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United in Diversity? The Relationship between Monetary Policy and Prudential Supervision in the Banking Union

Published online by Cambridge University Press:  21 May 2018

Matthias Goldmann
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Abstract

Banking Union – Single Supervisory Mechanism – Economic interplay between monetary policy and prudential supervision – Strict separation envisaged by the Single Supervisory Mechanism legal framework – Legal framework does not prevent a more holistic approach – Financial stability is a legitimate consideration for monetary policy-making – Price stability is a legitimate concern for prudential supervision – Challenge to European Central Bank legitimacy and independence – Democratising the European Central Bank

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Articles
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European Constitutional Law Review , Volume 14 , Issue 2 , June 2018 , pp. 283 - 310
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© The Authors 2018 

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Footnotes

*

Goethe University Frankfurt. Email: [email protected].

References

1 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, OJ L 287, 29.10.2013, p. 63-89 (hereinafter ‘SSM Regulation’).

2 Comprehensively on the establishment of the Banking Union: Moloney, N., ‘European Banking Union: Assessing Its Risks and Resilience’, 51 Common Market Law Review (2014) p. 1609 Google Scholar at p. 1616. The list of entities classified as significant and currently supervised by the Single Supervisory Mechanism is available at <www.bankingsupervision.europa.eu/banking/list/who/html/index.en.html>.

3 H. Van Rompuy et al., ‘Towards a Genuine Economic and Monetary Union’, 26 June 2012, EUCO 120/12, 4-5. On the Spanish and Cypriot Banking Crises see Tröger, T.H., ‘The Single Supervisory Mechanism – Panacea or Quack Banking Regulation?’, 15 European Business Organization Law Review (2014) p. 449 CrossRefGoogle Scholar at p. 456 ff.

4 On this principle see Padoa-Schioppa, T., ‘EMU and Banking Supervision’, 2 International Finance (1999) p. 295 CrossRefGoogle Scholar.

5 See recital 13, SSM Regulation.

6 Moloney, supra n 2, p. 1659; Wymeersch, E., ‘The Single Supervisory Mechanism: Institutional Aspects’, in D. Busch and G. Ferrarini (eds.), European Banking Union (Oxford University Press 2015) p. 93 Google Scholar. Whether the Single Supervisory Mechanism respects the limits of Art. 127(6) TFEU is disputed. In favour, emphasising the fact that the Single Supervisory Mechanism relies on the cooperation of national authorities with the European Central Bank and that the latter retain specific tasks: Selmayr, M., ‘Artikel 127’, in H. von der Groeben et al. (ed.), Europäisches Unionsrecht 3 (Nomos 2015)Google Scholar marginal nos. 53-55; Ohler, C., Bankenaufsicht und Geldpolitik in der Währungsunion (CH Beck 2015) p. 145-146 Google Scholar; Kämmerer, J.A., ‘Bahn frei der Bankenunion? Die neuen Aufsichtsbefugnisse der EZB im Lichte der EU-Kompetenzordnung’, Neue Zeitschrift für Verwaltungsrecht (2013) p. 830 Google Scholar at p. 832-834; sceptical: Waldhoff, C. and Dieterich, P., ‘Einführung einer gemeinsamen Bankenaufsicht auf EU-Ebene – ein Überblick über die Rechtsprobleme’, Europäisches Wirtschafts- und Steuerrecht (2013) p. 72 Google Scholar at p. 75; Lehmann, M. and Manger-Nestler, C., ‘Einheitlicher Europäischer Aufsichtsmechanismus: Bankenaufsicht durch die EZB’, Zeitschrift für Bankrecht und Bankwirtschaft (2014) p. 2 CrossRefGoogle Scholar at p. 6-7; Kaufhold, A.-K., ‘Die Europäische Bankenunion - vollendet unvollendet? Eine Zwischenbilanz’, 32 Zeitschrift für Gesetzgebung (2017) p. 18 Google Scholar at p. 33. Instructive on the legislative history: Smits, R., The European Central Bank. Institutional Aspects (Kluwer Law International 1997) p. 356 Google Scholar.

7 Alexander, K., ‘European Banking Union: A Legal and Institutional Analysis of the Single Supervisory Mechanism and the Single Resolution Mechanism’, 40 European Law Review (2015) p. 154 Google Scholar at p. 165; Kämmerer, supra n. 6, p. 832.

