Court of Justice of the European Communities (including Court of First Instance Decisions)

JUDGMENT OF THE GENERAL COURT (Third Chamber, Extended Composition)

28 February 2024 (*)

(Economic and monetary policy – Prudential supervision of credit institutions – Second subparagraph of Article 9(1) of Regulation (EU) No 1024/2013 – Direct exercise by the ECB of a power of a competent authority under the relevant Union law – Levying absorption interest under Austrian law where Article 395 of Regulation (EU) No 575/2013 has been infringed – Competence of the ECB – Article 65(1) and Article 70 of Directive 2013/36/EU – Proportionality)

In Case T‑667/21,

BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG, established in Vienna (Austria), represented by H. Bälz, D. Bliesener, M. Bsaisou and G. Tönningsen, lawyers,

applicant,

v

European Central Bank (ECB), represented by K. Lackhoff, J. Poscia and M. Ioannidis, acting as Agents,

defendant,

supported by

Republic of Austria, represented by J. Schmoll and F. Koppensteiner, acting as Agents,

intervener,

THE GENERAL COURT (Third Chamber, Extended Composition),

composed of F. Schalin, President, P. Škvařilová‑Pelzl, I. Nõmm (Rapporteur), G. Steinfatt and D. Kukovec, Judges,

Registrar: H. Eriksson, Administrator,

having regard to the written part of the procedure,

further to the hearing on 28 March 2023,

gives the following

Judgment

1        By its action under Article 263 TFEU, the applicant, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG, seeks to have set aside decision ECB-SSM-2021-ATBAW-7-ESA-2018-0000126 of 2 August 2021 of the European Central Bank (ECB), which was taken pursuant to Article 4(1)(d) and (3) and Article 9(1) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63), read in conjunction with Article 395(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1, and corrigenda OJ 2013 L 208, p. 68, and OJ 2013 L 321, p. 6) and point 2 of Paragraph 97(1) of the Bundesgesetz über das Bankwesen (Bankwesengesetz) (Law on the banking sector) of 30 July 1993 (BGBl. 532/1993), as amended by the Bundesgesetz, mit dem das Bankwesengesetz, das Börsegesetz 2018, das Finalitätsgesetz, das Finanzmarkt-Geldwäsche-Gesetz, das Sanierungs- und Abwicklungsgesetz, das Wertpapieraufsichtsgesetz 2018 und das Zentrale Gegenparteien-Vollzugsgesetz geändert werden (Federal Law amending the Law on banking activities, the Law on stock exchanges 2018, the Law on settlement finality, the Law on money laundering on financial markets, the Law on recovery and resolution, the Law on the securities supervision 2018 and the Law on the enforcement of central counterparties) of 28 May 2021 (BGBl. I, 98/2021) (‘the BWG’).

 Background to the dispute

2        The applicant is an Austrian credit institution within the BAWAG group of companies which is responsible for the banking activities of the BAWAG group. Its parent company is BAWAG Group AG, a financial holding company. It is subject to direct prudential supervision by the ECB.

3        In 2016, the applicant indirectly acquired a portfolio of residential real estate loans in France, consisting of approximately 20,000 loans, mainly secured real estate loans for an initial total amount of approximately EUR 1.4 billion, and associated ancillary rights and collateral (‘the Vermeer portfolio’).

4        The acquisition was made from two French credit institutions – My Money Bank SCA and GE SCF SCA. For the purposes of transferring the underlying loans and the collateral relating thereto without amending all of the contracts relating to them, the Vermeer portfolio was first securitised. That portfolio was thus transferred to a joint fund without legal personality, ‘FCT Pearl’, created on 10 August 2016 solely with a view to that acquisition and having Eurotitrisation SA as its management company. The custodian of the fund, Société Générale SA, is responsible for holding the fund’s assets and supervising the management company. My Money Bank was appointed as the management body for the loans constituting the assets of FCT Pearl (the ‘underlying loans’ or ‘underlying exposures’).

5        The applicant acquired all of the shares in FCT Pearl in December 2016, thereby becoming the beneficial owner. As such, it receives the repayments (capital and interest) made in respect of the underlying loans. However, it does not participate either in the operational management of the fund, which is the responsibility of the fund management company and of the custodian of the fund, or in the operational management of the underlying loans, which is the responsibility of My Money Bank.

