The establishment of the European Banking Union (EBU) stands as a paradigm for how the EU has become increasingly involved in directly enforcing EU law throughout recent years. The institutional centerpiece of the EBU is the so-called Single Supervisory Mechanism (SSM), a supervisory network under the auspices of the European Central Bank (ECB) assigned with the task to monitor the Euro-area banking system. Apart from its coordinating functions in relation to the national competent authorities (NCAs), the ECB is responsible for directly supervising the business activities of the 120 most significant credit institutions in the Euro-area in accordance to the so-called Single Rulebook, a set of harmonised prudential rules which credit institutions registered in the EU must adhere to.
This blog post is not doubting the importance of this type of vertical monitoring of market participants through public supervisory action. However, the recent crisis has shown that public enforcement is subject to several vulnerabilities. Even though the EBU may be able to overcome some of these vulnerabilities, several others will certainly remain. Thus, it is argued here that the existing supervisory architecture should be complemented by horizontal mechanisms of behavioral control. Central to this approach is a private enforcement of the Single Rulebook, i.e. the granting of individual causes of action for damages resulting from an institutions’ violation of EU banking regulation (as it is well-established for example in the area of EU competition law).
Author: Matthias Kraatz
Matthias Kraatz is a PhD Candidate at Humboldt University of Berlin. His research focuses on European bank supervisory law.