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Eurozone banks expected to pay €260 million in 2015 to cover European Central Bank supervisory costs

Out-Law News | 28 May 2014 | 4:59 pm | 2 min. read

Each of the eurozone's largest banks would be required to pay fees of around €15 million a year to help cover the European Central Bank's (ECB) expenditure on supervising the eurozone banking area, under draft proposals published by the bank.

The majority of banks to be directly supervised by the ECB would pay between €0.7m and €2m annually under the proposed measures, with the smallest paying around £2,000 a year, according to the draft proposals.

The money would be used to cover the cost of the ECB's banking supervision after it becomes the eurozone's single banking regulator in November. The ECB estimates that in 2015 it will spend around €260m on supervising Europe's largest banks. Around 60% of that will be spent on staffing costs, 10% on premises-related costs and 30% on operating expenditures such as travel, consultancy and IT services.

The ECB released the figures with the publication of the draft ECB regulation on supervisory fees which it has now put out to consultation until 11 July. The ECB, which is the central bank for the euro currency, will hold a public hearing on the consultation documents at its premises in Frankfurt on 24 June.

The draft regulation sets out the arrangements under which the ECB plans to levy an annual supervisory fee on individual banks to recover the expenses it incurs in relation to its new role. The regulation establishes the methodology by which the total amount of the annual supervisory fee will be determined, how the amount to be paid by each supervised bank or banking group will be calculated and the way in which fees will be collected.

From November this year the ECB will take over the direct supervision of up to 130 of the European Union's largest financial institutions and work with national competent authorities (NCAs) to oversee smaller banks.

The ECB is taking on the role as part of the European Union Single Supervisory Mechanism (SSM) which was established by EU leaders in the wake of the global financial crisis with the aim of increasing financial stability and integration in Europe and harmonising supervisory practices across the eurozone and other participating EU member states.

In explanatory notes accompanying the draft regulation the ECB said: "All banks supervised within the SSM will be subject to an annual ECB supervisory fee. However the amount to be paid by significant banks and less significant banks will be proportionate to the ECB's supervisory effort."

"Initial estimates show that approximately 85% of expenditures will be recovered from significant banking groups directly supervised by the ECB and that only 15% of the ECB's overall supervisory costs will be recovered from over 5,800 less significant banks," said the ECB.

Under the draft regulation the first fee notice would be issued to banks in June 2015 and would be payable within 30 days. In the event of partial payment or non-payment, interest on the overdue amount would accrue on a daily basis from the due date at a rate of the ECB's main refinancing rate plus 8 percentage points, the ECB said.

The ECB supervisory fee does not affect the rights of NCAs to levy fees in accordance with national laws for costs incurred in the performance of their supervisory activities.

Following the consultation period the EU regulation is due to enter into force before the ECB assumes its supervisory role in November.