Michel Tison

Do Not Attack the Watchdog! Banking Supervisor's Liability After Peter Paul

Banking supervisory liability has recently received much attention both from supervisory authorities themselves as from academics, thanks to the preliminary proceedings brought by the German Supreme Court before the European Court of Justice (ECJ) in case C-222/02, Peter Paul. In its judgement of 12 October 2004, the ECJ has refused to apply Francovich type Member State liability to the obligations incumbent on Member States to exercise a prudential supervision over credit institutions pursuant to the various EU banking directives.After providing a general overview of banking supervisory liability in the laws of different EU Member States, we analyze and proceed to a critical assessment of the Peter Paul judgment. We submit that the Court has been too restrictive in refusing to find in prudential supervision a clear depositor protection oriented dimension. In our view, the Court has overreacted to the potential financial consequences of holding the State liable for negligence in the exercise of prudential supervision. We demonstrate that Francovich type liability allows to strike a fair balance between the rational expectations from depositors as to the quality of supervision on the one hand, and the need to take account of the complicity and discretion of the prudential supervisor in the assessment of liability on the other hand.

Challenging the Prudential Supervisor: Liability versus (Regulatory) Immunity

Over the last decades, bank failures in different EU-countries have increasingly led to liability claims being directed against supervisory authorities for alleged negligence or improper conduct in the course of exercising prudential supervision over banks. The basic assertion of this paper is that integrated markets within the European Union, and in the near future, also including Central and Eastern European countries, should function under more or less similar rules as regards possible supervisory liability. After having analysed the existing legal regime as regards to supervisory liability in different EU-countries, we examine to which extent supervisory liability, as far as it is related to the European banking directives, could be directly based on EU-law. We argue that requirements set by the European Court of Justice in this respect could be met as far as prudential supervision is based on obligations deriving from the EU-banking directives. In our view, this situation does not create negative effects, as the European case law allows to duly take into account the complexity of prudential supervision and the discretion left to supervisory authorities in performing their functions.

Financial Market Integration in the Post-FSAP Era

This paper looks into the concepts underpinning the current generation of capital market integration directives, that follow the Lamfalussy-approach. In particular, we examine whether the Level 1-directives are based on minimum or maximum harmonization. We submit that the European lawmakers have failed to clarify this issue, thereby reducing legal certainty for the various stakeholders (suppliers, investors and supervisors alike). In addition, the adoption of yet a new harmonisation technique runs the risk of creating inconsistencies with the previous generation of financial market integration directives, adopted under the 1992 Internal market program. Finally, we look at how the Prospectus Directive and MiFID divide regulatory and supervisory powers between home and host state.

The Investment Services Directive and its Implementation in the EU Member States

With the entry into force of the Investment Services Directive (ISD) on January 1st 1996, a major move has been made towards the integration of capital markets, by ensuring the cross-border mobility of the intermediaries on the market. This paper examines to which extent the ISD has actually contributed to realising a single European capital market, and how the member states have in general implemented the directive. Attention is also paid to future developments in the field of capital market regulation and market developments (inter alia the advent of European Monetary Union, the alliance movement between stock-exchanges and regulated markets), and the demutualisation of the stock exchanges. Finally we examine whether the mutations brought about by EMU and technological developments in financial markets should lead to further modifications to be made to the European Directives in the field of capital markets.