JULY 4
2020
Nº24
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Karl-Philipp Wojcik
Christos Gortsos
THE EU’S RESPONSE TO THE COVID19 PANDEMIC IN THE FIELD OF EU BANKING REGULATION
THREATS TO EU FINANCIAL STABILITY AMIDST THE PANDEMIC CRISIS www.eulawlive.com 1
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Threats to EU Financial Stability Amidst the Pandemic Crisis Professor Dr. Christos V. Gortsos
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pervision’s ‘Basel III regulatory framework’. These are currently available to allow them to effectively contribute to the short- and longer-term nancing of economic activity and recovery in the EU, and complement the higher quality of capital, which has also been a by-product of the Basel III regulatory framework, as applied in the EU by the micro- and macroprudential pillars of the 2013 single rulebook, namely the capital requirements Regulation and Directive (CRR and CRD IV, as currently in force).
The robustness of the EU banking system before the current pandemic crisis (1) Unlike in the case of the 2007-2009 Global Financial Crisis (GFC), the current COVID-19 pandemic (hereinafter ‘pandemic crisis’) was not caused by failings of the nancial sector; it was rather caused by a random, almost completely unpredictable (black swan) event. In addition, the rstround focus is on the rescue of companies in the economy’s real sector; banks, which were at the centre of the GFC, are currently, on a global scale, much better capitalised and with stronger liquidity, while nancial stability has also been enhanced overall.
The second factor is the improvement in the quality of micro-prudential banking supervision, exercised since 2014, for the euro area Member States, carried out by the European Central Bank (ECB) for signicant credit institutions and by national competent (supervisory) authorities (NCAs) for less signicant credit institutions within the Single Supervisory Mechanism (SSM), namely the rst pillar of the Banking Union, designed and established as a response to the scal crisis in the eurozone. As illustratively noted in the 2009 Report drawn up by the de Larosière High-Level Group, the nancial system of several states were not exposed (at least primarily), or were less signicantly expo-
(2) The relatively better nancial conditions of EU banks (credit institutions) in the period just before the outbreak of the pandemic crisis can be attributed, inter alia, to two main factors: The rst is the so-called ‘Basel III impact’, namely the fact that credit institutions beneted, in terms of both capital and liquidity adequacy, from having implemented macro-prudential buffers, which were introduced at global level by the 2010 Basel Committee on Banking Su-
1. Professor of Public Economic Law at the Law School of the National and Kapodistrian University of Athens, and President of the Academic Board of the European Banking Institute (EBI).
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institutions resolvable, and the (related) build-up of minimum requirements (for own funds and) eligible liabilities (MREL) are considered as important elements in order to maintain a strong banking system and to preserve nancial stability. The resolution planning framework will be further enhanced as of 2021 upon the application of the revised rules laid down in the legislative acts which revised (in 2019) the initial ones (BRRD II and SRMR II).
sed, to the GFS not only because they were equipped with a strong institutional and regulatory framework, but also because micro-prudential supervision of their banking system (sector) was, admittedly, suitable, and that was not the case in the EU.
(3) In addition, since 2014, the EU solvency crisis management framework has also been enhanced by the (new) banking resolution framework laid down in the Bank Recovery and Resolution Directive (BRRD), the con(4) Overall, one can reasonably argue that, tent of which was heavily inuenced by the just before the outbreak of the pandemic criinternational nancial standards developed sis, the EU banking system was quite robust. by the Financial Stability Board (FSB). This Inter alia, according to framework was (glothe quarterly Risk Dashbally) designed to efBanks are in better financial board of the European fectively address the B anking Authority ‘too big to (be left to) condition now than during the (EBA) of 14 April fail problem’, in rela2007-2009 financial crisis thanks 2020, which covers dation to which the recent to the Basel III impact, improved ta of the 4th quarter of (28 June 2020) FSB con2019 and summarises sultation report ‘Evamicro-prudential banking the main risks and vulluation of the effects of supervision, and better solvency nerabilities in the EU too-big-to-fail reforms’ banking system ahead stresses that these recrisis management of the crisis, EU credit forms made banks gloinstitutions’ capital rabally more resilient and tios and asset quality have (on average) consresolvable, but noted that certain gaps still tantly improved (even though return on need to be addressed. equity has worsened). As recently noted by Andrea Enria, Chair of the ECB Supervisory For the euro area in particular, the Single ReBoard: “Unlike in the 2008 nancial crisis, solution Mechanism Regulation (SRMR) is banks are not the source of the problem this also applicable. This forms the basis for the time. But we need to ensure that they can be second pillar of the Banking Union, consispart of the solution.” ting of the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF). Even though resolution action has been taken only in a few (albeit rather important) cases in the EU, the progress made on resolution planning, in order to make credit
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Second, since the prudential regulatory framework governing credit institutions (CRR and CRD IV) provides certain elements of ‘exibility’, and by considering that making full use of this exibility is essential to overcome the nancing pressures faced by rms and households, the ECB, as a banking supervisory authority, within the SSM, and complemented by the EBA, adopted specic supervisory measures to ensure that credit institutions have the capacity to foster credit ows to households and businesses in a exible way during (at least the initial phase of) the pandemic crisis. Equivalent initiatives were undertaken at global level by the Basel Committee on Banking Supervision in accordance with its Report of 3 April 2020 ‘Measures to reect the impact of COVID19’.
A brief overview of EU economic policy responses to the crisis and the role of the ECB (1) Immediately after the outbreak of the crisis, the EU developed a (rather) consistent strategy, which has taken into account the spill-overs and interlinkages between EU economies and the need to preserve condence and stability. The measures taken, in order to deal with health emergency needs, support economic activity and employment, preserve monetary and nancial stability and prepare the ground for recovery, contain a combination of government scal stimuli (with extensive resort to the principle of solidarity), emergency liquidity and monetary policy measures and measures relating to nancial stability. (2) In this respect the role of the ECB in the euro area has been predominant. In particular:
The nancial stability-related measures taken by the ECB within the SSM include those relating to the relaxation of some macro-prudential buffers and the adaptation of the composition of specic capital requirements, the reduction of credit institutions’ capital requirements for market risk (in order to maintain their ability to provide market liquidity and continue their market-making activities), the application of exibility regarding, mainly, the treatment of non-performing loans (NPLs), and its Recommendation to credit institutions (on the basis of the ‘comply or explain principle’) to temporarily ban the payment of dividends by credit institutions. In addition, the ECB fully supported, in its Opinion of 20 May, the upcoming Regulation amending the CRR ‘as regards adjustments in response to the COVID-19 pandemic’.
