Case T‑403/21

(Published in extract form)

Norddeutsche Landesbank – Girozentrale

v

Single Resolution Board

 Judgment of the General Court (Eighth Chamber, Extended Composition) of 17 July 2024

(Economic and Monetary Union – Banking Union – Single Resolution Mechanism for credit institutions and certain investment firms (SRM) – Single Resolution Fund (SRF) – Decision of the SRB on the calculation of the 2021 ex ante contributions – Duty to state reasons – Equal treatment – Proportionality – SRB’s discretion – Manifest error of assessment – Plea of illegality – Commission’s discretion – Limitation of the temporal effects of the judgment)

1.      EU institutions – Exercise of powers – Power conferred on the Commission to adopt delegated acts – Scope – Complex assessments and evaluations – Broad discretion – Determination of the method of calculating the ex ante contributions to the Single Resolution Fund (SRF) – Establishment of criteria for adjusting those contributions – Judicial review – Limits

(Art. 290 TFEU; European Parliament and Council Regulation No 806/2014, recital 41; Commission Regulation 2015/63; European Parliament and Council Directive 2014/59)

(see paragraphs 46-48)

2.      Economic and monetary policy – Economic policy – Single Resolution Mechanism for credit institutions and certain investment firms – Ex ante contributions to the Single Resolution Fund – Calculation of the adjusting multiplier of the contributions according to the risk profile of the institutions – Classification of those institutions according to the binning method for the calculation of that multiplier

(Commission Regulation 2015/63, Arts 6 and 9(3) and Annex I; European Parliament and Council Directive 2014/59, Art. 103(7))

(see paragraphs 106-113, 115-120)

3.      Acts of the institutions – Statement of reasons – Duty – Scope – Explanations regarding the reasons for the measure provided by the author during the proceedings before the EU judicature – Conditions – There must be no contradictions and the explanations must be consistent with those reasons

(see paragraphs 156, 157)

4.      Acts of the institutions – Statement of reasons – Duty – Scope – Decision of the Single Resolution Board (SRB) establishing the ex ante contributions to the Single Resolution Fund (SRF) – Obligation for the SRB to disclose to the institutions concerned the methodology for calculating those contributions and the methodology for setting the amount of the annual target level

(European Parliament and Council Regulation No 806/2014; Council Regulation 2015/81, Art. 4; Commission Regulation 2015/63, Art. 4(2) and Annex I)

(see paragraphs 159, 160)

5.      Acts of the institutions – Statement of reasons – Duty – Scope – Decision of the Single Resolution Board (SRB) establishing the ex ante contributions to the Single Resolution Fund (SRF) – Not necessary to include, in that decision, all figures necessary for verifying the accuracy of the calculation of the contributions – Weighing the duty to state reasons against the general principle of protection of the business secrets of the institutions concerned – Legality of the provisions concerning the method for the calculation of the ex ante contributions to the SRF – Principle of non-disclosure of business secrets – Obligation for the SRB to publish or disclose to the institutions concerned, in collective and anonymised form, the information relating to the institutions that was used to calculate the ex ante contribution

(Art. 296, second para., TFEU; European Parliament and Council Regulation No 806/2014; Commission Regulation 2015/63, Arts 4 to 7 and 9, and Annex I; European Parliament and Council Directive 2014/59)

(see paragraphs 173-183)

6.      EU institutions – Exercise of powers – Power conferred on the Commission to adopt delegated acts – Scope – Complex assessments and evaluations – Broad discretion – Determination of the method of calculating the ex ante contributions to the Single Resolution Fund (SRF) – Application and weighting of the Institutional Protection Scheme (IPS) risk indicator – Judicial review – Limits

(Commission Regulation 2015/63, Art. 7(4))

(see paragraphs 296, 297)

7.      Economic and monetary policy – Economic policy – Single resolution mechanism for credit institutions and certain investment firms – Ex ante contributions to the Single Resolution Fund – Calculation of the adjusting multiplier of the contributions according to the risk profile of the institutions – Infringement of the freedom to conduct a business – Absence

(Charter of Fundamental Rights of the European Union, Art. 16; Commission Regulation 2015/63)

(see paragraphs 417-420, 423)

Résumé

Hearing an action for annulment, which it upholds, the General Court annuls the decision of the Single Resolution Board (‘the SRB’) setting the 2021 ex ante contributions to the Single Resolution Fund (‘the SRF’), in so far as it concerns Norddeutsche Landesbank – Girozentrale, the applicant, on account of the SRB’s failure to fulfil its duty to state reasons relating to the determination of the annual target level.

In its judgment, the Court provides clarifications on the consistency of the binning method, used for the purpose of adjusting the basic annual contributions to the actual risk profile of taxpaying institutions, with higher-ranking law.