6        From 20 January to 31 March 2017, the ECB carried out an on-the-spot inspection at the applicant’s premises, pursuant to Article 12 of Regulation No 1024/2013 and Articles 143 to 146 of Regulation (EU) No 468/2014 of the ECB of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the ECB and national competent authorities and with national designated authorities (OJ 2014 L 141, p. 1).

7        In that context, the ECB examined, inter alia, the method used by the applicant to determine its overall exposure in respect of the Vermeer portfolio in the light of the requirements of Regulation No 575/2013 relating to large exposures. In that regard, it noted that the applicant was not in possession of data enabling each of the debtors of the underlying loans to be identified. From that, it inferred that the applicant could not use the ‘look-through’ approach, envisaged in Article 390(7) of Regulation No 575/2013, to determine the level of its exposure in respect of the Vermeer portfolio, which makes it possible to calculate the value exposed to the risks at the level of the underlying exposures rather than of the operation itself.

8        The ECB came to the conclusion that, pursuant to Article 6(2)(a) of Commission Delegated Regulation (EU) No 1187/2014 of 2 October 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards regulatory technical standards for determining the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets (OJ 2014 L 324, p. 1), each of the underlying exposures for which the debtor was not identified had to be attributed to the transaction itself – FCT Pearl – as a separate client. It followed that the treatment of the Vermeer portfolio under the scheme applicable to large exposures showed that the 25% limit on eligible capital set by Article 395(1) of Regulation No 575/2013 had been exceeded.

9        In that regard, the ECB did not accept the applicant’s argument that the lack of data enabling each individual borrower to be identified in the Vermeer portfolio by name, address and date of birth did not prevent it from identifying borrowers under the scheme applicable to large exposures. First, the applicant stated that it had received a complete set of 93 data types for each underlying loan and the corresponding collateral, 21 of which were updated daily and 43 of which were updated monthly. Second, as regards 3 of those 93 data types (name, date of birth and address), it explained that, as those data are very sensitive personal data, under a data protection agreement, such data were provided in encrypted form, but that their disclosure in decrypted format was possible if it was necessary for the applicant to comply with regulatory requirements.

10      Consequently, the ninth conclusion of the ECB’s inspection report of 10 May 2017 found that the applicant had disregarded the limit to large exposures provided for in Article 395 of Regulation No 575/2013 in relation to the Vermeer portfolio.

11      On 1 September 2017, the applicant informed the ECB that the mechanism applicable to the communication of identification data relating to the debtors of the underlying loans would be amended as from mid-September, meaning that its data protection delegate would be able to identify each debtor of each underlying exposure within the Vermeer portfolio.

12       On 20 September and 30 October 2017, the Finanzmarktaufsichtsbehörde (Financial Markets Supervisory Authority, Austria; ‘the FMA’) requested the applicant to provide it with a table showing the eligible capital and the highest amount achieved by the limit to large exposures having been exceeded, on an individual and on a consolidated basis, for each month during the period from December 2016 to September 2017. The applicant provided the FMA with the information requested.

13      On 17 February 2021, the ECB sent the applicant a draft decision in order to enable it to submit its comments. On 2 March 2021, the applicant submitted its written comments on that draft decision.

14      On 29 June 2021, the ECB gave the applicant the opportunity to comment on a version of the draft decision which had been amended on account of changes made to Paragraph 97(1) of the BWG. The applicant reiterated the comments which it had made on 2 March 2021.

15      On 2 August 2021, the ECB adopted Decision ECB/SSM/2021-ATBAW-7-ESA-2018-0000126, pursuant to Article 4(1)(d) and Article 9(1) of Regulation No 1024/2013, read in conjunction with Article 395(1) of Regulation No 575/2013 and point 2 of Paragraph 97(1) of the BWG, which required the applicant to pay absorption interest in the amount of EUR 19 332 923.82 (‘the contested decision’).

16      In the first place, the ECB, referring to its final inquiry report, found that the applicant had at its disposal only information enabling it to identify the amount of each of the exposures underlying the Vermeer portfolio and not the identity of each of the debtors concerned, in so far as the relevant information had been provided to it in encrypted form and that, consequently, it ought to have applied Article 6(2)(a) of Delegated Regulation No 1187/2014 in order to determine the contribution of those underlying exposures to the risk exposure.

17      In the second place, the ECB, in the light of the information provided by the applicant to the FMA, found that, based on the application of Article 6(2)(a) of Delegated Regulation No 1187/2014, it had exceeded the threshold of 25% of its eligible capital for exposure to FCT Pearl for 10 consecutive months between December 2016 and September 2017.