First, in its capacity as a monetary authority within the Eurosystem, the ECB has adopted several bold monetary policy measures (admittedly, very close to those taken by major central banks all over the world), taking into account its primary objective of price stability, the instruments at its disposal and the limitations set by the TFEU (for example, the monetary nancing of scal policy by the purchase of government bills and bonds in the primary market is prohibited by virtue of Article 123), by applying both its conventional (interest rate) and unconventional (balancesheet) policies.
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The ECB's role has been predominant in a consistent EU strategy during the pandemic, and the ESRB has made a noteworthy contribution as well
Finally, noteworthy is also the contribution of the European Systemic Risk Board (ESRB), in the eld of nancial macroprudential oversight, in order to address pandemic-related systemic vulnerabilities. Since the ECB is heavily involved in the ESRB’s operation and the decisionmaking process, this is yet another eld in which the ECB’s contribution is signicant as well.
rities and Markets Authority (ESMA) has also taken a series of specic measures, such as guidance on accounting implications for listed companies, measures relating to short selling bans and the maintenance of conduct of business obligations under the Markets in Financial Instruments Directive (as currently in force, MiFID II).
Challenges ahead (3) It is also noted that, with a view to achieving the objective of preserving nancial stability at euro area level, while also allowing exibility in the application of the resolution framework amidst the crisis, the Chair of the Single Resolution Board (SRB), Elke König, made targeted interventions in relation to credit institutions’ resolution planning. In addition, in relation to nancial stability in capital markets, the European Secu-
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(1) The exit strategy from the ECB’s monetary policy measures, which are designed as temporary, will be dictated by the duration of the crisis and macroeconomic developments over the coming months (even though accurate assessments cannot obviously be made as yet). On the other hand, the exit strategy in the case of prudential regulation is much more complicated, even though the measures
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adopted are designed as temporary as well. On 6 and 27 May 2020, respectively, the ESRB’s General Board took two sets of actions in response to the coronavirus crisis, addressing ve major nancial stability issues: nancial system implications of scal measures taken to protect the real sector of the economy; market illiquidity and implications for asset managers and insurers, as well as the impact of large-scale downgrades of corporate bonds on markets and entities across the nancial system (as a by-product of increased volatility in capital markets and ‘ight to quality’ reactions); system-wide restraints on dividend payments, share buybacks and other pay-outs; and liquidity risks arising from margin calls. (2) Nevertheless, the most acute problem is (yet again) the expected increase in the ratio of credit institutions’ NPLs (and more broadly non-performing exposures (NPEs)), which – as already mentioned – on average, signicantly decreased during the years following the GFC and the euro area scal crisis. NPLs are expected to increase across the board (and in certain cases exponentially) in almost all Member States (including within the euro area) both in relation to credits and loans granted to rms and households before the outbreak of the pandemic crisis, to the extent that these will be affected by the severe slowdown of the economy, as well as to credit and loans that are granted during the crisis (albeit in certain cases of ailing businesses covered by State guarantees). Financial Stability Reports (nal and interim) published over the last weeks highlight this aspect. The author has defended the view that the exibility currently provided to credit institu-
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mely the preservation of nancial stability, should not (and is not expected to) be compromised. From this perspective, the role of supervisory and resolution authorities and the decisions they will take are of utmost importance. Taking into account the existing set of tools available in order to achieve the nancial stability goal and in view of the necessary exibility that has to be (and is being) applied, the author argues that the effectiveness of the policy reaction under the current conditions will be basically tested against two benchmarks:
tions to prolong the periods for the classication of loans as non-performing is justied in terms of supporting the nancing of the fragile real sector of the economy at this rst phase of the pandemic crisis. It, nevertheless, entails the risk of accumulation of problems after the lapse of the ‘moratorium’ period, the extent of which will vary both among Member States (depending on the depth and the duration of the current and upcoming economic recession) and among credit institutions in each Member State (depending on the composition of their loan portfolio, mainly in relation to exposures on individuals and companies in sectors most severely affected).
First, how supervisory authorities will navigate credit institutions in appropriately balancing two of the primary objectives of the current policy agenda, which may, nevertheless, in the medium-term become conicting ones: on the one hand, nancially supporting the real sector of the economy (and hence employment) and, on the other, preserving nancial stability; and
(3) As already noted, the duration of the current pandemic crisis and its precise economic impact cannot be accurately determined yet. The views on the economic outlook and economic projections are quite divergent, constantly revised and vary among Member States. However, it is quite reasonable to consider that in the medium-term the crisis may, globally, have a negative impact on the banking system and lead to extensive corporate restructurings therein. It is taken as a given that the ultimate public policy objective, na-
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Second, how the triggers embedded in the framework to activate the existing set of tools will be activated by both supervisory and resolution authorities.
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gle methodology and set of harmonised tools used pursuant to the Supervisory Review and Evaluation Process (SREP) framework (governed by Articles 97-101 CRD IV), both the ECB within the SSM and national supervisory authorities (for non-participating Member States) will be in a position to assess, on a consistent basis, all four areas covered by this SREP methodology and, in particular, credit institutions’ risks in capital and in liquidity.
On the role of banking supervisory authorities (1) National banking supervisory authorities, the EBA and the ECB are alert on the front of increasing NPLs as a consequence of the severe economic downturn, which, inter alia, is evidenced by the publication of two recent ECB Reports (of 26 and 27 May, respectively): ‘Pandemic increases risks to nancial stability’ and ‘COVID-19 and nonperforming loans: lessons from past crises’. There are several short-term alternatives for resolving this (rapidly) emerging problem:
Furthermore, the conduct of stress testing exercises of credit institutions’ portfolios, either by the supervisory authorities, including the ECB, or by the EBA, may haFirst, the role of credit institutions’ own ve temporarily been suspended (at least on credit risk management assessment is a dea generalised basis), cisive factor. This apbut are still an absoplies, in particular, to lutely necessary tool the provision of new cre- Banks and supervisory authorities dit and loans to hou- have short-term alternatives to deal in order to identify weaknesses under seholds and businesses with the problem of increasing the current exceptioduring both the current n al conditions. non-performing loans as a result and the upcoming phaApplicable in both cases of the pandemic criof the sharp economic downturn ses are the common sis; while demand for procedures and metbank credit has surged h odologies laid and is expected to furtdown in the EBA Guidelines of 19 July her increase, it may nevertheless (in seve2018. ral cases) not be fully supported by solid economic fundamentals of (prospective) Finally, the creation of a European Asset borrowers. In addition, it is also more than Management Company (‘bad bank’), evident that credit institutions’ operational which would be set up in order to absorb a risk frameworks have also been impacted signicant stock of NPLs, has already by the crisis, inducing them to accordingly been proposed as an alternative solution to revise their capital planning scenarios. this emerging problem. A similar proposal was aired in 2017 by Andrea Enria (in his Second, it is the quality in the exercise of capacity as Chair of the EBA), but has not prudential banking supervision which will been formalised. In any case, relevant disbe of primary importance in addressing cussions are at an early stage and such an the NPLs problem. On this basis of the sin-
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exible conditions, while ensuring the necessary level playing eld in the single market, also applies to credit institutions in relation to their precautionary recapitalisation. This is mainly of concern for credit institutions of ‘systemic relevance’, namely those treated as ‘systemically important institutions’ according to the criteria laid down in the regulatory framework and/or those whose insolvency could have a signicant negative impact on the nancial system due to adverse market circumstances or nancial stress.