8 See also the Decision of the European Central Bank on the implementation of separation between the monetary policy and supervision functions of the European Central Bank of 17 September 2004, ECB/2014/39.

9 Arts. 129 and 282(2) TFEU, in conjunction with Art. 12.1 ESCB Statute.

10 Art. 26(8), SSM Regulation.

11 Micossi, S., ‘The Monetary Policy of the European Central Bank (2002 to 2015)’, LUISS Guido Carli School of European Political Economy Working Paper (2015) No. 2015/4, 28 Google Scholar.

12 E.g. C. Siedenbiel, ‘Banken und EZB geben sich gegenseitig Schuld an der Misere’, Frankfurter Allgemeine Zeitung, 5 October 2016, <www.faz.net/aktuell/finanzen/anleihen-zinsen/deutsche-banken-kritisieren-geldpolitik-der-ezb-14466320.html>, visited 16 April 2018.

13 Hellwig, M., ‘Financial Stability, Monetary Policy, Banking Supervision, and Central Banking’, Preprints of the Max Planck Institute for Research on Collective Goods (2014) p. 3-4 Google Scholar. On Longer-Term Refinancing Operations, see ECB, ‘ECB announces measures to support bank lending and money market activity’, Press release, 8 December 2011, <www.ecb.europa.eu/press/pr/date/2011/html/pr111208_1.en.html>, visited 19 April 2018. See also the Decision of the European Central Bank of 29 July 2014 on measures relating to targeted longer-term refinancing operations, ECB/2014/34, OJ L 258/11 of 29 August 2014 and subsequent modifications.

14 Bernanke, B.S., ‘The Effects of the Great Recession on Central Bank Doctrine and Practice’, Speech at the Federal Reserve Bank of Boston 56th Economic Conference, Boston, Massachusetts (8 October 2011) p. 12 Google Scholar; De Graeve, F. et al., ‘Monetary policy and financial (in) stability: An integrated micro–macro approach’, 4 Journal of Financial Stability (2008) p. 205 CrossRefGoogle Scholar; I. Agur and M. Demertzis, ‘Will Macroprudential Policy Counteract Monetary Policy’s Effects on Financial Stability?’, IMF Working Paper WP/15/283 (2015); Alexander, K., ‘The ECB and Banking Supervision: Building Effective Prudential Supervision?’, 33 Yearbook of European Law (2014) p. 417 CrossRefGoogle Scholar at p. 423.

15 B.S. Bernanke and M. Gertler, ‘Inside the black box: the credit channel of monetary policy transmission’, National bureau of economic research Working Paper No. w5146 (1995); Glatzl, S., Geldpolitik und Bankenaufsicht im Konflikt. Die Pflicht der Mitgliedstaaten zur Unterstützung der EZB im Bereich der Preisstabilität unter besonderer Berücksichtigung der Bankenaufsicht (Nomos 2009) p. 192-212 Google Scholar.

16 ‘Why do interest rates tend to have an inverse relationship with bond prices?’, Investopedia, 15 December 2017, <www.investopedia.com/ask/answers/04/031904.asp>, visited 16 April 2018.

17 Kashyap, A.K. and Stein, J.C., ‘The impact of monetary policy on bank balance sheets’, 42 Carnegie-Rochester Conference Series on Public Policy (1995) p. 151 CrossRefGoogle Scholar.

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19 Van den Heuvel, S.J., ‘Does bank capital matter for monetary transmission?’, 8 Economic Policy Review (2002) p. 259 Google Scholar.

20 Art. 130 Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, OJ L 176/338 of 27 June 2013.

21 Angeloni, I. and Faia, E., ‘Capital regulation and monetary policy with fragile banks’, 60 Journal of Monetary Economics (2013) p. 311 CrossRefGoogle Scholar.

22 Cf Goodhart, C. and Schoenmaker, D., ‘Should the Functions of Monetary Policy and Banking Supervision Be Separated?’, 47 Oxford Economic Papers (1995) p. 539 CrossRefGoogle Scholar; L. Amorello, The Legal Interaction between Macroprudential Banking Supervision and Monetary Policy in the European Union (unpublished manuscript, on file with the author, 2017).

23 For the US: A. Komai and G. Richardson, ‘A brief history of regulations regarding financial markets in the United States: 1789 to 2009’, National Bureau of Economic Research Working Paper No. w17443 (2011); for England: Capie, F., The Bank of England (Cambridge University Press 2010)CrossRefGoogle Scholar; for Germany: Müller, C., Die Entstehung des Reichsgesetzes über das Kreditwesen vom 5. Dezember 1934 (Duncker & Humblot 2003)Google Scholar; for France: Plessis, A., ‘The history of banks in France’, in M. Pohl (ed.), Handbook on the History of European Banks (Edward Elgar 1994) p. 185 Google Scholar.

24 Goodhart and Schoenmaker, supra n. 22, p. 541.

25 Bagehot, W., Lombard Street. A Description of the Money Market (Henry S. King & Co 1873) p. 48 Google Scholar ff.

26 Goodhart and Schoenmaker, supra n. 22, p. 539; Buckle, M. and Thompson, J.L., The UK Financial System: Theory and Practice, 4th edn (Manchester University Press 2004) p. 334 Google Scholar ff; Thiele, A., Finanzaufsicht (Mohr Siebeck 2014) p. 193 CrossRefGoogle Scholar ff.

27 Goodhart and Schoenmaker, supra n. 22, p. 543-544.

28 Thiele, supra n. 26, p. 194-195; on the origins of the German model, which can also be traced back to the desire of the Nazi regime to control financial supervision, see Müller, supra n. 23, p. 382-385.

29 Van den Heuvel, supra n. 19, p. 259.

30 This understanding of the Philips curve was proposed by Samuelson, P.A. and Solow, R.M., ‘Analytical aspects of anti-inflation policy’, 50 The American Economic Review (1960) p. 177 Google Scholar.

31 For the US: Taylor, J.B., ‘A historical analysis of monetary policy rules’, in J.B. Taylor (ed.), Monetary Policy Rules (University of Chicago Press 1999) p. 319 CrossRefGoogle Scholar at p. 338-339.

32 Hellwig, supra n. 13, p. 18.

33 Friedman, M., A Program for Monetary Stability (Fordham University Press 1960)Google Scholar; Friedman, M., ‘The Role of Monetary Policy’, 58 The American Economic Review (1968) p. 1 Google Scholar.

34 Ioannidou, V.P., ‘Does monetary policy affect the central bank’s role in bank supervision?’, 14 Journal of Financial Intermediation (2005) p. 58 CrossRefGoogle Scholar at p. 59; Franck, R. and Krausz, M., ‘Why separate monetary policy from banking supervision?’, 36 Journal of Comparative Economics (2008) p. 388 CrossRefGoogle Scholar at p. 389; Lastra, R.M., ‘Central Bank Independence and Financial Stability’, 18 Revista de Estabilidad Financiera (2010) p. 51 Google Scholar; James, H., Making the European Monetary Union (Harvard University Press 2012) p. 180 CrossRefGoogle Scholar ff.

35 Rogoff, K., ‘The optimal degree of commitment to an intermediate monetary target’, 100 The Quarterly Journal of Economics (1985) p. 1169 CrossRefGoogle Scholar; Walsh, C.E., ‘Optimal contracts for central bankers’, The American Economic Review (1995) p. 150 Google Scholar; Hellwig, supra n. 13, p. 12-13. Somewhat surprisingly, Milton Friedman rejected central bank independence. See Friedman, M., ‘Should there be an independent monetary authority?’, in L. Yeager (ed.), In Search of a Monetary Constitution (Harvard University Press 1962) p. 219 Google Scholar; Friedman, M., Capitalism and Freedom (University of Chicago Press 1962) p. 77 Google Scholar. However, the conundrum quickly dissolves when considering that Friedman understood independence as synonymous with discretion, hence in opposition to his proposal of a rules-based, inflation-targeting monetary policy. Central bank independence is in line with Friedman’s views to the extent that it relates to the instruments of monetary policy only, not to the goals. See Fischer, S., ‘Central-Bank Independence Revisited’, 85 The American Economic Review (1995) p. 201 Google Scholar at p. 202.

36 Tinbergen, J., Centralization and Decentralization in Economic Policy (North Holland Publishing Co 1954) p. 75 Google Scholar. On the significance of Tinbergen’s work, see Bruni, F. and Masciandaro, D., ‘Evaluating Central Bank Independence. Theoretical Issues and European Perspectives’, 99 Rivista Internazionale di Scienze Sociali (1991) p. 93 Google Scholar at p. 101-103; Issing, O., ‘Monetary and financial stability: is there a trade-off?’, 18 BIS Papers (2003) p. 16 Google Scholar at p. 19.