18      In the third place, the ECB held that it followed from Article 4(1)(d) and (3), as well as the second subparagraph of Article 9(1) of Regulation No 1024/2013, that it was entitled to levy absorption interest on the applicant pursuant to Paragraph 97 of the BWG, which was characterised as an ‘administrative measure’ within the meaning of Article 65(1) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338) in the judgment of 7 August 2018, VTB Bank (Austria) (C‑52/17, EU:C:2018:648). It also stated that the amendment made to Paragraph 97 of the BWG on 28 May 2021 was irrelevant. On the one hand, the exception added at the time of that amendment concerns only excesses relating to exposures in the trading portfolio, which are authorised, subject to conditions, by Article 395(5) of Regulation No 575/2013. On the other hand, the exposures to FCT Pearl were not classified by the applicant as being within its negotiating portfolio, but outside it.

19      In the fourth place and in consequence, the ECB levied absorption interest in the amount of EUR 19 332 923.82 on the applicant, namely EUR 10 159 572.31 in respect of infringement of Article 395(1) of Regulation No 575/2013 on an individual basis and EUR 9 173 351.51 for its infringement on a consolidated basis.

 Forms of order sought

20      The applicant claims that the Court should:

–        annul the contested decision;

–        order the ECB to pay the costs.

21      The ECB and the Republic of Austria contend that the Court should:

–        reject the application;

–        order the applicant to pay the costs.

 Law

22      In support of its action, the applicant puts forward, in essence, six pleas in law alleging (i) that the ECB lacks competence to levy absorption interest, (ii) that levying absorption interest is time barred, (iii) errors of law and assessments by the ECB in finding an infringement on its part, (iv) breach of the principle of proportionality, (v) breach of its obligation to take into account all relevant elements of the case and, (vi), and in the alternative, errors in the calculation of the amount of the absorption interest levied.

 The first plea: the ECB lacks competence

23      The applicant maintains that Regulation No 1024/2013, and in particular the second sentence of the second subparagraph of Article 9(1) thereof, does not delegate to the ECB the power to levy absorption interest under point 2 of Paragraph 97(1) of the BWG and that it was only open to the ECB, pursuant to the third subparagraph of Article 9(1) of Regulation No 1024/2013, to require the FMA to apply that power which is conferred on it under Austrian law. The applicant adds that the judgment of 7 August 2018, VTB Bank (Austria) (C‑52/17, EU:C:2018:648) is irrelevant.

24      The ECB, supported by the Republic of Austria, is of the view is that it was competent to apply Paragraph 97(2) of the BWG since what is involved is a power conferred ‘under the relevant Union law’ within the meaning of the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013 and it submits that the judgment of 7 August 2018, VTB Bank (Austria) (C‑52/17, EU:C:2018:648) implicitly demonstrates that it is competent to levy absorption interest.

25      By the contested decision, the ECB levied absorption interest on the applicant, on the basis of point 2 of Paragraph 97(1) of the BWG, on account of the applicant having infringed Article 395(1) of Regulation No 575/2013.

26      Under Article 395(1) of Regulation No 575/2013 in the version applicable during the relevant period, ‘an institution shall not incur an exposure, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to a client or group of connected clients the value of which exceeds 25% of its eligible capital. Where that client is an institution or where a group of connected clients includes one or more institutions, that value shall not exceed 25% of the institution’s eligible capital or EUR 150 million, whichever [is] the higher, provided that the sum of exposure values, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to all connected clients that are not institutions does not exceed 25% of the institution’s eligible capital.’

27      Point 2 of Paragraph 97(1) of the BWG states:

‘The FMA shall levy interest on credit institutions, responsible undertakings within the meaning of Paragraph 30(6) [of the present law] and the central body in the case of a network of credit institutions in accordance with Paragraph 30a [of the present law] in the following amounts: … 2% of the excess over the large exposure limit laid down in Article 395(1) of [Regulation No 575/2013], calculated annually, for 30 days, save in the event of a permissible excess in respect of the limit in accordance with Article 395(5) of [that regulation], supervisory measures as provided for in Paragraph 70(2) [of the present law] or the over-indebtedness of the credit institution.’

