The ECB in check: a case from Portugal on the new Single Supervisory Mechanism

Résumé : La décision par le parlement portugais d’inviter le vice-président de la BCE à répondre aux questions d’une commission parlementaire dans son Etat membre d’origine motive une discussion sur la coopération entre cette institution européenne et les parlements nationaux. Ce blog post explore cette question du point de vue du droit européen.

European Central Bank (ECB) Vice-President Vítor Constâncio was recently invited by the Portuguese Parliament to attend a meeting of an inquiry committee regarding the Banif, a Portuguese banking institution that went bankrupt at the end of 2015. In response, Constâncio, who is also the former head of the Bank of Portugal, expressed, in a letter sent to the head of that inquiry committee, that the ECB answers to the European Parliament and that, as a consequence of the ECB’s institutional position “that [he] necessarily ha[s] to meet”, he could not take part in that committee meeting. It is worth remembering that this position was not only taken by the ECB with regard to Portugal. Ireland received the same response when it set up an inquiry commission following the 2010 banking crisis. Both Vítor Constâncio and Mario Draghi used the exact same argument to excuse themselves from participating in these inquiries. This situation highlights a sometimes difficult relationship between national legislatures and the ECB. However, this time the applicable rules are different.

According to Article 21-2 of Council Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (which is one of the two legal acts that establish the Single Supervisory Mechanism), national parliaments of EU member states may request the ECB “to reply in writing to any observations or questions submitted” in respect of its attributed tasks. A written answer by the ECB is therefore foreseen in this case; however, paragraph 3 of the same article does provide the possibility for “[t]he national parliament of a participating Member State [to] invite the Chair or a member of the Supervisory Board to participate in an exchange of views in relation to the supervision of credit institutions in that Member State together with a representative of the national competent authority”. In contrast, Article 20, on “Accountability and reporting”, clearly establishes that “The ECB shall be accountable to the European Parliament and to the Council for the implementation of this Regulation” (par. 1). This provision, in line with the two pillars for the guarantee of democracy in the Union defined in article 10 Treaty of the European Union, has been used here by the ECB to avoid being held to account by the Portuguese parliament. Such an interpretation is actually in line with the principle according to which European institutions are only accountable to other European institutions, and the existence of this accountability mechanism of the ECB directly to national parliaments is the exception rather than the rule in the EU institutional framework.

As stated in the Recitals of the same Regulation, which are arguably not legally binding but shed some light over this norm, national parliaments of the participating Member States “should be able to address any observations or questions to the ECB on the performance of its supervisory tasks, to which the ECB may reply” (par. 56). This is appropriate, this paragraph adds, because of the “potential impact that supervisory measures may have on public finances, credit institutions, their customers and employees, and the markets in the participating Member States”. The potential impact on national parliaments’ budgetary prerogatives at large may explain this unusual accountability mechanism. Whether the ECB has the duty to reply still remains unclear: in paragraph 56 of the Recitals quoted above, it would seem that there is no obligation, as indicated by the phrase “may reply”. On the other hand, Article 21 unambiguously states that “National parliaments […] may request the ECB to reply in writing to any observations or questions submitted by them to the ECB” pointing instead to the existence of a legal obligation.

This Council Regulation 1023/2013 was approved after the Irish crisis and therefore the Irish and the Portuguese situations fall under different regimes. Before 2013 the ECB did not have the supervision powers it now possesses. Today, as shown, the possibility exists for national parliaments to address questions to the ECB on its supervisory tasks. In Portugal, the supervisory activities of the ECB over the Banif bank had an impact on public finances. The fact that what happened with the Banif had such an impact means that the Portuguese parliament should be able to address questions to Constâncio. And, according to the new rules, a response in writing is legitimately expectable. The same actually happened with the European Commissioner Vestager, another European figure who refused to attend a meeting of the same inquiry committee in person but will answer in writing.

Another layer of complexity adding up to this relates to the rules of the parliamentary inquiries in Portugal. These rules actually entail criminal consequences for those who refuse to participate in Parliament inquiries, namely the crime of qualified disobedience (Article 348 of the Portuguese Criminal Code). The regime of functional immunity that Constâncio seems to benefit for working at the ECB illustrates well the tension that exists between the European Union legal order and that of its Member States. This is raising a political discussion within Portugal, especially considering that Constâncio had already participated in previous inquiries, namely before regarding his work as head of the Bank of Portugal.

All in all, it appears that both sides were initially “playing politics with the law”. In affirming that Constâncio is obliged to respond to the invitation, the Portuguese Parliament disregarded the content of the European obligations as these only contend an answer in writing. On the other hand, Constâncio was ignoring the additional accountability mechanism introduced by Council Regulation 1023/2013 which results in the ECB not being solely accountable to the European legislator for its actions, as is normally the case, but also to national legislatures. It can only be hoped that this episode, which finally should end up with Constâncio answering the questions in writing, will pave the way towards more transparency and better accountability in the European banking system.

Nelson Coelho, PhD Candidate, Utrecht University School of Law – International and European Law

Diane Fromage, Assistant Professor, University of Utrecht Netherlands