporting”). In such cases, while the notification is submitted to the national supervisory authorities, the checking of the notification is however handled by the European Central Bank.

With regards of the transmission of data by the national supervisory authorities to the European Central Bank, parties submitting applications are referred to the data protection declarations of the European Central Bank. The applicants are required to submit a signed copy of the declaration with the corresponding application.

The ECB’s “Guide to fit and proper assessments” was published on 15 May 2017 and must be applied by significant credit institutions.

Less significant institutions or groups of credit institutions are directly supervised by the national supervisory authorities within the Single Supervisory Mechanism (SSM).

The Financial Market Authority is responsible for the supervision of more than 500 less significant institutions in Austria. Further information can be found in the section on “The role of the Financial Market Authority in the Single Supervision Mechanism.”

 

Duties of the national supervisory authorities with regard to LSIs within the Single Supervisory Mechanism

The ongoing activities of the national supervisory authorities in the supervision of less significant institutions include;

  • Meetings with the senior management,
  • Conducting and evaluation of periodical risk analyses,
  • Planning and conducting on-site inspections,
  • Reporting to the European Central Bank (ex ante and ex post).
  • Conducting of procedures, approvals and ongoing supervision.

National supervisory activities for less significant institutions are required to maintain the high supervisory standards of the Single Supervisory Mechanism (SSM). The European Central Bank must generally ensure convergence within the euro area in terms of the supervision of LSIs. It therefore assumes a type of “oversight function”. The aim is to establish and ensure a uniform and high standard in LSI supervision. This duty is performed within the European Central Bank by Directorate General “Microprudential Supervision III”. Further information can be found in the sections on the “Organisational structure and the decision-making process of the European Central Bank and the Single Supervisory Mechanism (SSM)”.

To make the European Central Bank’s work possible in the first place, the European Central Bank relies on the regular and detailed reporting from the national supervisory authorities. The nature, scoping and timing of reports varies depending on the case on hand as well as the size and relevance of the credit institution in question. This is defined in Articles 96 to 100 of the SSM Framework Regulation.

The European Central Bank can issue regulations, guidelines or general instructions to the national supervisory authorities to ensure the consistent application of high supervisory standards (“SSM standards”) and in the case of specific criteria being fulfilled can take over direct supervision over individual or multiple less significant institutions.

For licencing issues and qualifying holding procedures common procedures have been defined between the national supervisory authorities and the European Central Bank.

A common procedure applies for all CRR-credit institutions regardless of whether they are a significant or less significant institution. The European Central Bank has the sole decision-making responsibility in such issues. The applications triggering the procedures are however submitted to the national supervisory authorities. In the case of Austria, the Financial Market Authority is the national supervisory authority. The Financial Market Authority then forwards the application together with a draft decision and the relevant documentation to the European Central Bank for the decision-making process.

With regards of the transmission of data by the national supervisory authorities to the European Central Bank, parties submitting applications are referred to the data protection declarations of the European Central Bank. The applicants are required to submit a signed copy of the declaration with the corresponding application.

For further Information regarding “Common Procedures” with the European Central Bank see SSM-Website/Authorisations.

Granting licences to CRR-credit institutions

Applications for the granting of licences must be submitted by the applicant to the national supervisory authority of the Member State in which the new credit institution is intended to be established. The national supervisory authority then informs the European Central Bank within 15 working days that it has received the application. In from the perspective of the national supervisory authority all conditions have been satisfied for granting of licences, it submits a draft decision to this effect to the European Central Bank. The national supervisory authority may also reject the application. In the event that the application is rejected, a hearing procedure is conducted. The ultimate decision about the granting of a licence is taken by the European Central Bank. The applying party with then informed by the national supervisory authority about the decision taken by the European Central Bank.

We would draw your Attention to the data protection declaration, which must be returned signed with the application.

Link:

 

Withdrawal of licences

The proposal to withdraw a licence may be made either by the European Central Bank or by the national supervisory authority of a Member State, in which the credit institution is based. The national supervisory authority acts in accordance with national law or on the basis of the licence of the credit institution in question. The cases in which the European Central Bank may initiate the withdrawal of a licence are set out the corresponding provisions under European law. Once the European Central Bank has carried out a detailed consultation with the national supervisory authority, a draft decision is drawn up by the competent supervisory authority. The affected credit institution may submit an opinion prior to the final decision being taken, and furthermore also has a right to a hearing. The European Central Bank then decides on the verdict of the procedure and thereafter informs the national supervisory authority, the national resolution authority and the credit institution about its decision.

Assessment of the acquisition of qualifying holdings

The notification of the acquisition of a qualifying holding (any time that a threshold of 20%, 30%, or 50% of capital or voting rights is exceeded) is submitted to the national supervisory authority of the Member State, in which the institution for which a qualifying holding is to be acquired is incorporated (applying the FMA Regulation on Qualifying Holdings and the relevant notification forms). The competent national supervisory authority shall confirm the completeness of the notification within two working days. The receipt of a complete notification must be acknowledged by the national supervisory authority to the European Central Bank within five working days, in order to ensure a prompt agreement between the national supervisory authorities and the European Central Bank. The national supervisory authority checks the content of the notification and prepares a draft decision. The draft decision is submitted to the European Central Bank for the decision-making process. In the event that the European Central Bank does not raise any objection within 60 working days of the notification being received by the national supervisory authority against the acquisition of the qualifying holding, then the acquisition shall be deemed to have been approved. On the other hand, in the event that the European Central Bank rules against the acquisition of a qualifying holding, it is required to inform the applicant of this being the case.