28      Under Article 4(1)(d) of Regulation No 1024/2013, the task of ‘ensur[ing] compliance with the acts referred to in the first subparagraph of Article 4(3), which impose prudential requirements on credit institutions in the areas of … large exposure limits …’ has been conferred on the ECB. Article 4(3) of that regulation provides that ‘for the purpose of carrying out the tasks conferred on it by [the present] Regulation, and with the objective of ensuring high standards of supervision, the ECB shall apply all relevant Union law, and where this Union law is composed of Directives, the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the ECB shall apply also the national legislation exercising those options’. In addition, since the applicant is a significant entity within the meaning of Article 6(4) of Regulation No 1024/2013, the implementation of that task falls directly to the ECB and not to the national authorities under the Single Supervisory Mechanism (see to that effect, judgment of 16 May 2017, Landeskreditbank Baden-Württemberg v ECB, T‑122/15, EU:T:2017:337, paragraph 63).

29      The ECB is therefore competent to ensure that the applicant complies with Article 395(1) of Regulation No 575/2013, which the applicant does not challenge.

30      By contrast, the applicant does dispute the ECB’s competence to levy absorption interest pursuant to Article 97 of the BWG on the basis of the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013.

31      In the first place, it should be noted that Article 9 of Regulation No 1024/2013 is found at the beginning of Chapter III of that regulation, which is entitled ‘Powers of the ECB’, and that Article 9 is itself entitled ‘Supervisory and investigatory powers’. That article provides as follows:

‘1. For the exclusive purpose of carrying out the tasks conferred on it by Articles 4(1), 4(2) and 5(2), the ECB shall be considered, as appropriate, the competent authority or the designated authority in the participating Member States as established by the relevant Union law.

For the same exclusive purpose, the ECB shall have all the powers and obligations set out in this Regulation. It shall also have all the powers and obligations, which competent and designated authorities shall have under the relevant Union law, unless otherwise provided for by this Regulation. In particular, the ECB shall have the powers listed in Sections 1 and 2 of this Chapter.

To the extent necessary to carry out the tasks conferred on it by this Regulation, the ECB may require, by way of instructions, those national authorities to make use of their powers, under and in accordance with the conditions set out in national law, where this Regulation does not confer such powers on the ECB. Those national authorities shall fully inform the ECB about the exercise of those powers.

2. The ECB shall exercise the powers referred to in paragraph 1 of this Article in accordance with the acts referred to in the first subparagraph of Article 4(3). In the exercise of their respective supervisory and investigatory powers, the ECB and national competent authorities shall cooperate closely.

…’

32      Accordingly, Article 9(1) of Regulation No 1024/2013 states that, for the purpose of carrying out its prudential tasks, the ECB is to constitute the competent authority and that it is to have three categories of supervisory and investigatory powers in that regard.

33      First, under the first sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013, the ECB is to have the powers set out in that regulation. They are found in Section 1 (Investigatory powers) and Section 2 (Specific supervisory powers) of Chapter III of that regulation. Those cover requests for information (Article 10), general investigations (Article 11), on-site inspections (Articles 12 and 13), authorisation (Article 14) and, more generally, all the powers listed in Article 16, which is entitled ‘Supervisory powers’. In addition, the ECB has the power to impose administrative penalties, laid down in Article 18 of that regulation.

34      Second, under the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013, the ECB has the powers of ‘competent … authorities … under the relevant Union law, unless otherwise provided for by this Regulation’. That was the basis on which the ECB took the view that it had the powers which Article 97 of the BWG confers on the FMA.

35      Third and lastly, under the third subparagraph of Article 9(1) of Regulation No 1024/2013, the ECB may instruct national authorities to ‘make use of their powers, under and in accordance with the conditions set out in national law, where this Regulation does not confer such powers on the ECB’. The applicant maintains, in essence, that that was the subparagraph which applied, with the result that the ECB could not itself levy absorption interest, but ought to have given instructions to that effect to the FMA.

36      In the second place, it should be noted that the ‘relevant Union law’ referred to in the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013 is the law which constitutes the legal framework governing the prudential supervision of credit institutions. That legal framework comprises, in particular, in addition to Regulation No 1024/2013, Regulation No 575/2013 and Directive 2013/36, which, pursuant to recitals 5 and 2 thereof respectively, must be read together. The powers of the authorities which are competent in the area of the prudential supervision of credit institutions are provided for in Title VII of Directive 2013/36.

37      Article 65(1) of Directive 2013/36 is worded as follows:

‘Without prejudice to the supervisory powers of competent authorities referred to in Article 64 and the right of Member States to provide for and impose criminal penalties, Member States shall lay down rules on administrative penalties and other administrative measures in respect of breaches of national provisions transposing this Directive and of [Regulation No 575/2013] and shall take all measures necessary to ensure that they are implemented ...’