entity would not become operational in the short-term (provided that a decision could be reached at all given the existing divergent approaches, including with regard to moral hazard considerations). (2) For the medium-term horizon, and to the extent that problems will accumulate, three aspects deserve attention in relation to the action of supervisory authorities: First, of critical importance will be their (prudential supervisory) approach to consolidation (mergers and acquisitions) in the banking system (relevant in this respect is the ECB draft ‘Guide on consolidation in the banking sector’ of 1 July 2020), as well as the use, as appropriate, of their specic supervisory powers under Article 104 CRD IV (and Article 16 SRMR for the euro area) and their early intervention powers (in accordance with Articles 27 BRRD and 13 SRMR).
Finally, in the worst case scenario, and even though it is evidently premature to assess to what extent credit institutions will reach the point of meeting the ‘failing or likely to fail’ criterion and, hence, resolution action will have to be undertaken in relation to them, this is an aspect which may become of signicant concern from the end of this year onwards (predominantly due to the expected rise in the rate of NPLs). In this respect, it is (usually) the supervisory authorities that will be called upon to adequately assess the occurrence of this (rst) resolution condition, which constitutes the clearest indication of the link between the supervisory and resolution functions.
Furthermore, of particular interest is whether the conditions for granting public support to credit institutions meeting the (strict) conditions for ‘precautionary recapitalisation’ (as provided for in Articles 32(4), point (d)(iii) BRRD and 18(4) SRMR) will be interpreted in a exible (and hence broader) way in order to accommodate to the needs arising amidst the current crisis. It is noted in this respect, that in accordance with Commission Communication of 20 March on a ‘Temporary Framework for State aid measures to support the economy in the current COVID19 outbreak’ (as currently in force), this framework, which allows public support to be extended to companies under more
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On the role of banking resolution authorities (1) With regard to resolution planning, the SRB has already presented its approach in view of the uncertainty and disruption caused to the economy by the pandemic crisis, setting out its remit on potential operational relief measures, its actions to support efforts
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tion. In this respect, three main challenges arise:
to mitigate the economic impact of the crisis and its dealing with MREL targets. Resolution authorities are determined not to compromise on these targets, which they consider to be essential in terms of nancial stability.
The rst relates to the application of resolution tools. In this respect, the question arises whether, under the current circumstances and on a generalised basis, the bailin resolution tool can (or more precisely should) be considered as the appropriate instrument when resolution authorities take resolution action, due to the amplifying effect of its application for (already) distressed individuals and businesses. The author has recently defended the view that a decision to make use of this tool, at least in relation to the deposits of companies (of any size), could have severe pro-cyclical effects to the detriment of economic as well as nancial stability to the extent that loans of depositors affected by the application of the bail-in tool would, very probably, become non-performing, either because these (depositors) may have been granted loans by the credit institution un-
(2) On the other hand, equal attention must be paid to the application, amidst the crisis, of the framework governing the resolution of credit institutions, which (with the exception of Greece in 2015) has not yet been tested under conditions of a generalised, systemic crisis. In particular, banking resolution authorities, including the SRB as the EU hub within the SRM, will also have to take delicate decisions once the rst resolution condition (namely, the determination concerning the fullment of the failing or likely to fail criterion) is met by credit institutions (on top of their power to make this determination themselves, even though this is usually made – as already noted – by supervisory authorities), paving the way for resolution ac-
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der resolution or due to overall liquidity problems arising from the conversion into equity or the writing down of her/his/its deposits.
(above-mentioned) negative effects of bailing-in deposits (even if only uncovered ones), it is expected that this will not be a priority option.
The second challenge refers to the potential activation of the so-called Government Financial Stabilisation Tools (GFSTs) for the provision of public support to ailing credit institutions, which (exceptionally and under strict conditions) is permissible under the regulatory framework in force. These tools are governed by Articles 37(10) and 56-58 BRRD and, by design, are tailor-made for systemic crises (even though they are not available in the Member States which have opted not to make use of the relevant discretion under the BRRD). Since bail-in is a prerequisite for the activation of GFSTs, in view of the
Finally, the third challenge, for the euro area, is linked to the capacity of the SRF to support the nancing of resolution actions of a large scale. In this respect, it is noted that the adoption of the common backstop to the SRB for the SRF, which is long overdue, may prove extremely imperative in the forthcoming turbulent months and years. Nevertheless, its establishment may be further delayed due to the ESM’ primary focus on the operationalisation of the ‘Pandemic Crisis Support’ instrument, which will absorb a signicant amount of its funds.
Banking resolution authorities, including the SRB as the EU hub within the SRM, will also have to take delicate decisions once the first resolution condition is met by credit institutions
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The EU’s Response to the COVID-19 Pandemic in the Field of EU Banking Regulation? Karl-Philipp Wojcik
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decade to better regulate the nancial serviThe COVID-19 outbreak and the subsequent ces sector. Credit institutions in particular are pandemic health crisis have led to the closure nowadays far better capitalised, less highly leof international borders and lockdowns impoveraged, less reliant on short term funding sed by governments all over the world. These and better supervised than when they entered connement measures disrupted global the economic crisis caused by the global supply chains and dried up consumption. The nancial crisis. As a consequence, the key to following simultaneous supply and demand understanding the EU’s shocks, together with regulatory and legislatheir immediate negatitive response to the ve impact on the liquiThe key to understanCOVID-19 pandemic dity of businesses and ding the EU's response is in the eld of EU banhouseholds, caused a seking regulation lies in vere exogenous econorealising that the realisation that pomic shock to the EU policymakers' attitude licymakers’ attitude toMember States’ econowards banks has dramies and beyond. to banks has dramatically matically changed: inschanged: banks tead of being part of the It is worth noting that, problem banks are now unlike the global nanare not part of the perceived to be part of cial crisis, it was a virus problem, but the solution. and not the banks or other nancial instituperceived as part Part I: Monetary, scal tions that have caused of the solution and supervisory resthe economic crisis. Moponses to the COVIDreover, the economic 19 crisis stress has been, for the time being, limited to the real economy, whiFrom the start of the COVID-19 health crisis le the nancial system and in particular the in Europe in February 2020 it became rapidly banking system have demonstrated a remarclear that one of the major immediate chakable resilience. That resilience is largely llenges was to bridge short-term liquidity due to the far-reaching regulatory reforms unneeds of businesses which were unable to prodertaken at global and EU level over the past 1. Karl-Philipp Wojcik, Dr. iur., lic. en droit (Paris I Panthéon-Sorbonne), Member of the European Commission’s Legal Service. The views set out in this article are those of the author and do not necessarily reect the ofcial opinion of the European Commission.