We would draw your attention to the data protection declaration, which must be returned signed with the application.

Link:

Significant Credits Institutions

Communications between the credit institutions and the Single Supervisory Mechanism is carried out in the Union official language (in this regard, the place of incorporation of the supervised credit institution is relevant). However special memoranda of understanding can also be signed to conduct all formal communications in English.

Submissions by significant credit institutions should generally be submitted to their JST Coordinator. The JST Coordinator is their contact person within the European Central Bank. The submission should also be submitted to the JST sub-coordinator for their information. The JST Sub-Coordinator is their contact person within the national supervisory authority.

Submissions to be made are submissions in accordance with Article 73 SSM-FR (Granting of a licence), Article 85 SSM-FR (Qualifying holding procedure), Article 93 SSM-FR (Fit & Proper) and Article 11 SSM-FR (Passporting).

 

Less Significant Credit Institutions

As was previously the case, the supervision of the less significant credit institutions is conducted by the national supervisory authority. Submissions should be made through the Incoming Platform. Special rules apply for the granting of a licence, qualifying holding procedure and for passporting.

In Austria, the Financial Market Authority directly supervises the less significant credit institutions. Submissions about less significant credit institutions should be made through the Financial Market Authority’s Incoming Platform.

Exceptions to this rule are submissions in accordance with Article 73 SSM-FR (Granting of a licence), Article 85 SSM-FR (Qualifying holding procedure), Article 93 SSM-FR (Fit & Proper) and Article 11 SSM-FR (Passporting).

The European Central Bank’s competences in relation to banking supervision are to be kept strictly separate from their monetary policy activities.

During the implementation of the Single Supervisory Mechanism (SSM) a separate Supervisory Board was established within the European Central Bank. The Supervisory Board is made up of the Chairperson, the Deputy Chairperson, four representatives of the European Central Bank as well as one representative of the competent national supervisory authorities from each participating Member State. Austria is represented with voting rights by Helmut Ettl, Executive Director of the Financial Market Authority.

Decision-making process

The Supervisory Board presents a completed draft decision to the Governing Council of the European Central Bank for the decision-making process. Provided that the Governing Council of the European Central Bank does not raise any objections to the draft decision within ten working days, the decision is deemed to have been accepted (“non-objection procedure”).

Directorates General in the European Central Bank

To allow the European Central Bank to perform supervisory tasks together with the national supervisory authorities, the European Central Bank has established four Directorates General.

Austria’s Financial Market Authority cooperates closely with every one of these Directorates General.

  • The Directorate General “Microprudential Supervision I (DG MS I)” is responsible for direct ongoing supervision of the approximately 30 most significant banking groups within the Single Supervisory Mechanism (SSM).
  • The Directorate General “Microprudential Supervision II (DG MS II)” is responsible for direct ongoing supervision for the remaining significant credit institutions.
  • The Directorate General “Microprudential Supervision III (DG MS III)” is responsible for oversight regarding the supervision of less significant institutions by the national supervisory authorities. The Financial Market Authority submits reports both on a regular and an ad hoc basis in relation to its supervisory activities over less significant credit institutions.
  • The Directorate General for “Microprudential Supervision IV (DG MS IV)” performs horizontal and specialised duties for all credit institutions supervised within the Single Supervisory Mechanism and provides expertise for the supervisory authorities (DG MS I, II and III as well as the national supervisory authorities). This Directorate General also houses the “Authorisation” division, in which the decisions relating to the common procedures are prepared.

The detailed structure is described by the ECB on its website in the section on “Organisation & Governance”.
Link to the ECB website (Section on “Organisation & Governance”)

The Single Supervisory Mechanism (SSM) was established as a decentralised supervisory mechanism. It is based on the cooperation by the European Central Bank and the national supervisory authorities. The Financial Market Authority is the national competent supervisory authority in Austria. It contributes to the successful operation of the Single Supervisory Mechanism by providing the necessary supervisory and official support from an Austrian perspective.

 

The Duties of the Financial Market Authority within the Single Supervisory Mechanism (SSM)

  • The FMA directly supervises the less significant credit institutions and reports regularly to the European Central Bank.
  • Employees of the Financial Market Authority participate actively in the supervision of significant institutions as members of the Joint Supervisory Teams, and play their part in the JST with their knowledge of the Austrian legal framework and the local market.
  • The Financial Market Authority plays a significant contributory role in Common Procedures.
  • Tasks that do not constitute institution-specific banking supervision (e.g.: issuing of circulars, minimum standards and guidelines, drafting of economic guidelines on banking supervision, information management, measures with regard to macroprudential measures and quality assurance of administrative practice relating to banking supervision).

 

The Financial Market Authority has sole competence for the following agendas:

  • Prevention of money laundering and terrorist financing, the prevention of unauthorized banking operations, as well consumer protection issues
  • Supervision of all credit institutions which are not classified as CRR-credit institutions pursuant to the Regulation (EU) No. 575/2013 (CRR) (also in regard to matters relating to licencing issues related to qualifying holdings)
  • Enforcement of special legal acts relating to banking supervision (e.g. the Austrian Building Society Act (BSpG), the Austrian Mortgage Banks Act (HypBG) and the Austrian Mortgage Bond Act (PfandbriefG))

Responsibilities relating to macroprudential supervision remain the competence of national authorities. However, it is possible for the European Central Bank to impose stricter regulations than those provided by the national supervisory entities.

Further information: