On 29 June 2021, the European Central Bank (ECB) launched a public consultation on updates to its harmonised policies for exercising the options and discretions that it is allowed to exercise under EU law when supervising banks.

In 2016 and 2017, the ECB published a set of policy instruments harmonising how options and discretions (O&Ds) are exercised in relation to significant institutions (SIs) and promoting the harmonised exercise of O&Ds by Member State national competent authorities (NCAs) in relation to less significant institutions (LSIs). The ECB’s policies are set out in four O&D instruments:

  • A guide, first published in 2016, containing policy guidance for joint supervisory teams to follow when assessing individual applications by SIs in relation to the exercise of O&Ds applicable on a case-by-case basis.
  • An ECB Regulation, adopted in 2016, in which the ECB exercises several O&Ds of a generally applicable nature in relation to SIs.
  • An ECB Recommendation, published in April 2017, addressed to NCAs in respect of the exercise of O&Ds applicable on a case-by-case basis for LSIs or for which a common approach specific to LSIs is warranted.
  • An ECB guideline, also published in April 2017 and addressed to NCAs, concerning the exercise of O&Ds of a generally applicable nature in relation to LSIs.

In the consultation the ECB is proposing to update the above documents. Most of the changes that the ECB is proposing are needed because of changes to EU banking law introduced since these policy instruments were first published in 2016-17. Most notably, Regulation (EU) 2019/876 (CRR II) and Directive (EU) 2019/878 (CRD V) introduced some new O&Ds into the EU legislative framework while amending or removing others. These legislative changes require certain consequential changes to be made to the O&D instruments. In addition, the ECB is  proposing to introduce some changes to the O&D instruments on the basis of the experience that it has gained in the supervision of banks since the adoption of the O&D instruments in 2016-17.

The deadline for comments on the consultation is 23 August 2021.