Cleary Gottlieb represented BNP Paribas and Credit Agricole in their victory against the European Central Bank (ECB).
By a judgment of July 13, 2018, the General Court of the European Union annulled the decisions of the European Central Bank, refusing to allow six French credit institutions including BNP Paribas and Crédit Agricole to benefit from an exemption from the calculation of the leverage ratio for certain exposures to the French State-owned Caisse des Dépôts et Consignations related to regulated savings accounts.
The court confirmed that the ECB had discretion to grant the benefit of the exemption, but found that the ECB had erred in law and committed manifest errors of assessment in the exercise of its discretion.
In particular, the court found that the ECB’s refusal was based on certain characteristics inherent to the relevant exposures (notably the fact that they were guaranteed by the French State), thus depriving the exemption of any useful effect. The court also found that the ECB’s assessment of potential risks of excessive leverage was manifestly incorrect and that the ECB had failed to carry out a detailed examination of the characteristics of regulated savings accounts.
The court’s decision is the first case in which a decision of the ECB on supervisory matters is overturned since the ECB took over the supervision of Eurozone banks in 2014.