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that it was driven by the goal to ensure solidarity in the Internal Market and willing to make temporary use of the exibility of EU State aid rules (3).
duce and to sell their products to households which in turn were squeezed by a fall in income due to temporary or permanent layoffs. Policymakers in the EU at various levels addressed this challenge with monetary, scal and supervisory measures:
Furthermore, Ministers of Finance agreed with the assessment of the Commission that the conditions for the use of the general escape clause of the EU scal framework had been met. This gives Member States the necessary scal space in the application of the Stability and Growth Pact for combatting the consequences of the COVID19 pandemic. Additional scal stimulus will be provided through the various budgetary measures announced or proposed by the Commission or the cushion provided by the SURE Regulation (4).
1. Monetary measures The European Central Bank (ECB) has very quickly started easing the conditions of its monetary policy operations, for instance by temporarily changing key parameters for the application of its targeted longer-term renancing operations (TLTRO III) and by temporarily easing collateral requirements for the purposes of Eurosystem credit operations. Furthermore, the ECB created new monetary policy instruments, notably by adding a new temporary Pandemic Emergency Purchase Programme (PEPP) to its existing kit of asset purchase programmes on 24 March 2020 (2). The PEPP’s repower is impressive and stands now at 1.35 trillion euros.
Finally, the discussions on scal measures have in the meanwhile moved on from the immediate COVID-19 crisis response to the question how to nance the recovery. These discussions are centred around the Multiannual Financial Framework (MFF) currently being negotiated and the Next Generation EU package proposed by the Commission on 28 May 2020. The package includes a new Recovery and Resilience Facility, proposes changes to the Own Resources Decision and would allow the Commission to signicantly tap nancial markets on behalf of the EU (5).
2. Fiscal measures At the same time, EU Member States have provided signicant and coordinated scal stimulus to support affected workers and their economies. The Commission has facilitated such a swift and effective action by Member States in communicating very early
2. The secondary markets public sector asset purchase programme (PSPP), alongside the third covered bond purchase programme, the asset-backed securities purchase programme, and the corporate sector purchase programme, constitute the expanded asset purchase programme (APP) of the ECB. 3. Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Investment Bank and the Eurogroup on Coordinated economic response to the COVID-19 Outbreak (COM/2020/112 nal); Communication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak 2020/C 91 I/01, and subsequent amendments. 4. Council Regulation (EU) 2020/672 of 19 May 2020 on the establishment of a European instrument for temporary support to mitigate unemployment risks in an emergency (SURE) following the COVID-19 outbreak (OJ L 159, 20.5.2020, p. 1). 5. This is not the place to further analyse the scal measures taken or planned, although this would be an interesting topic..
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3. Measures taken by banking supervisors and global regulators In parallel, both global and EU banking supervisors have taken various measures to alleviate the shock of COVID-19 on banks and to allow them to be part of the solution. The ECB as the Banking Union’s direct banking supervisor has very quickly communicated its temporary exibility to banks meeting certain capital requirements, buffer requirements and the liquidity coverage ratio (6). In order to preserve the banks’ capital positions it nevertheless recommended on 27 March 2020 that banks do not pay out dividends and refrain from share buy-backs (7). The Single Resolution Board (SRB) as the Banking Union’s central resolution authority likewise indicated its exibility and readiness to use the discretion provided by the Banking Union framework to adapt transition periods, reporting requirements and MREL targets (8). The European Banking Authority (EBA) provided important input through its data analyses, which conrmed that EU banks were generally sufciently capitalised for the crisis (9). Particularly important are the new EBA Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis. They refer to measures taken by many Member States which granted some
6. See ECB Banking Supervision provides temporary capital and operational relief in reaction to coronavirus: or ECB Banking Supervision provides temporary relief for capital requirements for market risk. 7. Recommendation of the ECB of 27 March 2020 on dividend distributions during the COVID-19 pandemic and repealing Recommendation ECB/2020/1 (ECB/2020/19, OJ C 102I, 30.3.2020, p. 1). 8. See for instance An extraordinary challenge: SRB actions to support efforts to mitigate the economic impact of the COVID-19 outbreak: and COVID-19 crisis: the SRB’s approach to MREL targets; MREL: the next steps. 9. EU banks sail through the Corona crisis with sound capital ratios.
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banks are expected to act as ‘conduits’ for the provision of liquidity and credit, for instance when distributing public sector nancing to borrowers or when used in moratoria schemes – a task which has even been welcomed by the CEOs of banks (11).
forms of moratorium on payments of credit obligations, with the aim of supporting the short-term operational and liquidity challenges faced by borrowers. The EBA guidelines clarify the prudential treatment of such moratoria.
In light of the policy context set out above Finally, global banking regulators, like the and the specic role attributed to banks in the Basel Committee on Banking Supervision COVID-19 crisis, the se(BCBS), have announced cond part of this article a one-year-delay for the will analyse the specic initial deadline to implelegislative response adopment the nal Basel III Measures taken are heavily ted by the EU in the eld standards. The IASB, geared towards liquidity needs of banking supervision. upon request of the Financial Stability Board of undertakings and households: (FSB) and the G20 introbanks play a crucial role as Part II: The EU’s legisduced a more forward lool ative response to king approach to loanliquidity providers COVID-19 in the area loss provisioning under of banking supervision its IFRS 9 accounting standard. 1. The Commission’s ‘banking package’ of 28 April 2020 Conclusion to Part I In reaction to the COVID-19 crisis on 28 April 2020, the Commission adopted a ‘banking package. It consists of two distinct elements: (i) an Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending (the ‘Interpretative Communication’) (12) , and (ii) a proposal for a legislative amendment to Regulation (EU) No 575/2013 (the Capital Requirement Regulation, ‘CRR’) (13).
