Towards a Meaningful Prudential Supervision Dialogue in the Euro Area? A Study of the Interaction Between the European Parliament and the European Central Bank in the Single Supervisory Mechanism

Fabian Amtenbrink,Menelaos Markakis

doi:10.2139/ssrn.3218861

Abstract

This working paper focuses on the accountability arrangements for the ECB in the framework of the EU's Banking Union. For this purpose, first of all an analytical framework for the purposes of evaluating the preconditions and instruments of accountability placed at the disposal of the European Parliament in the Single Supervisory Mechanism is set out. Thereafter the powers conferred on the European Parliament in the legal framework of the SSM to hold the Supervisory Board to account for the exercise of its duties are examined based on this framework. Notably, the paper highlights the lack of a clear yardstick against which to assess the ECB's performance in the area of banking supervision, as well as a gap in terms of the ability of the European Parliament to assign consequences to the ECB's conduct. Furthermore, the interaction between the European Parliament and the Supervisory Board of the ECB, as evidenced through the parliamentary hearings that have been held thus far, is examined. A qualitative analysis of these hearings notably highlights the topics covered in those hearings, as well as the attitude of the MEPs towards the institutional structure and accountability arrangements in the Banking Union. Finally, a number of concrete proposals for enhancing the role of the European Parliament as an accountability holder in the Banking Union are made.

Highlights

The Single Supervisory Mechanism Regulation (SSM Regulation) has conferred specific supervisory tasks on the European Central Bank (ECB). The latter is currently responsible for the supervision of 124 ‘significant’ banks or cross-border groups that are established in Euro area Member States, whereas the national authorities supervise ‘less significant’ banks or branches ‘with a focus on protecting the stability of the financial system of the Union.’[1]. One of the remarkable features of the SSM Regulation is the inclusion of two provisions directly addressing the accountability of the ECB and namely its Supervisory Board vis-à-vis the European Parliament (EP) and the national parliaments (NPs) of the participating Member States
With this a practice is continued and extended that has started with the monetary dialogue for monetary policy and thereafter found its way into secondary Union law in the shape of the economic dialogues as part of the Six Pack[2] and Two Pack legislation.[3]. As this supervisory dialogue between the ECB and the EP is a relatively new feature, this paper aims to provide evidence for the effectiveness of this mechanism as a means to hold the ECB to account for its conduct in the context of the SSM by analyzing the interaction between the EP and the ECB, which is governed by the SSM Regulation and further specified in the related Interinstitutional Agreement between these two Union institutions
The inclusion of explicit provisions on the accountability of the ECB for the conduct of the supervisory tasks in the framework of the SSM may be an acknowledgement of the difference in quality of the tasks of banking supervision from the conduct of monetary policy, but in a broader sense evidence for the evolving role of the European Parliament in the monitoring of the performance of European institutions and bodies in European monetary, economic and financial governance that has commenced with the initiation by the European Parliament of the monetary dialogue, which has previously been extended to economic policy coordination in the European Semester.[95]

Summary

Introduction

The Single Supervisory Mechanism Regulation (SSM Regulation) has conferred specific supervisory tasks on the European Central Bank (ECB). The latter is currently responsible for the supervision of 124 ‘significant’ banks or cross-border groups that are established in Euro area Member States, whereas the national authorities supervise ‘less significant’ banks or branches ‘with a focus on protecting the stability of the financial system of the Union.’[1] One of the (many) remarkable features of the SSM Regulation is the inclusion of two provisions directly addressing the accountability of the ECB and namely its Supervisory Board vis-à-vis the European Parliament (EP) and the national parliaments (NPs) of the participating Member States With this a practice is continued and extended that has started with the monetary dialogue for monetary policy and thereafter found its way into secondary Union law in the shape of the economic dialogues as part of the Six Pack[2] and Two Pack legislation.[3]. The current state of affairs, thereby providing a tentative answer to the somewhat rhetoric question asked in the title of this paper

On the function of parliamentary hearings as accountability mechanism

The accountability framework of the SSM Regulation

Initial evidence from parliamentary practice

Preliminary conclusions