The guidance on governance and supervisory arrangements related to the provision of retail banking services, which the European Banking Authority (EBA) issued in March 2016, is valid, the Court of Justice of the European Union ruled on Thursday 15 July (C-911/19).
The French Banking Federation is challenging these guidelines, which the French Prudential and Resolution Authority has decided to apply and enforce on the financial institutions under its supervision. Among the recommendations made by the EBA is the need to develop products that meet the needs of the targeted customers, to test these products before and during their marketing, and to remedy the situation if problems are detected.
Referred to by the French Council of State, the Court first of all declares itself competent, under Article 267 TFEU, to assess the validity of the contested guidelines. In its view, the fact that these guidelines have no binding legal effect on the French banking supervisor and the industry does not exclude its competence.
The Court questions whether the guidelines issued fall within the scope of the EBA’s powers under Regulation 1093/2000 establishing the European Authority. It notes that the guidance is necessary to ensure the consistent and effective application of Directives 2013/36, 2007/64, 2009/110 and 2014/17 which are directly or indirectly covered by the EBA Regulation. For the first three directives, this guidance sets out principles to ensure effective processes for identifying, managing and monitoring financial risks and adequate internal control mechanisms.
Furthermore, the Court states that the contested EBA guidelines contribute to the protection of consumers, depositors and investors and to the establishment of consistent and effective supervisory practices within the European system of financial supervision.
Thus, contrary to the assessment of the Advocate General (see EUROPE 12700/3), the European Court concludes that the guidelines at issue do fall within the specific framework laid down by the EU legislator for the exercise of the EBA’s powers.
“The Court confirms that, while EBA guidelines are not legally binding, supervisory authorities and financial institutions must make every effort to comply with them, that supervisory authorities have to give reasons if they intend not to comply, and that national courts are expected to take EBA guidelines into consideration when resolving cases”, the EBA said in a statement.
More info at: https://bit.ly/36D8OEM (Original version in French by Mathieu Bion)