38       Article 67(1) of Directive 2013/36 provides that ‘this Article shall apply at least in any of the following circumstances: … (k) an institution incurs an exposure in excess of the limits set out in Article 395 of Regulation (EU) No 575/2013.’ Article 67(2) of that directive provides that ‘Member States shall ensure that in the cases referred to in paragraph 1, the administrative penalties and other administrative measures that can be applied include at least the following: …’ That is followed by a list of administrative penalties and other administrative measures, which list does not include the levying of absorption interest.

39      Accordingly, it follows from Directive 2013/36 that, first, it is for the Member States to determine the administrative penalties and other administrative measures which may be imposed in situations where there is an infringement, in particular, of Regulation No 575/2013 and, second, the Member States are required to lay down certain penalties and administrative measures and are free to lay down additional penalties.

40      In the third place, and in consequence, the outcome of the present plea depends on whether the expression ‘under the relevant Union law’ in the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013 includes a power of the national authorities which is not expressly referred to in Article 67(2) of Directive 2013/36, but can be classified as an ‘administrative measure’ within the meaning of Article 65(1) of that directive or whether, on the contrary, the exercise of such a power continues to fall within the sole competence of the national authorities, and the ECB must instruct them to exercise it, pursuant to the third subparagraph of Article 9(1) of that regulation.

41      In that regard, first, it should be stated that the expression ‘under Union law’ has been interpreted as including all the powers resulting from the legal framework established by a directive, whether they result from an obligation or power for the Member State to legislate, as opposed to the recognition by that directive of the power which the Member States enjoy under national law to provide for stricter provisions outside the framework of the regime established by that directive (see, to that effect, judgment of 10 March 2016, Safe Interenvíos, C‑235/14, EU:C:2016:154, paragraph 79 and the case-law cited).

42      Second, it follows from the judgment of 7 August 2018, VTB Bank (Austria) (C‑52/17, EU:C:2018:648), that the levying of absorption interest falls within the legal regime established by Directive 2013/36.

43      It was held in respect of an earlier version of Paragraph 97 of the BWG that the levying of absorption interest under that provision is akin to an administrative measure falling within the scope of Article 65(1) of Directive 2013/36, the fact that they are not referred to in the list in Article 67(2) of Directive 2013/36 being irrelevant, since it is apparent from the wording of that provision that that list is not exhaustive and that Article 65(1) provides that Member States are to take all measures necessary to ensure that that directive and Regulation No 575/2013 are implemented (judgment of 7 August 2018, VTB Bank (Austria), C‑52/17, EU:C:2018:648, paragraphs 31 to 44).

44      More specifically, the Court of Justice emphasised that, in accordance with recital 9 of Regulation No 575/2013, in order to avoid market distortions and regulatory arbitrage, prudential minimum requirements adopted by EU law should ensure maximum harmonisation and concluded that, where the limits set out in Article 395(1) of Regulation No 575/2013 are exceeded, Member States are required to levy on credit institutions not a measure governed by national law but an administrative penalty or other administrative measure within the meaning of Article 65(1) of Directive 2013/36 (judgment of 7 August 2018, VTB Bank (Austria), C‑52/17, EU:C:2018:648, paragraph 41).

45      Third, it follows that the fact that the levying of absorption interest is not referred to in the list in Article 67(2) of Directive 2013/36 does not prevent it from falling within the legal regime established by that directive. Consequently, it is akin to a power available to the FMA ‘under the relevant Union law’ within the meaning of the second sentence of the second subparagraph of Article 9(1) of Regulation No 1024/2013.

46      The ECB was, therefore, competent to levy absorption interest directly on the applicant.

47      The present plea must therefore be rejected.

 The fourth plea: breach of the principle of proportionality

48      The applicant maintains, in essence, that the ECB failed to comply with the principle of proportionality by levying absorption interest on it under point 2 of Paragraph 97(1) of the BWG. In that regard, it submits, in particular, first, that the contested decision is disproportionate since it does not take into consideration the fact that its alleged fault is limited to it having initially had the borrowers’ names, addresses and dates of birth only in encrypted form, even though it selected that approach for a legitimate reason, namely to comply with data protection requirements and minimise the unnecessary processing of personal data and, second, that, in order to ensure compliance with the large exposure requirements referred to in Article 395(1) of Regulation No 575/2013, additional data were transmitted in a non-encrypted format.