37 A. Greenspan, ‘Economic Volatility’, Proceedings of Federal Reserve Bank of Kansas City Symposium, Jackson Hole (2002).

38 Cf Docherty, P., ‘Basel II and the Political Economy of Banking Regulation-Monetary Policy Interaction’, 37 International Journal of Political Economy (2008) p. 82 CrossRefGoogle Scholar at p. 92-93.

39 Schwartz, A.J., ‘Why Financial Stability Despends on Price Stability’, 15 Economic Affairs (1995) p. 21 CrossRefGoogle Scholar.

40 Cf Hayek, F.A., Law, Legislation and Liberty 1: Rules and Order (University of Chicago Press 1974) p. 8-31 Google Scholar.

41 Seminal for the rules vs. discretion debate: Kydland, F.E. and Prescott, E.C., ‘Rules Rather than Discretion: The Inconsistency of Optimal Plans’, 85 The Journal of Political Economy (1977) p. 473 CrossRefGoogle Scholar.

42 Polillo, S. and Guillén, M.F., ‘Globalization Pressures and the State: The Worldwide Spread of Central Bank Independence’, 110 American Journal of Sociology (2005) p. 1764 CrossRefGoogle Scholar at p. 1770-1771.

43 E.g. Bernanke and Gertler, supra n. 15.

44 Goodhart and Schoenmaker, supra n. 22, p. 544-545.

45 Art. 130, 282 (3), TFEU.

46 Lastra, R.M., Legal Foundations of International Monetary Stability (Oxford University Press 2006) p. 90 Google Scholar.

47 See chart in Federal Reserve System, The Federal Reserve System. Purposes & Function, 10th edn (2016) p. 77.

48 Sec. 7 Kreditwesengesetz. On the controversy about the relationship between BaFin and Bundesbank surrounding the establishment of BaFin: J.H. Lindemann, ‘Section 7’, in K.-H. Boos et al. (eds.), Kreditwesengesetz-Kommentar 1, 5th edn (2016) marginal no. 10-14.

49 Sec. 7 Kreditwesengesetz. Instructive on the legislative history: Humm, H., Bankenaufsicht und Währungssicherung (Duncker & Humblot 1989) p. 117 Google Scholar.

50 Lastra, supra n. 46, p. 96.

51 Committee on International Economic Policy and Reform, ‘Rethinking Central Banking’, Brookings Institution (2011); Hellwig, supra n. 13, p. 21; T. Beck and D. Gros, ‘Monetary Policy and Banking Supervision: Coordination Instead of Separation’, CEPS Policy Brief No. 286) (2012).

52 Bernanke, supra n. 14, p. 5.

53 J. De Larosière et al., ‘Report of the high-level group on financial supervision in the EU’, European Commission. Brussels (2009) para. 48. The European Central Bank had recognised the need for central banks to promote systemic stability even before the crisis: Bini Smaghi, L., ‘Central Bank Independence in the EU: From Theory to Practice’, 14 European Law Journal (2008) p. 446 CrossRefGoogle Scholar at p. 454.

54 See supra n. 13 and accompanying text.

55 ECJ 16 June 2015, Case C-62/14, Gauweiler et al. v Deutscher Bundestag, ECLI:EU:C:2015:400, paras. 51 and 52.

56 Cf. supra n. 20.

57 Supra.

58 ‘Rethinking Central Banking’, supra n. 51, p. 5 ff; O. Blanchard et al., ‘Rethinking Macroeconomic Policy’, IMF Staff Position Note SPN/10/03 (2010) p. 5.

59 S. Roger and J. Vlček, ‘Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements’, IMF Working Paper (2011).

60 This is called the risk-taking channel, cf. G. Dell’Ariccia et al., ‘Monetary Policy, Leverage, and Bank Risk-Taking’, IMF Working Paper No. 276 (2010).

61 Cf Fama, E.F., ‘Efficient capital markets: A review of theory and empirical work’, 25 The Journal of Finance (1970) p. 383 CrossRefGoogle Scholar.