1. The monetary, scal and supervisory measures taken immediately after the COVID19 outbreak (10) are heavily geared towards tackling the liquidity needs of undertakings and households. From this perspective, it is evident that banks play a crucial role as liquidity providers to the real economy. The exibility and forbearance granted can be explained with the policymakers’ goal to ensure that banks continue to provide liquidity and credit to undertakings and households and do not – in the face of an economic downturn – withdraw from the market. Even more so,
10. See for a constant update on the various measures taken, the COVID-19 newsletter published by the European Banking Institute (EBI), https://ebieuropa.eu/covid-regulatory-tracker/. 11. Société Générale’s CEO Frédéric Oudéa apparently described banks as ‘doctors of the economy’. 12. COM(2020) 169 nal. 13. COM(2020) 310 nal.
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a) The Interpretative Communication of 28 April 2020
sistently and transparently. With the same aim, the Commission calls on banks to adapt their business models to digitalisation, remain vigilant as regards fraud, not to pay out dividends and take a conservative approach on variable remuneration (16).
The Commission’s Interpretative Communication illustrates well the policy response of the EU in the eld of banking regulation as well as the delicate policy trade-offs involved.
These seemingly diverging goals show well that an ‘instrumentalisation’ of banks for liquidity provisioning to struggling businesses and households may, as a side effect, actually increase the risks for banks and may make them less safe.
・ The Commission’s expectations for banks The Interpretative Communication very candidly recalls the Commission’s expectation that banks have to play a key role in limiting the economic impact of the COVID19 crisis and promoting a rapid recovery by providing effective transmission channels for public nance and keeping the ow of liquidity and credit (14). To this end, the Commission encourages them explicitly to make full use of the exibility provided by the existing accounting and prudential rules when dealing with events caused by the COVID-19 (15).
・Conrmation of exibility in the application of accounting and prudential rules Another important objective of the Interpretative Communication is to consolidate and to conrm the various exibility announcements made by various EU authorities (EBA (17), ECB (18), ESMA (19)) on the interpretation of those EU rules applied by them. The Commission’s key objective in this regard is to provide for maximum legal clarity and to ensure the integrity of the Internal Market in the application of the single rulebook (20).
On the other hand, the Commission is wary of a potential ‘overuse’ of such exibility which could lead to a weakening of banks in the mid- and long run, and which would impede their role in the economic recovery. To this end, the Commission tries to contain negative effects by asking banks to continue measuring their various risks accurately, con-
14. See COM(2020) 169 nal, p. 3, 10. 15. COM(2020) 169 nal, p. 3. 16.COM(2020) 169 nal, p. 10 f. 17. See EBA Statement on the application of the prudential framework regarding Default, Forbearance and IFRS9 in light of COVID-19 measures, 25 March 2020; EBA Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis, 2 April 2020. 18. ECB Banking Supervision FAQs on ECB supervisory measures in reaction to the coronavirus, 20 March 2020; ECB Banking Supervision letter to signicant institutions ‘IFRS 9 in the context of the coronavirus (COVID-19) pandemic’, 1 April 2020. 19. ESMA Statement on Accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9, 20. COM(2020) 169 nal, p. 4.
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ment fully and exibility when applying and where provided by IFRS 9 in order to avoid an unnecessary decrease in own funds. Specically, the Commission claries its interpretation that loans which were subject to moratoria do not necessarily amount to substantial modications or automatically lead to loss provisioning. Moreover, the Commission encourages banks to make use of the transitional arrangements under Article 473a CRR which allow adding back IFRS 9 induced loan-loss recognition to their prudential own funds.
・The accounting rule IFRS 9 During the last nancial crisis, it became apparent that, also due to the applicable accounting rules at the time, banks had too little loan-loss provisions for the default of their borrowers. The IASB issued IFRS 9 in 2014 . The Commission endorsed that standard in 2016 (21). IFRS 9 sets out a framework for determining the amount of expected credit losses (ECL) that should be recognised. It requires that lifetime ECLs be recognised when there is a signicant increase in credit risk (SICR). This approach leads to an earlier recognition of losses and a more realistic view of the bank’s nancial situation. In the prudential context, recognition of losses leads to a reduction in Common Equity Tier 1 capital.
On substance, the Commission conrms the announcements made by EBA, ESMA and IASB, contributing to legal certainty. ・Prudential classication of Non Performing Loans (NPLs)
While making the application of IFRS 9 for banks mandatory as of 1 January 2018, the EU legislator also provided for transitional provisions which exceptionally allow banks to add back some of the IFRS 9 induced losses to their own funds (22).
Concerns had also arisen as to the prudential impact of state guarantees and of moratoria introduced by governments to support the real economy. The Commission claries that the EU prudential framework does not automatically consider a borrower to be in default when he calls on a guarantee. Otherwise this would lead to provisioning requirements, which in turn would reduce a bank’s capacity to lend going forward.
The Commission addresses IFRS 9 related concerns resulting from the fact that COVID-19 might deteriorate borrowers’ ability to pay back loans, lead to increased recognition, lowering of own funds and hence a reduced capacity to provide liquidity to borrowers in need.
Similarly, the Commission takes the approach that the moratoria schemes introduced during the COVID-19 crisis are of a ge-
Against this background, the Commission encourages banks to exercise their judge-
21. Commission Regulation (EU) 2016/2067 of 22 November 2016. For a detailed analysis of the endorsement procedure incorporating international nancial reporting standards into binding EU law see Wojcik, Die internationalen Rechnungslegungsstandards IAS/IFRS als europäisches Recht, Berlin 2008, p. 70 ff. Art. 473a CRR. 22. Art. 473a CRR.
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rate certain interpretations provided by the Commission in its Interpretative Communication as well as implement certain developments at the global regulatory level.
neral and preventive nature, thus conrming the EBA guidelines on legislative and nonlegislative moratoria on loan repayments applied in the light of the COVID-19 crisis. The existence or use of moratoria does not automatically trigger a forbearance qualication under prudential rules (23) with negative consequences for the capital position of the credit institution. In both cases though, banks will still need to make a case-by-case assessment on the borrower’s likeliness to pay.