49      When questioned at the hearing, the ECB confirmed that it had relied on the Austrian courts’ interpretation of point 2 of Paragraph 97(1) of the BWG according to which the levying of absorption interest is automatic where the conditions laid down in that provision are satisfied. It argued, in essence, that it was required to apply point 2 of Paragraph 97(1) of the BWG, since that provision is not, of itself, disproportionate. In its written pleadings, it also disputes the substance of the applicant’s arguments seeking to demonstrate that the absorption interest in the present case is disproportionate.

50      In that regard, the Republic of Austria, both in its statement in intervention and at the hearing, confirmed that point 2 of Paragraph 97(1) of the BWG is interpreted by the Austrian courts as automatically giving rise to the levying of absorption interest when the conditions set out therein are satisfied.

51      The last sentence of Article 65(1) of Directive 2013/36 states that the ‘administrative penalties and other administrative measures shall be effective, proportionate and dissuasive’.

52      Under Article 70 of Directive 2013/36, which is headed ‘Effective application of penalties and exercise of powers to impose penalties by competent authorities’:

‘Member States shall ensure that when determining the type of administrative penalties or other administrative measures and the level of administrative pecuniary penalties, the competent authorities shall take into account all relevant circumstances, including, where appropriate:

(a)      the gravity and the duration of the breach;

(b)      the degree of responsibility of the natural or legal person responsible for the breach;

(c)      the financial strength of the natural or legal person responsible for the breach, as indicated, for example, by the total turnover of a legal person or the annual income of a natural person;

(d)      the importance of profits gained or losses avoided by the natural or legal person responsible for the breach, in so far as they can be determined;

(e)      the losses for third parties caused by the breach, in so far as they can be determined;

(f)      the level of cooperation of the natural or legal person responsible for the breach with the competent authority;

(g)      previous breaches by the natural or legal person responsible for the breach;

(h)      any potential systemic consequences of the breach.’

53      In so far as it follows from paragraph 49 above that the ECB adopted the contested decision on the premiss that the application of point 2 of Paragraph 97(1) of the BWG is automatic and, consequently, is an instance of the exercise of a non-discretionary competence, it is for the Court to review whether that premiss is correct. The nature of the competence which the ECB must exercise when imposing an administrative measure is a preliminary issue determining how the ECB was required to conduct its examination of the proportionality of levying absorption interest. If the ECB had a margin of discretion which meant that it had to examine whether levying absorption interest was proportionate in the light of the circumstances of the case, it would follow that the assessment of whether the absorption interest by the ECB in the contested decision was proportionate is based on a legally incorrect premiss.

54      In that regard, the fact that the applicant has not, in the context of the present plea, called into question the automatic nature of the application of point 2 of Paragraph 97(1) of the BWG does not prevent the Court from examining that question.

55      It follows from the case-law that, within the framework of the dispute as defined by the parties, the EU Courts, whilst they must rule only on the heads of claim put forward by the parties, cannot confine themselves to the arguments put forward by the parties in support of their claims or they might be forced, in some circumstances, to base their decisions on erroneous legal considerations (see judgment of 21 September 2010, Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, EU:C:2010:541, paragraph 65 and the case-law cited; judgment of 20 January 2021, Commission v Printeos, C‑301/19 P, EU:C:2021:39, paragraph 58). That is the case, in particular, where it is necessary for an aspect of the relevant legislation not raised by an applicant to be taken into account in order to answer a preliminary question which must be resolved in the light of the arguments which the applicant has put forward (see, to that effect, judgments of 8 July 2010, Commission v Putterie-De-Beukelaer, T‑160/08 P, EU:T:2010:294, paragraphs 65 and 66, and of 12 June 2019, RV v Commission, T‑167/17, EU:T:2019:404, paragraph 59).

56      In accordance with the rule that the parties should be heard, the parties were invited, at the hearing, to express their views on the compatibility of the ECB’s interpretation of point 2 of Paragraph 97(1) of the BWG with Article 70 of Directive 2013/36.

57      In the first place, in so far as the interpretation of a provision of national law is at issue, it should be recalled that, in principle, the scope of national laws, regulations or administrative provisions must be assessed in the light of the interpretation given to them by national courts (see, to that effect, judgment of 16 September 2015, Commission v Slovakia (C‑433/13, EU:C:2015:602, paragraph 81 and the case-law cited).

