There was a need for this volume by Stefano Lucchini and Andrea Zoppini, "Supervise banks in Europe. Who controls the controller?on the legal assessment of banking supervision in Europe. This is for three essential reasons. First, why the Banking Union was born a little quietly and the profound implications still elude the general public. Furthermore, because the debate that has taken place around the Banking Union has been predominantly of an economic nature, while all the great institutional innovations, and the Banking Union certainly is, have also far-reaching legal implications which, if not well understood, can affect its success. Lastly, because only thanks to the synthesis and dissemination effort that this book makes is it possible for a slightly wider audience to have access to a discussion on the many legal aspects of the Banking Union, a discussion which is dispersed in specialized journals and which, in original texts, speaks a language too technical to be understood by non-experts.
My overall judgment is therefore very positive. Of course, this is not a book to read before bed. Despite the authors' effort to disseminate it, after the graceful introduction many passages require the reader to concentrate and pay attention, otherwise they will be lost. They follow three substantial chapters, in order dedicated to "The acts of the ECB", "The powers of the ECB over credit institutions and their governing bodies" and "Challenges against the acts of the ECB". References are current and accurate. Well done is the reconstruction of the events that surround the subject matter.
Right from the start, Lucchini and Zoppini make the reader understand that nothing is the same as before. They start from the "ear adjustment”, as they call it, that is, from the tradition of the Bank of Italy, in the supervision of stability, of guiding the banking system also through confidential interactions with the bankers who, at times, even went beyond the "moral suasion" and took the form of bilateral recommendations. Many years ago, as a young official of the Bank of Italy, I myself had the opportunity to coordinate the content and organization of the periodic meetings that the Governor held with the shortlist of the main Italian banks. Even if I wasn't admitted to the meetings, it was easy for me to imagine from the announced contents that confidential issues would also be touched upon and that, alongside the board meeting, the Governor would often have bilateral meetings with one or more of those bankers. Well, the whole book really wants to demonstrate how that world no longer exists. Wisely, the authors do not judge but underline the epochal discontinuity by attributing it precisely to the Banking Union and to the role played in it by the European Central Bank (ECB).
The first chapter develops in detail the regulatory context and the tools used by the ECB in implementing the most advanced pillar of the Banking Union, i.e. the Single Supervisory Mechanism. In particular, the authors distinguish between regulations, decisions, recommendations, guidelines and instructions. Two problems often arise: 1) the widespread use of "soft law" mechanisms; 2) the frequent formal vagueness of the role of the National Competent Authorities (NCAs), which are in any case de facto involved in the supervisory process. These two issues will then be explored in the following two chapters which go deeper, respectively, in terms of the powers of the ECB over credit institutions and the challenge of the acts of the ECB itself.
The extensive use of "soft law" mechanisms is correctly evaluated by the authors in terms of its pros and cons. On the one hand, it allows for that flexibility which is necessary/appropriate to have in the "institutional building" phases in which the transition from the previous structure takes place - in our case from the sole responsibility of the decentralized NCAs - to the new one - in the Banking Union the sharing of responsibilities between the central authority ECB and the decentralized NCAs. In the background it seems to be perceived the greater difficulties in the legal definition of a new institution that have legal systems based on the "civil law" than what would presumably happen in systems based on the "common law". In fact, many scholars recognize that "civil law" systems are less flexible than "common law" ones in the face of innovations, even of an institutional nature. However, the authors lucidly observe that this is a double-edged sword because, on the other hand, that strong recourse to "soft law" broadens the ECB's discretion to a potentially exaggerated extent and exposes it to the risk of attenuating the "accountability" of the ECB towards all parties involved.
In reality, as well highlighted in the second chapter, also the second problem that crosses the volume - that of the frequent formal vagueness of the role of the NCAs in their symbiosis with the ECB - has significant implications on discretion, "accountability" and appealability. And this brings us to the concluding chapter where Lucchini and Zoppini make us understand that also for the ECB "there is a judge in Berlin", indeed in this case in Luxembourg. In fact, it is the Court of Justice of the European Union that is called into question for appeals. In addition, the final chapter discusses the possible involvement of other forums in appeal proceedings. Again, the authors do not limit themselves to carrying out an accurate review of the arguments in the discipline but also provide the reader with an appreciable discussion of concrete cases that have become final.
Overall, therefore, the volume is well done, is usable for a rather large audience and performs an important function.
Alongside the undoubted merits of the work, the role of commentator requires me to also identify what could perhaps be improved. I will limit myself to three main observations. A first critical aspect is that perhaps the authors underestimate other factors that contributed to overcoming the “ear fit”. For example, it's hard to think that major technological innovations didn't also play a role in that transformation. Technological innovations, the challenges of the digital economy and the new global players who are expanding from that sector towards financial services weigh heavily on the rethinking needed today for the banking industry. It is difficult to imagine that informal regulation could survive even in the absence of the Banking Union. A second weakness is that Lucchini and Zoppini trace the Banking Union back to the Global Financial Crisis of 2007-2009 which, according to them, would have elicited this European response. In a sense it is true. However, it must be remembered that the Banking Union was also born in response to the sovereign debt crisis and the vicious circle between sovereign debts and national banking systems (the so-called "doom loop") that manifested itself in 2010-2012.
Indeed, the response to the De Larosière Commission report had been the establishment of the European Banking Authority (the EBA, alongside ESMA – the European market authority – and EIOPA – the European pension fund authority etc.) and some think that perhaps we would not have had the Banking Union if the sovereign debt crisis had not triggered the "doom loop". The last aspect I want to point out is the opportunity to consider less in passing the other two pillars of the Banking Union, i.e. not only the Single Supervisory Mechanism but also the Single Resolution Mechanism and the Deposit Guarantee Harmonization initiative, whose trajectories have undoubtedly influenced that of the Single Supervisory Mechanism. The same is perhaps true of the Capital Market Union, a sister measure of the Banking Union. Finally, in passing, I would note that the interesting suggestion – advanced in the introduction – that the implementation path chosen for the Banking Union would have had asymmetrical effects between the banking systems of the various member countries is not adequately developed in the three chapters of the volume.
