ECB Proposes Aligning Upper Limit for Fines Imposed on Banks

The European Central Bank wants to align the maximum penalties it can impose on lenders for breaches of its rules as it prepares to oversee Europe’s banks.

The ECB says the upper limit for fines that has been in place since the central bank was created in 1998 should match that applicable to the lenders it will start supervising in November. The proposed changes to European law were posted on the ECB’s website yesterday along with the framework regulations for the Single Supervisory Mechanism.

Under current rules, the ECB can fine lenders a maximum of 500,000 euros ($692,000), or 10,000 euros a day for as much as six months, for infringements of regulations such as minimum reserve requirements. Under the rules governing the SSM, the ECB will be able to impose a penalty of 10 percent of the annual turnover of the financial institution or as much as twice the profit made or loss avoided from a breach of European Union law.

“This difference is not considered justifiable since an infringement of an ECB regulation is not necessarily less serious than a breach of directly applicable Union law,” the ECB said. “All administrative penalties imposed by the ECB on the credit institutions it supervises within the SSM should be subject to the same upper limits.”

The ECB will be responsible for the supervision of about 130 of the euro area’s biggest banks from November. National regulators will monitor smaller financial institutions and will remain responsible for issuing penalties under domestic law.

Expanded Powers

As Europe’s top supervisor, the ECB’s powers to impose sanctions will be greatly expanded. It will be able to penalize banks for infringements including failing to meet capital requirements, to disclose information or to fulfill their duties in granting loans.

The central bank also said yesterday that it wants European governments to spell out its power to impose periodic payments on banks to “compel undertakings to comply with an ECB regulation or decision.”

ECB Supervisory Board Chair Daniele Nouy said yesterday in Amsterdam that the SSM will be a “robust and effective” bank supervisor.

Before it's here, it's on the Bloomberg Terminal.