58      Consequently, where the Court is called upon to review the substance of the ECB’s application of national law transposing a directive, the interpretation of national courts is sufficient to establish the scope of that national law where it results in a finding that it is compatible with the directive which it transposes. In such a situation, criticisms seeking to call into question the substance of the interpretation by those courts are liable to be rejected at the outset (see, to that effect, judgment of 24 April 2018, Caisse régionale de crédit agricole mutuel Alpes Provence and Others v ECB (T‑133/16 to T‑136/16, EU:T:2018:219, paragraphs 84 to 92).

59      The situation is different, however, where the interpretation of the national courts does not make it possible to ensure the compatibility of national law with a directive.

60      In such a situation, compliance with the principle of the primacy of EU law means that, the General Court must, as must a national court, where necessary, interpret national law so far as possible in the light of the wording and the purpose of the directive transposed in order to achieve the result sought by the directive (see, to that effect, judgment of 24 January 2012, Dominguez, C‑282/10, EU:C:2012:33, paragraph 24).

61      While the obligation to refer to EU law when interpreting and applying the relevant rules of domestic law is limited by general principles of law and cannot serve as the basis for an interpretation of national law contra legem, the requirement to interpret national law in conformity with EU law entails the obligation for national courts to change established case-law, where necessary, if it is based on an interpretation of national law which is incompatible with the objectives of a directive (see, to that effect, judgment of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraphs 32 and 33 and the case-law cited).

62      Where it is unable to interpret national law in compliance with the requirements of EU law, the General Court, like the national court which is called upon to apply provisions of EU law, is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any national legislation, even if adopted subsequently, which is contrary to a provision of EU law with direct effect (see, to that effect, judgment of 24 June 2019, Popławski, C‑573/17, EU:C:2019:530, paragraphs 58 and 61).

63      In the second place, it must be stated that Article 70 of Directive 2013/36, read in conjunction with Article 4(1), Article 65(1) and recital 37 of that directive, must be understood as meaning that it is for the FMA and, in consequence, the ECB, to determine the type of administrative measure by taking into account all the circumstances, which necessarily implies that they have margin of discretion and precludes them from being in a situation of a non-discretionary competence.

64      First, that is apparent from a literal and contextual interpretation of Article 70(1) of Directive 2013/36.

65      Initially, it should be stated that, while the title of Article 70 of Directive 2013/36 refers only to ‘penalties’, it is apparent from the wording of that article that that provision also deals with determining ‘other administrative measures’. Consequently, the emphasis on the Member States’ obligation to ensure that the competent authorities take into account all the circumstances – a non-exhaustive list of which is provided – also applies to other administrative measures.

66      Next, it follows from Article 4(1) of Directive 2013/36 that the ‘competent authorities’ referred to in Article 70 of Directive 2013/36 are those which ‘carry out the functions and duties provided for in this Directive’, namely, as regards Austria, the FMA and, as regards the implementation of the second subparagraph of Article 9(1) of Regulation No 1024/2013, the ECB.

67      Finally, it should be noted that Article 65(1) and Article 70 are found in the same section of Directive 2013/36, concerning ‘supervisory powers, powers to impose penalties and right of appeal’, with the result that the concept of ‘administrative measures’ in those two provisions must be regarded as having the same meaning. Consequently, since it is apparent from the judgment of 7 August 2018, VTB Bank (Austria) (C‑52/17, EU:C:2018:648) that absorption interest constitutes an administrative measure within the meaning of Article 65(1) of Directive 2013/36, its application is governed by Article 70 of that directive.

68      Second, that conclusion is borne out by a teleological interpretation of Article 70 of Directive 2013/36, since recital 37 thereof demonstrates the legislature’s intention that Member States should ensure ‘that the competent authorities take into account all relevant circumstances’.

69      Third, it must be stated that the ECB’s obligation to take account of all the circumstances implies that it must examine the particular circumstances of the case when it adopts an administrative measure.

70      Fourth, it follows that an interpretation of point 2 of Paragraph 97(1) of the BWG which places the ECB in a situation of non-discretionary competence would prevent it from taking into account all the relevant circumstances and would have the effect that that provision would be incompatible with Article 70 of Directive 2013/36.

71      It is true that it is apparent from the wording of point 2 of Paragraph 97(1) of the BWG that the automatic nature of the levying of absorption interest is attenuated by the fact that that provision itself takes into account two situations in which an infringement of Article 395(1) of Regulation No 575/2013 will not lead to absorption interest being levied. That is so where the credit institution, first, is the subject of an administrative decision by the competent authority requiring it to take certain measures because of the risk that it will be unable to meet its obligations to its creditors or for the purposes of ensuring the stability of the financial system, pursuant to Paragraph 70(2) of the BWG, or, second, is in a position of over-indebtedness.

