The EU General Court has annulled a decision of the Single Resolution Board (SRB), insofar as it concerns Nordea Bank, concerning ex ante contributions to the Single Resolution Fund (SRF) for the 2022 period, on the basis of SRB making a wrongful calculation by setting the annual target level too high, resulting in contributions that exceeded the 12.5% cap stipulated by Article 70(2) of the Regulation.
The three cases were Case T‑430/22, Nordea Bank Abp v SRB; Case T-431/22, Nordea Kiinnitysluottopankki Oyj v SRB; and, Case T-432/22, Nordea Rahoitus Suomi Oy v SRB, and the respective judgments were delivered on 23 October 2024.
Background
The SRB had made a calculation regarding Nordea Bank’s ex ante contributions for the 2022 year. Nordea in this instance is three legal persons (albeit within the same company group): Nordea Bank (a credit institution) Nordea Kiinnitysluottopankki (specialised mortgage bank), and Nordea Rahoitus Finland (a financial services).
The SRB’s calculation (and decision) was based on Article 70(2) of the Regulation, which mandates that the annual contributions from all institutions should not exceed 12.5% of the final target level of the Single Resolution Fund (SRF).
The SRB’s decision included a detailed process for calculating these contributions (setting the annual target level based on 1/8 of 1.6% of covered deposits in 2021, resulting in contributions that surpassed the cap), which involved determining the final target level of the SRF and the annual target level for the 2022 contribution period. The SRB aimed to ensure that the SRF’s financial means would reach at least 1% of the covered deposits of all participating institutions by the end of the initial period, which began on January 1, 2016.
Arguments of the parties
Nordea’s primary argument was that the SRB had set the annual target level too high, resulting in contributions that exceeded the 12.5% cap stipulated by Article 70(2) of the Regulation, and thus, was a violation of EU secondary law. They thus sought for Decision SRB/ES/2022/18 of the SRB of 11 April 2022 on the calculation of the 2022 ex ante contributions to the Single Resolution Fund (SRF), in so far as it concerned them, to be annulled.
The SRB, on the other hand, argued that the 12.5% cap did not apply during the initial period and that it had prioritized achieving the final target level by the end of this period. The SRB also contended that the dynamic nature of the final target level, which could change due to fluctuations in covered deposits, justified its approach.
Judgment of the General Court
The judgments were delivered by the General Court on 23 October 2024. In all three cases, the General Court annulled the SRB’s decision for exceeding the 12.5% cap.
The General Court examined the SRB’s methodology, noting that the calculations were based on data provided by (national) deposit guarantee schemes, though subject to harmonisation under EU secondary law. Given this, the General Court noted that rhe SRB then adjusted the basic annual contribution of each institution according to its risk profile, as required by the Regulation.
The General Court found and emphasised that the 12.5% cap was indeed applicable during the initial period. The General Court referred to previous case-law here, and the clear wording of Article 70(2) of the Regulation, which mandates that the contributions must not exceed 12.5% of the target level each year. The General Court highlighted that EU secondary law intended for this cap to apply during the initial period to ensure a balanced and predictable financial burden on institutions.
Furthermore, the Court noted that the SRB’s estimate of the final target level was €79 billion, and the annual target level for 2022 was set at €14 billion. This amount exceeded the 12.5% cap, which should have been just under €10 billion based on the SRB’s own estimates.
Consequently, the General Court found that the SRB had violated Article 70(2) by setting contributions that exceeded the permissible limit. As a result, the General Court annulled the SRB’s decisions in so far as it concerned Nordea’s ex ante contributions for 2022.
Maintaining the effects of the annulled decisions
The General Court recognised, however, the potential impact of this annulment on financial stability. To mitigate any adverse effects that might arise, the General Court decided to maintain the effects of the annulled decision until the SRB could implement the necessary measures to comply with the judgment.
This implementation period was limited to a maximum of six months from the date the judgment became final. Or in other words, six months from the date that the time to appeal the judgment to the Court of Justice, in accordance with the Statute of the Court, had expired.
Analysis
The judgment underscores the importance of the EU’s own bodies adhering to regulatory caps on financial contributions to ensure fairness and predictability in the banking and financial sector. It also highlights the balance that must be struck between achieving long-term financial stability (under the applicable EU secondary law) and respecting the legal limits designed to protect individual institutions from disproportionate financial burdens.
Read the judgments
The judgments of the General Court delivered on 23 October 2024, can be read here (T-430/22), here (T-431/22), and here (Case T-432/22).