62 Cf H. P. Minsky, ‘The Financial Instability Hypothesis’, Levy Economics Institute Working Paper No. 74 (1992). On the rediscovery of Minsky after the crisis, see Rosser, J.B. et al., ‘A Minsky-Kindleberger perspective on the financial crisis’, 46 Journal of Economic Issues (2012) p. 449 CrossRefGoogle Scholar.

63 Based on econometric data: Cömert, H., Central banks and financial markets: the declining power of US monetary policy (Edward Elgar 2013) p. 89 CrossRefGoogle Scholar ff.

64 Goodhart and Schoenmaker, supra n. 22, p. 547-548; Issing, supra n. 36, p. 18; Blanchard et al., supra n. 58, p. 11-13; Rethinking Central Banking’, supra n. 51; Hellwig, supra n. 13, p. 18-19. Overview of the most pertinent arguments pro and contra holistic approaches: E.W. Nier, ‘Financial stability frameworks and the role of central banks: lessons from the crisis’, IMF Working Paper WP/09/70 (2009) p. 14 ff.

65 R. Goyal et al., ‘A banking union for the euro area’, IMF Staff Discussion Note SDN/13/01 (2013) p. 14; sceptical about the merits of the separation model: Berger, W. and Kißmer, F., ‘Central bank independence and financial stability: A tale of perfect harmony?’, 31 European Journal of Political Economy (2013) p. 109 CrossRefGoogle Scholar. Evidence from before the crisis: De Graeve et al., supra n. 14; Ioannidou, supra n. 34; emphasising the need for further research: G. Carboni et al., ‘Exploring the Nexus between Macro-Prudential Policies and Monetary Policy Measures’, ECB Financial Stability Review (May 2013) p. 99; finding evidence for the positive effects of a coordination between macroprudential supervision and monetary policy: Bruno, V. et al., ‘Comparative assessment of macroprudential policies’, 28 Journal of Financial Stability (2017) p. 183 CrossRefGoogle Scholar.

66 Lastra, R.M., International Financial and Monetary Law, 2nd edn (Oxford University Press 2015) p. 125 Google Scholar.

67 Green, D., ‘The Relationship between Micro-Macro-Prudential Supervision and Central Banking’, in E. Wymeersch et al. (ed.), Financial Regulation and Supervision (Oxford University Press 2012) p. 57 CrossRefGoogle Scholar at p. 63 (3.32).

68 G. Claeys and Z.M. Darvas, ‘The financial stability risks of ultra-loose monetary policy’, Bruegel Policy Contribution No. 2015/03 (2015), 12; S. Laseen et al., ‘Systemic Risk: A New Trade-off for Monetary Policy?’, IMF Working Paper WP/15/142 (2015).

69 Kaufhold, A.-K., ‘Systemaufsicht. Der Europäische Ausschuss für Systemrisiken im Finanzsystem als Ausprägung einer neuen Aufsichtsform’, Die Verwaltung (2012) p. 21 Google Scholar.

70 Dalla Pellegrina, L., Masciandaro, D. and Pansini, R.V., ‘The central banker as prudential supervisor: Does independence matter?’, 9 Journal of Financial Stability (2013) p. 415 CrossRefGoogle Scholar at p. 415-416: ‘great reversal’.

71 ECB, ‘The ECB’s monetary policy strategy’, press release, 8 May 2003, available at <www.ecb.europa.eu/press/pr/date/2003/html/pr030508_2.en.html>, visited 19 April 2018.

72 ‘The ECB’s monetary policy strategy after the evaluation and clarification of May 2003’, Speech by Jean-Claude Trichet, President of the European Central Bank, delivered at the Center for Financial Studies’ key event, Frankfurt am Main, 20 November 2003, available at <www.ecb.europa.eu/press/key/date/2003/html/sp031120.en.html>, visited 19 April 2018.

73 Ibid.

74 ECB, The Monetary Policy of the ECB (2011) p. 83-86.

75 Padoa-Schioppa, T., ‘Central banks and financial stability: exploring the land in between’, in V. Gaspar et al. (ed.), The Transformation of the European Financial System (European Central Bank 2003) p. 269 Google Scholar at p. 287. Similar: Issing, supra n. 36, p. 16.