The proposal suggests changing the prudential framework in ve ways: ・ Postponement of the application of the new leverage ratio buffer
In the course of the COVID-19 pandemic Finally, the Commission The CRR amendment proposal the BCBS agreed at inannounces in its Interpreternational level to defer tative Communication a is part of the Commission's the deadline for implelegislative proposal to mageneral response to the crisis menting the nal Basel ke targeted amendments III framework by one to adjust the framework to to the relevant EU pruyear. As a consequence, dential rules in order to facilitate bank-lending the Commission propoprovide for further legal sed to postpone by one certainty. That proposal year , until 1 January was adopted simulta2023, the application of a neously with the Interprenew leverage ratio requirement for global tative Communication. and systemically important banks. b) The Commission legislative proposal of 28 April 2020 ・Adjustment of transitional provisions regarding the impact of IFRS9 accounting The legislative proposal to amend the CRR on regulatory capital tabled by the Commission on 28 April 2020 does not aim to alter the EU’s prudential fraAlready in its Interpretative Communication mework fundamentally. It forms rather part the Commission has presented its interpretaof the Commission’s general response to adtion in relation to the concerns raised by the dress the COVID-19 crisis. Its general obpotential negative impact of IFRS9 accounjective is to adjust the prudential framework ting on a bank’s capital position. In order to in a way that facilitates banks to lend to the provide more legal clarity, the Commission real economy. For this reason, the amendproposes specic changes to Art. 473a CRR ments proposed are of a rather technical natuwhich will facilitate the ‘add back’ of potenre. Some of these amendments will incorpotial loss provisioning to the Common Equity 23. Art. 47b CRR.
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Tier 1 capital due to a deterioration of borrowers’ ability to pay in the economic crisis. To this end, the proposal suggests inter alia to prolong the transitional period for such ‘add back’”, a change in the formula to calculate ‘add backs’ and an option for banks to reconsider using ‘add backs’.
・Frontloading of certain capital benets Finally, the Commission proposes to frontload capital benets by anticipating the application date of provisions on the treatment of certain software assets, the provisions on certain loans backed by pensions or salaries, the provisions on the revised supporting factor for small and medium-sized enterprises (SME) and on the new supporting factor for infrastructure nance. The new date would be the date of entry into force of the amending regulation. This frontloading will again free prudential capital and facilitate the channelling of credit to businesses and households.
・Treatment of publicly guaranteed loans under the NPL prudential backstop Non-performing exposures guaranteed or insured by an ofcial export credit agency receive preferential treatment under the CRR (24). Such NPLs do not enter into the calculation of provisioning requirements. The Commission proposes to extend this preferential treatment to exposures guaranteed or counter-guaranteed by the public sector in the context of measures aimed at mitigating the economic impact of the COVID-19 pandemic (24).
2. The adoption by the European Parliament and Council on 24 June 2020 of Regulation (EU) 2020/873 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic
・Exclusion of exposures to central banks from the leverage ratio
In a fast track legislative procedure the European Parliament and the Council adopted on 24 June 2020 ‘Regulation (EU) 2020/873 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic’ (25).
To ensure that liquidity measures provided by central banks in a crisis context would be effectively channelled by credit institutions to the economy the Commission proposes to change the way the leverage ratio is calculated. In particular, it is proposed to exclude certain central bank exposures from the calculation of the leverage ratio without an explicit exemption by the supervisor.
This act entered into force on 27 June 2020 and became applicable from that very day. It follows closely the proposals made by the Commission. In addition, it adds a number of elements which do not, however, change
24. OJ L 204, 26.6.2020, p. 4–17. 25. COM(2020) 301 nal , p. 6
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ght the consequences of the COVID-19 pandemic. To avoid unnecessary constraints on banks investing in such bonds, the legislators reintroduced transitional arrangements for such exposures with respect to their treatment under the credit risk framework and to prolong the transitional arrangements with respect to the treatment of such exposures under the large exposure limits.
the nature of the proposed act. ・Prudential lter for sovereign bond exposures The legislators temporarily reintroduced a prudential lter for sovereign bond exposures. It is meant to mitigate the impact of the current volatility of nancial markets on public debt instruments held by banks. ・ Additional exibility for supervisors to mitigate negative effects of the extreme market volatility on the backtesting of internal models
Regulation 2020/873 follows the Commission's proposals closely and adds a number of elements which do not however change the nature of the proposed act
・ Frontloading of favourable treatment of certain elements concerning the leverage ratio exposure
To further alleviate the capital burden on banks, the adopted Regulation frontloads the more favourable treatment of the leverage ratio exposure value of regular-way purchases and sales awaiting settlement from 28 June 2021 by one year.
The amending regulation gives banking supervisors additional exibility to mitigate a possible increase in capital requirements due to the extreme market volatility observed in during the last months due to the COVID-19 outbreak. This additional exibility applies to the back-testing requirement of banks’ internal models.
・No mandatory dividend pay-out ban During the legislative negotiations one of the most contentious issues discussed concerned a legislative obligation to suspend dividend payments by banks. As already indicated above the ECB had recommended on 27 March 2020 that banks within the Banking Union do not pay out dividends and refrain from share buy-backs (26). Some MEPs requested to introduce a mandatory dividend pay-out ban. They argued that this would pre-
・Favourable treatment of bonds denominated in the domestic currency of another Member State Public nancing through the issuance of government bonds denominated in the domestic currency of another Member State was considered an option to support measures to
26.Recommendation of the ECB of 27 March 2020 on dividend distributions during the COVID-19 pandemic and repealing Recommendation ECB/2020/1 (ECB/2020/19, OJ C 102I, 30.3.2020, p. 1).
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against COVID19 has been found yet.
vent the evaporation of the capital relief provided by the new amendments to shareholders. However, taking account of the existing ECB recommendation, their request did not nd a majority. Nevertheless, legislators compromised to add anew recital to the regulation which reads:
Fortunately, this time and by contrast to the last global nancial crisis, banks and the nancial sector were not the cause of the economic crisis. That is why there is the wide consensus that banks will play a part in the solution of the challenges ahead.
‘In the exceptional circumstances triggered by the COVID-19 pandemic, stakeholders are expected to contribute to efforts towards recovery. EBA, the European Central Bank and other competent authorities have issued recommendations for institutions to suspend dividend payments and share buybacks during the COVID19 pandemic. To ensure the consistent application of such recommendations, competent authorities should make full use of their supervisory powers, including powers to impose binding restrictions on distributions for institutions or limitations on variable remuneration, where appropriate, in accordance with Directive 2013/36/EU. Based on the experience from the COVID-19 pandemic, the Commission should assess whether additional binding powers should be granted to competent authorities to impose restrictions on distributions in exceptional circumstances.’
Up to now – and this is the big common thread of the responses given by the EU – the measures taken in the area of EU banking regulation serve mainly to alleviate the accounting and prudential framework in such a way as to facilitate and ensure the continuous ow of liquidity and credit from banks to households and businesses. As a quid pro quo, policymakers put a lot of pressure on banks to effectively hand out credit. This is a reasonable approach which banks are even welcoming (26). One may ask whether this may not pave the way into a future in which banks are regarded more as utilities, comparable to service providers of basic needs such as electricity, water or communication service providers (27).