72      However, it should be noted that the Austrian legislature’s emphasis on two situations in which an infringement of Article 395(1) of Regulation No 575/2013 will not lead to absorption interest being levied cannot be equivalent to the competent authority taking account of ‘all the [relevant] circumstances’, as laid down in Article 70 of Directive 2013/36.

73      Similarly, the fact that the absorption interest levied under point 2 of Paragraph 97(1) of the BWG is classified as an ‘administrative measure’ rather than an ‘administrative penalty’ within the meaning of Article 65(1) of Directive 2013/36 does not make the automatic nature of its being levied compatible with Article 70 of that directive.

74      While it is true that, due to that difference in nature, the obligation of the competent authority to take account of all the circumstances cannot necessarily be as intense as when an administrative measure, such as the levying of absorption interest or an administrative penalty or, a fortiori, an administrative pecuniary penalty, is involved, the fact remains that the scope of Article 70 of Directive 2013/36 is not limited to administrative penalties, but also includes administrative measures.

75      In the third place, it should be stated that point 2 of Paragraph 97(1) of the BWG may be interpreted in the light of Article 70 of Directive 2013/36 as implying a margin of discretion on the part of the ECB allowing it, where appropriate, not to levy absorption interest if it believes that the circumstances entail making a decision to that effect.

76      First, the wording of point 2 of Paragraph 97(1) of the BWG does not expressly rule out the possibility that the FMA may, where appropriate, have a margin of discretion as to whether it is appropriate to apply it.

77      Second, Section XXII of the BWG also contains Paragraph 99e, which reproduces the content of Article 70 of Directive 2013/36, from which it follows that, when determining the type of penalty or measure to be adopted in response to infringements of Regulation No 575/2013, the FMA must, to the extent appropriate, take into account the same circumstances as set out in Article 70 of Directive 2013/36, which also involves a list which is presented as non-exhaustive. Consequently, the reference to ‘measures’ in that article can perfectly well be understood as including the levying of absorption interest referred to in point 2 of Paragraph 97(1) of the BWG.

78      Third, the recognition of a margin of discretion on the part of the ECB when implementing point 2 of Paragraph 97(1) of the BWG does not adversely affect the applicant, with the result that the recognition of a margin of discretion cannot be limited by compliance with general principles of law as provided for in the case-law cited in paragraph 61 above.

79      In the fourth place and in consequence, in so far as the ECB adopted the contested decision, holding that absorption interest was levied automatically, it relied on a premiss which is legally incorrect, which vitiated its examination of the proportionality of the application of point 2 of Paragraph 97(1) of the BWG, since it resulted in it failing to examine the circumstances of the case.

80      Lastly, in the fifth place, as regards the ECB’s line of argument alleging, in essence, that the levying of absorption interest is not disproportionate in the light of those circumstances, it must be held to be irrelevant in relation to the examination of the lawfulness of the contested decision.

81      It is not for the EU Courts to take the place of the defendant by carrying out in its stead an examination which it never undertook and speculating as to the conclusions which it would have reached had it done so (see, to that effect, judgment of 13 May 2015, Niki Luftfahrt v Commission, T‑511/09, EU:T:2015:284, paragraph 149 and the case-law cited).

82      In so far as the ECB, incorrectly, came to the conclusion that, when adopting the contested decision, it was required to apply point 2 of Paragraph 97(1) of the BWG, the considerations specific to the circumstances of the case which it set out in its written pleadings could not have been taken into account in the contested decision.

83      The present plea must, therefore, be upheld and, consequently, the contested decision must be annulled, there being no need to examine the two other pleas put forward by the applicant.

 Costs

84      Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the ECB has been unsuccessful, it must be ordered to bear its own costs and to pay those of the applicant.

85      Under Article 138(1) of the Rules of Procedure, the Member States and institutions which have intervened in the proceedings are to bear their own costs. The Republic of Austria must therefore bear its own costs.

On those grounds,

THE GENERAL COURT (Third Chamber, Extended Composition)

hereby:

1.      Annuls decision ECB/SSM/2021-ATBAW-7-ESA-2018-0000126 of 2 August 2021 of the European Central Bank (ECB);

2.      Orders the ECB to bear its own costs and to pay those of BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG;

3.      Orders the Republic of Austria to bear its own costs.

Delivered in open court in Luxembourg on 28 February 2024.

*      Language of the case: English.

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