76 ECJ, Case C-370/12, Pringle v Ireland, EU:C:2012:756, para. 53.

77 Concluding that financial stability concerns therefore have no place in monetary policy: Siekmann, H., ‘Missachtung rechtlicher Vorgaben des AEUV durch die Mitgliedstaaten und die EZB in der Schuldenkrise’, in T.M.J. Möllers and F.-C. Zeitler (ed.), Europa als Rechtsgemeinschaft-Währungsunion und Schuldenkrise (Mohr Siebeck 2013) p. 101 Google Scholar at p. 145.

78 Lastra, R.M. and Louis, J.V., ‘European Economic and Monetary Union: History, Trends, and Prospects’, 32 Yearbook of European Law (2013) p. 57 CrossRefGoogle Scholar at p. 82.

79 Art. 25.1 ESCB Statute. Art. 25.2 ESCB Statute refers to Art. 127 (6) TFEU and has no relevance for the question under consideration.

80 Disagreeing: Waldhoff, C., ‘Art. 127’, in H. Siekmann (ed.), Kommentar zur Europäischen Währungsunion 2 (2013) p. 263 Google Scholar, marginal no. 69.

81 Smits, supra n. 6, p. 338-339.

82 Pringle, supra n. 76, para. 56; Gauweiler, supra n. 55, para. 64.

83 Gauweiler, supra n. 55, paras. 51 and 52.

84 Gauweiler, supra n. 55, paras. 49-50.

85 Cf Ohler, supra n. 6, p. 74, who, however, locates the competence of the European Central Bank for financial stability considerations only in Art. 127(5) TFEU.

86 Cf supra n. 63.

87 Art. 5(4) TEU; ECJ Gauweiler, supra n. 55, paras. 66 ff.

88 See Art. 296(2) TFEU; ECJ Gauweiler, supra n. 55, para. 70.

89 Glatzl, supra n. 15, p. 244.

90 Recitals 65 and 66 SSM Regulation.

91 Art. 25(4) SSM Regulation.

92 In this sense also Kämmerer, supra n. 6, p. 832; Moloney, supra n. 2, p. 1635; Ferran, E. and Babis, V.S., ‘The European single supervisory mechanism’, 13 Journal of Corporate Law Studies (2013) p. 255 CrossRefGoogle Scholar at p. 266.

93 Art. 26(8) SSM Regulation.

94 Art. 26(3) SSM Regulation.

95 Art. 26(3) SSM Regulation.

96 Manger-Nestler, C., ‘Die Bankenunion. Einheitliche Mechanismen zur Bankenaufsicht und -abwicklung’, in H.-J. Blanke and S. Pilz (eds.), Die ‘Fiskalunion’ (Mohr Siebeck 2014) p. 299 Google Scholar at p. 325-326. See also Sacarcelik, O., ‘Europäische Bankenunion: Rechtliche Rahmenbedingungen und Herausforderungen der einheitlichen europäischen Bankenaufsicht’, Zeitschrift für Bank und Kapitalmarktrecht (BKR) (2013) p. 353 Google Scholar at p. 355.

97 Cf Art. 26(8) SSM Regulation.

98 Siekmann, H., ‘Art. 119’, in H. Siekmann (ed.), Kommentar zur Europäischen Währungsunion (2013)Google Scholar marginal no. 102; C. Waldhoff, ‘Art. 127’, in Siekmann, supra n. 80, p. 263, marginal no. 7; H.J. Hahn and U. Häde, Währungsrecht, 2nd edn (2010) Sec. 15 marginal no. 14. Dissenting, arguing that the treaties give precedence to price stability: Manger-Nestler, supra n. 96, p. 326.

99 See supra n. 87 and accompanying text.

100 Art. 411 ff., Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, OJ L 176/1 of 27 June 2013.

101 E.g. Art. 86 Directive 2013/36/EU, supra n. 20.

102 Art. 125(1) TFEU.

103 Art. 127(1) TFEU.

104 Minsky, supra n. 62.

105 Pistor, K., ‘A legal theory of finance’, 41 Journal of Comparative Economics (2013) p. 315 CrossRefGoogle Scholar.

106 Ibid., p. 316.

107 Cf, however, ibid., p. 323: Pistor hints at the significance of democracy for financial stability several times, but never really engages with this issue.

108 L. Wittgenstein, Philosophische Untersuchungen 1, 16th edn (2004) Sec. 43.

109 Gadamer, H.-G., Wahrheit und Methode (JCB Mohr 1960) p. 333-335 Google Scholar.

110 With respect to Dworkin’s right answer thesis: Habermas, J., Faktizität und Geltung (1992) p. 278-279 Google Scholar.