Part III: Assessment and outlook
However, this is also not an approach without risks – risks of which the same policymakers are obviously aware as they know that they tread a ne line. The risk is that what is still a liquidity squeeze becomes a more protracted solvency crisis of businesses and households in an environment of an increased scal indebtedness of Member States. In that case, banks which followed the public call and have generously continued their lending activity may fall in the trap of ri-
The COVID-19 crisis and the ensuing economic stress are posing enormous challenges to policymakers. They have to deal with an immediate liquidity shock due to the connement measures taken which were effectively ‘mothballing’ many economies. Moving forward, policymakers need to organise a swift and quick recovery, even when no vaccine or effective medical treatment
27. See the discussion already started before the COVID19 outbreak, for instance Schiff, ‘Is Basel turning banks into utilities’, (2015) 3 Journal of Financial Perspectives 04; see for criticism on this view Lehmann, in: Gortsos/Ringe, Pandemic Crisis and Financial Stability, p. 155, 167.
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course to taxpayer’s money. However, depending on the size of the economic downturn and the unavoidable hit to banks’ balance sheets going forward, the EU resolution framework will be exposed to a severe test by a more systemic than idiosyncratic crisis. Furthermore, having grown used to the extensive use of public support over the last months, Member States might be tempted to step in with public nancial support to rescue banks which they see as instrumental in nancing the economic recovery, raising concerns as to whether they will honour their promise to taxpayers to never again bail out banks with public money.
sing non-performing exposures, higher loan loss provisioning, deterioration of their regulatory capital, which – together with legacy issues still present from the last global nancial crisis, such as a rather low protability of European banks in general – may effectively impede their ability to contribute to a swift economic recovery and trigger a selfreinforcing vicious circle. In addition, if banks – despite their current resilience – are adversely affected by further deteriorating conditions in the real economy and cannot raise their protability in the current ‘lower for longer’-interest environment, they may themselves become part of the problem to solve.
Due to the central role of credit institutions in our economies, the EU will continue to address the various challenges stemming from the COVID-19 outbreak by nding the best policy responses available in the area of EU banking regulation. It won’t get boring.
Fortunately, the EU has introduced, with the Banking Union (while still incomplete), and post-nancial crisis regulation (in particular the BRRD and the SRMR), a legal framework which is capable of effectively dealing with failing banks without having to have re-
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News Highlights Week 29 June-3 July 2020
Rubén Perea Award for young competition lawyers
Court of Justice annuls General Court judgment in staff-related psychological harassment case
Monday 29 June
Monday 29 June
Announcement was made of the ‘Rubén Perea Award’ for the best paper (master thesis, research paper or article) in competition/State aid law written by lawyers, economists or students under 30 years old, a tribute to Rubén Perea, a young EU competition lawyer who tragically passed away on 1 April 2020.
The Court of Justice has upheld the appeal in HF v Parliament (C-570/18 P), annulling the General Court’s ruling in HF v Parliament (T-218/17) concerning psychological harassment claims made by HF against the head of the Audiovisual Unit in the European Parliament, the appeal nding a breach of Article 41 of the Charter as HF had not been given an anonymised summary of the statements of the various witnesses and was not heard on the subject of those statements.
AG Hogan proposes broad interpretation of ‘taxable person acting as such’ under the VAT Directive Monday 29 June
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Commission launches public consultation on the Market Definition Notice Monday 29 June
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Advocate General Hogan delivered his Opinion in Wellcome Trust (C-459/19), concerning the interpretation of Article 44 of the VAT Directive 2006/112. In particular, the question is whether or not the term ‘a taxable person acting as such’ has the same meaning under both Article 44 and in Article 2(1)(c).
The European Commission launched a public consultation on the Market Denition Notice used in EU competition law. The Commission will assess whether and how the current Market Denition Notice needs to be updated to address all pertinent questions arising today when dening the relevant product and geographic market.
Commission’s report on the Interchange Fees Regulation sent to the Parliament and Council
Temporary COVID-19 derogations of rules in the fruit, vegetables and wine sector published and in force
Monday 29 June
Monday 29 June
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The Commission published a report examining the application of the EU’s Regulation on Interchange Fees for Card-based payment (2015/751), which must be submitted to the Parliament and Council of the EU under its Article 17.
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Ofcial publication was made of Commission Delegated Regulation 2020/884 derogating in respect of the year 2020 from Delegated Regulation 2017/891 concerning the fruit and vegetables sector and from Delegated Regulation 2016/1149 as regards the wine sector in connection with the COVID-19 pandemic.
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ECtHR’s Grand Chamber: ineffective investigation into allegations of forced prostitution breaches prohibition of slavery and of forced labour Tuesday 30 June
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Tuesday 30 June
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The European Data Protection Supervisor’s Opinion on the Commission’s White Paper on articial intelligence provides more focus on the safeguards that are necessary in regulation of this eld: the protection of EU values and fundamental rights, EU personal data protection rights, highlighting the issues around predictive policing, and providing recommendations to address the foregoing.
The Grand Chamber of the European Court of Human Rights gave its judgment in S.M. v. Croatia, clarifying its case law on human trafcking for the purpose of exploitation and prostitution, and holding Croatian authorities in breach of the prohibition of slavery and of forced labour (Article 4 ECHR) due to shortcomings in investigations into forced prostitution.
Council adds eleven Venezuelan officials to EU sanctions list Tuesday 30 June
European Data Protection Supervisor shares Opinion on Commission’s AI White Paper
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European Supervisory Authorities respond to consultation on Digital Finance Strategy Tuesday 30 June
Eleven senior Venezuelan ofcials were added to the EU’s list of persons and entities subject to restrictive measures, based on acts and decisions undermining democracy and the rule of law in Venezuela, through an ofcially published Council Decision and Council Implementing Regulation.
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The European Securities and Markets Authority, the European Banking Authority, and the European Insurance and Occupational Pensions Authority announced that they have submitted their responses to the European Commission’s consultation on a new digital nance strategy for the EU.
ESA fines Telenor EUR 112 million for anticompetitive practices
Status of judges appointed during communist rule in Poland: request for a preliminary ruling
Tuesday 30 June
Tuesday 30 June
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The EFTA Surveillance Authority (ESA) announced that it is ning Norway’s Telenor (majority state-owned telecommunications company) in the amount of 112 million euros for anticompetitive practices. During a critical growth phase in mobile data in Norway, Telenor’s wholesale prices for access to its network were higher than the retail prices it charged its own residential users to access mobile broadband services on large-screen devices.
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Ofcial publication was made of a preliminary ruling request made by the Polish Supreme Court in BM, DM and EN v Getin Noble Bank SA (C-132/20), referring a total of seven questions relating to the status of a judge originally appointed by a political body within the executive branch of the People’s Republic of Poland (19471989).
