The Eurosystem comprises the European Central Bank (ECB) and the national central banks of the Member States that have adopted the euro as a common currency. On 5 July 2011, the ECB published on its website the Eurosystem Oversight Policy Framework, which describes the Eurosystem’s role in the oversight of ‘payment, clearing and settlement systems’. According to the ECB, the oversight of those systems and that infrastructure as a whole stems from the task assigned to it by the FEU Treaty of promoting the smooth operation of payment systems and from Article 22 of the Statute of the European System of Central Banks and of the ECB, which provides that ‘the ECB may make regulations, to ensure efficient and sound clearing and payment systems within the Union and with other countries’.

In the Policy Framework, the ECB explained that securities settlement systems and central counterparty clearing houses (central counterparties; ‘CCPs’) 1 are key components of the financial system. A financial, legal or operational problem affecting them can be a source of systemic disturbance for the financial system. That is particularly true of CCPs in that they are a focal point for credit and liquidity risk. It was further stated in the Policy Framework that malfunctioning on the part of infrastructures located outside the euro area could have adverse effects on payment systems located in the euro area, whilst the Eurosystem has no direct influence on such infrastructures. The ECB drew the conclusion that infrastructures that settle euro-denominated transactions should be legally incorporated in the euro area with full managerial and operational control and responsibility, over all core functions, exercised from within that area.

The ECB stated that this location policy applies to CCPs which, on average, have a daily net credit exposure of more than €5 billion in one of the main euro-denominated product categories.

The United Kingdom brought an action before the General Court, contending, in particular, that the ECB lacks competence to impose a location requirement in respect of CCPs.

In its judgment delivered today, the General Court annuls the European Oversight Policy Framework published by the ECB in so far as it sets a requirement for CCPs involved in the clearing of securities to be located within the Eurozone.

Stating that creation of such a requirement goes beyond mere oversight by intervening in the regulation of their activity, the General Court holds that the ECB lacks the competence necessary to regulate the activity of securities clearing systems as its competence is limited to payment systems alone by Article 127(2) of the FEU Treaty. Accordingly, in the absence of an explicit reference to the clearing of securities in Article 22 of the Statute, the term ‘clearing and payment system’ must be interpreted as intended to make it clear that the ECB has competence to adopt regulations to ensure efficiency and safety of payment systems, including those with a clearing stage, rather than granting it an autonomous regulatory competence in respect of all clearing systems.