The applicant is a credit institution established in Germany. On 14 April 2021, the SRB adopted a decision in which it set (1) the 2021 ex ante contributions to the SRF of credit institutions and certain investment firms, one of which was the applicant. (2)

Findings of the Court

As regards the illegality of ‘Step 2’ in Annex I to Delegated Regulation 2015/63 (3) (‘the contested provision’), the applicant submits that the Commission made an error of assessment when it adopted the binning method provided for therein, since it prevents the SRB from making appropriate adjustments to the basic annual contributions in line with the institutions’ actual risk profile.

In that regard, initially, the Court infers three stages from that method.

First of all, the SRB must determine a number of bins with a view to comparing the institutions in the light of the various risk indicators and sub-indicators, next, it is to assign, in principle, the same number of institutions to each bin, starting by assigning institutions with the lowest values of the raw indicator to the first bin and, finally, it is to assign all the institutions in a particular bin the same score, referred to as the ‘discretised indicator’, which it must take into account for the remainder of the calculation of their risk adjusting multiplier.

Subsequently, the Court points out that two specific phenomena follow from that method.

First, it cannot be ruled out that the application of that method may lead to situations in which institutions which, for a given risk indicator, have values that show that they have less risky profiles for that indicator than the average value of the institutions concerned are nevertheless assigned, for the indicator at issue, to one of the bins that are composed of relatively riskier institutions. That consequence follows, in particular, from the fact that certain institutions have ‘extreme’ values, that is to say, values representing a significant departure from the average. Second, on account of the existence of those extreme values, it cannot be ruled out that the application of the binning method may result in situations in which institutions with values for a particular risk indicator that are close to those of institutions assigned to the preceding bin are however assigned to the next bin, containing institutions with values for that same risk indicator which might sometimes be considerably higher.

However, that does not mean that the binning method is vitiated by a manifest error of assessment.

In that regard, the Court recalls, in the first place, that Delegated Regulation 2015/63 laid down (4) a method for adjusting ex ante contributions to the risk profile of institutions which is based on a comparison of their risk profiles. As is apparent from the empirical study carried out prior to the adoption of Delegated Regulation 2015/63, the results of which were summarised in the technical study of the Commission’s Joint Research Centre (‘the JRC’), the binning method is one of the methods which may enable such a comparison to be made and is even considered to be the most appropriate method for that purpose. The binning method is a recognised statistical method for the purposes of treating extreme values, since it avoids, as far as possible, the presence of those values leading to distorted comparisons. In the present case, that method makes it possible to avoid, as is apparent from the JRC technical study, institutions with high values for certain risk indicators nevertheless receiving a score which indicates a low risk profile for those indicators, since there are certain institutions with extreme values.

In the second place, the Court notes that the binning method is an easy method to compare a large amount of data reported by institutions whose ex ante contribution is adjusted to their risk profile. In that regard, it states that the contested provision lays down the rule that the number of bins is calculated on the basis of a formula set out therein and the rule that the SRB assigns, in principle, the same number of institutions to each bin, starting by assigning institutions with the lowest values of the raw indicator to the first bin. The Court considers that the binning method lays down objective rules that are capable of being easily applied by the SRB, which is, moreover, an objective that may legitimately be pursued by the EU rules.

In the third place, the Court considers that the consequences of the two phenomena cited above are to be qualified by the following four circumstances. First, that the ex ante contributions can be adjusted only within the range of a coefficient of between 0.8 and 1.5. (5) The basic annual contribution thus remains the primary factor in determining the ex ante contribution having regard to the risk profile of the institutions.

Second, the Court notes, in essence, from the JRC technical study that those phenomena are limited in that they tend to occur primarily in the last bins, and not in the vast majority of the bins.

Third, the Court finds that the institutions in those last bins have higher values for the risk indicator concerned than the institutions assigned to the lower bins.

Fourth, the method of adjusting the ex ante contributions to the risk profile takes into account a multitude of risk indicators. (6) An institution is thus assigned, ultimately, to a multitude of bins according to its values and those of the other institutions for each risk indicator. As is apparent from the JRC technical study, institutions tend to be placed in different bins for different risk indicators, which allows for a comprehensive comparison to be made of the institutions concerned.

In those circumstances, the Court rejects the argument that, in introducing the binning method, Delegated Regulation 2015/63 is vitiated by a manifest error of assessment.

1      In accordance with Article 70(2) of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ 2014 L 225, p. 1).

2      Decision SRB/ES/2021/22 of the Single Resolution Board of 14 April 2021 on the calculation of the 2021 ex ante contributions to the Single Resolution Fund.

3      Commission Delegated Regulation (EU) 2015/63 of 21 October 2014 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to ex ante contributions to resolution financing arrangements (OJ 2015 L 11, p. 44).

4      In accordance with Article 103(7) of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ 2014 L 173, p. 190).

5      Pursuant to Article 9(3) of Delegated Regulation 2015/63.

6      As is apparent from Article 6 of Delegated Regulation 2015/63.