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Another case challenging the Council’s Decision to conclude the Withdrawal Agreement for breach of EU citizenship rights pending before the General Court Tuesday 30 June
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Ofcial publication was made of the case JU and Others v Council (T-252/20), in which the applicants seek the annulment of Council Decision 2020/135 on the conclusion of the Withdrawal Agreement. According to the applicants, that Decision ‘deprives them without their consent and without due process of their status as Union citizens and their rights arising therefrom’.
Ryanair seeks annulment of Commission Decision approving French COVID19 aid scheme for airlines Wednesday 1 July
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Ofcial publication was made of an action for annulment (T-259/20), brought by Ryanair against the European Commission’s Decision of 31 March on State aid SA.56765 (moratorium on the payment of aeronautic taxes and royalties in favour of French airlines). Ryanair also requested that its action be determined under the expedited procedure as referred to in Article 23a of the Statute of the Court of Justice.
Council endorses draft Representative Action Directive
German Bundesgerichtshof requests preliminary ruling on Community de-
Wednesday 1 July
Wednesday 1 July
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The Council of the EU approved the political agreement reached last week by the Croatian Presidency of the Council and the European Parliament on the draft Representative Action Directive, a part of the New Deal for Consumers launched in April 2018 by the European Commission to ensure stronger consumer protection in the EU.
Ofcial publication was made of a request for a preliminary ruling (C-123/20) from the German Federal Court of Justice (Bundesgerichtshof). The request, made in the case Ferrari SpA v Mansory Design & Holding GmbH, WH, concerns the interpretation of several provisions of Council Regulation 6/2002 on Community Designs.
Youth Employment and Skills: new objectives presented by Commission
Commission launches process to address collective bargaining for the selfemployed
Wednesday 1 July
Thursday 2 July
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The College of Commissioners decided on objectives to create employment opportunities in the EU in line with its green and digital objectives, especially in the context of the COVID-19 pandemic and subsequent need for recovery. This includes a Youth Employment Support package and a European Skills Agenda.
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The European Commission launched a process to ensure that EU competition rules respect the right of collective bargaining (Article 28 of the Charter) of all workers who need to improve their working conditions, including certain categories of self-employed persons as well as employees.
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AG Kokott’s Opinion in Grand Chamber cases regarding fundamental rights protection in the context of requests
EUIPO launches Strategic Plan 2025
Thursday 2 July
Thursday 2 July
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Advocate General Kokott delivered her Opinion to the Grand Chamber in État du Grand-duché de Luxembourg (Droit de recours contre une demande d’information en matière scale) (joined cases C-245/19 and C-246/19). These cases concern the compatibility with the Charter of certain requests for taxrelated information and of national rules precluding judicial review thereof.
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The European Union Intellectual Property Ofce (EUIPO) launched its new Strategic Plan 2025, which consists of projects and activities grouped under three strategic drivers with the overall aim to make the EUIPO an ‘IP hub of excellence’ for European businesses and citizens.
AG Tanchev’s Opinion in Grand Chamber case ‘Recorded Artists Actors Performers’
Court of Justice rules that third country nationals posing a serious threat to public security can be detained in prison for the purpose of removal
Thursday 2 July
Thursday 2 July
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Advocate General Tanchev gave his Opinion in Recorded Artists Actors Performers (C-265/19), a Grand Chamber case stemming from a request for a preliminary ruling from the High Court of Ireland. The case concerns the interpretation of Article 8 of Directive 2006/115, read in conjunction with Articles 4 and 15 of the World Intellectual Property Organisation (WIPO) Performances and Phonograms Treaty (WPPT), adopted on 20 December 1996 in Geneva and approved on behalf of the European Community by Council Decision 2000/278.
The Court of Justice rendered its judgment in Stadt Frankfurt (C-18/19), in response to the German Federal Court of Justice’s request for a preliminary reference concerning the interpretation of Article 16(1) of the Returns Directive (2008/115).
Banking Sector: ECB launches public consultation on its supervisory approach to consolidation
Using official EU languages when communicating with the public: Ombudsman’s recommendations
Thursday 2 July
Friday 3 July
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The European Central Bank (ECB) launched a public consultation on its Guide on the supervisory approach to consolidation in the banking sector. The Guide aims to clarify the ECB’s supervisory approach to consolidation projects involving euro area banks. The ECB is inviting interested parties to submit their comments on the Guide until 1 October 2020.
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Further to a consultation with the public as well as EU Institutions, the EU’s Ombudsman published a set of recommendations to the EU administration on the use of 24 ofcial EU languages when communicating with the public, which takes into account its commitment to respect and safeguard linguistic diversity as well as administrative and budgetary constraints.
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Analyses & Op-Eds The ECB is Responding to the Federal Constitutional Court of Germany: A Comparison of Monetary Policy Accounts By Phedon Nicolaides
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Op-Ed on the European Central Bank’s response to the judgment of the German Federal Constitutional Court of 5 May 2020, nding evidence that the ECB is trying to avoid future conict with the FCC, and that the unusual steps taken by the ECB to demonstrate that its monetary policy decisions and unconventional instruments are compliant with the principle of proportionality pursuant to Article 4 TFEU.
The CFSP derogation before the Court – ongoing developments By Merijn Chamon
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Op-Ed on last week’s judgments in SatCen v KF and SC v Eulex Kosovo, which were ruled by separate Chambers of the Court of Justice, explaining that these cases are in the line of CFSP staff cases that touch on three broader issues: the procedural question of the relationship between the annulment procedure (Article 263 TFEU) and the arbitration clause (Article 272 TFEU); the EU Courts’ jurisdiction in CFSP matters; and the possibility to exclude the EU Court’s jurisdiction by granting jurisdiction on an internal review body.
Case C-24/19 – Grand Chamber ruling on the interpretation of Directive 2001/42 on the assessment of the effects of certain plans and programmes on the environment READ MORE ON EU LAW LIVE
By Alessandra Donati
Analysis on the recent Grand Chamber judgment of the Court of Justice in A and others, an important ruling conrming the Court’s previous case law and providing a wide interpretation of the notion of national ‘plans and programmes’ that, under Directive 2001/42 and to achieve a high level of environmental protection, are subject to an environmental assessment.
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Library - Book Review JEF AUSLOOS
By Laura Drechsler
Oxford University Press, 2020
The Right to Erasure in EU Data Protection Law: From Individual Rights to Effective Protection
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A review describing current EU data protection law as a dense dark jungle where it is difcult to nd one’s way, an environment in which Jef Ausloos’s book provides a needed, clear and comprehensive map to navigate these difculties and understand the world of ‘datacation’ and dominant internet platforms we are inhabiting.
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