The ECJ has ruled that the EBA acted within its powers when it adopted guidelines on product governance and oversight arrangements for retail banking products in 2015.
The guidelines set out requirements for manufacturers and distributors when designing and launching products to consumers relating to certain provisions of the CRD IV Directive, the original Payment Services Directive (PSD), the second Electronic Money Directive (2EMD) and the Mortgage Credit Directive (MCD).
The EBA is required to act within the powers conferred by the EBA Regulation and specified legislative acts (including those mentioned above), however, apart from the MCD, none of the relevant legislative acts make any express provision concerning the governance of retail banking products or empower the EBA to issue guidelines on that topic.
The question for the ECJ to consider therefore was whether the EBA had the power to make the guidelines. The ECJ held that the EBA had acted within its powers as the guidelines:
- contain principles intended to ensure effective processes to identify, manage and monitor risks and adequate internal control mechanisms, as required by the CRD IV Directive, PSD and 2EMD; and
- fall within the EBA Regulation framework for the adoption of guidelines because their aim is to:
- contribute to consumer protection (and depositor and investor protection);
- ensure that the taking of credit and other risks are appropriately regulated; and
- contribute to the establishment of consistent, efficient and effective supervisory practices within the European System of Financial Supervision.