Sanctions

Sanctions are intended to punish ongoing or past breaches by a supervised entity and to deter future violations across the banking system. They can be imposed as long as the limitation period has not elapsed.  

Allocation of sanctioning powers

Within the Single Supervisory Mechanism (SSM), the allocation of sanctioning powers between the European Central Bank (ECB) and the national competent authorities (NCAs) is determined by the nature of the alleged breach, the person(s) responsible and the type of sanction to be imposed.  

The ECB can impose pecuniary sanctions on significant banks that breach directly applicable European Union (EU) law such as the Capital Requirements Regulation or ECB supervisory decisions or ECB regulations such as the ECB Regulation on supervisory fees.  

Breaches of national law implementing EU directives such as the Capital Requirements Directive committed by significant banks can only be sanctioned by NCAs at the request of the ECB. This also applies to the imposition of non-pecuniary sanctions on significant banks, as well as to the imposition of pecuniary or non-pecuniary sanctions on natural persons (e.g. individuals within a significant bank held liable for the breach committed by the supervised entity). Following the ECB request, NCAs conduct the sanctioning proceedings in accordance with the applicable national law.  

NCAs remain fully competent for imposing sanctions on less significant banks, except for breaches of ECB supervisory decisions or regulations that impose obligations on those institutions towards the ECB, where the power to impose sanctions rests with the ECB. 

ECB sanctioning framework

Maximum level of sanctions

The ECB may impose pecuniary sanctions of up to 10% of a bank’s total annual turnover in the preceding business year, or twice the amount of profits gained or losses avoided as a result of the breach, where those can be determined.  

Effective, proportionate and dissuasive sanctions

The ECB ensures that the sanctions it imposes are effective, proportionate and dissuasive. When determining the level of sanctions, the ECB considers all relevant circumstances of the case and assesses the severity of the breach on the basis of its impact and the bank’s misconduct. The ECB also considers both mitigating and aggravating circumstances. Mitigating circumstances include cooperation with the ECB (e.g. self-reporting of the breach and timely provision of all relevant information) and implementing remedial actions that effectively alleviate the effects of the breach or that are appropriate to prevent similar infringements in the future. Conversely, aggravating circumstances may involve reluctance to cooperate with the ECB during investigations, providing contradictory information or the imposition of previous sanctions. Furthermore, the ECB assesses whether multiple breaches stem from the same set of facts.  

Find out more about the principles the ECB applies in the Guide to the method of setting administrative pecuniary penalties.

Investigations and sanctioning proceedings

The ECB’s independent Investigatory Unit (IU) is responsible for investigating alleged breaches of prudential requirements by significant banks, conducting sanctioning proceedings and submitting sanction proposals to the Supervisory Board.  

Investigations

The IU can exercise the powers granted to the ECB by the SSM Regulation (e.g. request for documents, examination of books and records, request for explanations, interviews and on-site inspections). The IU can also request information internally and from the NCAs. In addition, the IU can instruct the NCAs to make use of their investigatory powers under and in accordance with national law.  

Sanctioning procedure

Once it has completed its investigation, the IU may initiate sanctioning proceedings by addressing a statement of objections to the supervised bank concerned. The bank will have the chance to comment on the facts and objections raised by the IU and also on the proposed amount of the sanction.  

If, on the basis of its initial analysis of the facts, the evidence collected and the written submissions of the bank concerned, the IU considers that a sanction should be imposed, it submits a proposal for a complete draft decision to the Supervisory Board.