111 Cf Habermas, supra n. 110, p. 272 ff.

112 On the democratic ramifications of judgments by (international) courts, see von Bogdandy, A. and Venzke, I., ‘In Whose Name? An Investigation of International Courts’ Public Authority and Its Democratic Justification’, 23 European Journal of International Law (2012) p. 7 CrossRefGoogle Scholar.

113 Cf Kydland, F.E. and Prescott, E.C., ‘Rules Rather than Discretion: The Inconsistency of Optimal Plans’, 85 The Journal of Political Economy (1977) p. 473 CrossRefGoogle Scholar.

114 BVerfG Gauweiler, decision of 14 January 2014, ECLI:DE:BVerfG:2014:rs20140114.2bvr272813, para. 59; with respect to Art. 88 of the Basic Law: BVerfG Maastricht, judgment of 12 October 1993, 89 BVerfGE 155, 208-9; Amtenbrink, F. and Lastra, R.M., ‘Securing Democratic Accountability of Financial Regulatory Agencies – A Theoretical Framework’, in R.V. De Mulder (ed.), Mitigating Risk in the Context of Safety and Security – How Relevant is a Rational Approach? (2008) p. 115 Google Scholar; Dinov, S., ‘Europäische Bankenaufsicht im Wandel’, Zeitschrift Europarecht (EuR) (2013) p. 593 Google Scholar at p. 606.

115 See supra n. 33 and accompanying text.

116 E.g. Issing, O., ‘The Eurosystem: Transparent and Accountable or “Willem in Euroland”’, 37 JCMS: Journal of Common Market Studies (1999) p. 503 Google Scholar.

117 See also De Haan, J. and Eijffinger, S.C.W., ‘The Democratic Accountability of the European Central Bank: A Comment on Two Fairy-tales’, 38 Journal of Common Market Studies (2000) p. 393 CrossRefGoogle Scholar at p. 397-398.

118 Mudge, S.L. and Vauchez, A., ‘Fielding supranationalism: the European Central Bank as a field effect’, 64 The Sociological Review Monographs (2016) p. 146 CrossRefGoogle Scholar.

119 For an early critique see Gormley, L.W. and De Haan, J., ‘The democratic deficit of the European Central Bank’, 21 European Law Review (1996) p. 95 Google Scholar.

120 Cf Case T-368/15, Order of the General Court (Fourth Chamber) of 14 July 2016, Alcimos Consulting SMPC v European Central Bank, ECLI:EU:T:2016:438; for a detailed account, see DIEM25, ‘#TheGreekFiles. Why independence is impossible without greater transparency’ (2017).

121 Cf Franck and Krausz, supra n. 34.

122 Art. 19 SSM Regulation.

123 W. Münchau, ‘Central bank independence is losing ist lustre’, Financial Times, 19 February 2017, <www.ft.com/content/6ed32b02-f526-11e6-95ee-f14e55513608>, visited 19 April 2018. This position refers to Issing, supra n. 114.

124 K. Allen, ‘Mario Draghi defends ECB independence after German criticism’, The Guardian, 21 April 2016, <www.theguardian.com/business/2016/apr/21/mario-draghi-defends-ecb-independence-german-criticism-central-bank-eurozone-interest-rates>, visited 19 April 2018; A. Weidel, ‘Der EZB Einhalt gebieten’, 22 March 2016, <www.afdbayern.de/alice-weidel-der-ezb-einhalt-gebieten/>, visited 19 April 2018.

125 A. Vauchez, Démocratiser l’Europe (Seuil 2014), especially at p. 45-46; A. Vauchez, ‘The Appeal of Independence: Exploring Europe’s Way of Political Legitimacy’, TARN Working Paper 7/2016 (2016).

126 Vauchez (2014), supra n. 125, p. 51-53, 57-58.

127 Ibid., p. 59 ff., p. 77-79.

128 Ibid., p. 80-81.

129 On the European Central Bank transparency policy, see ECB, supra n. 74, p. 86 ff.

130 Cf ‘ECB to adjust schedule of meetings and to publish regular accounts of monetary policy discussions in 2015’, ECB Press conference of 3 July 2014, <www.ecb.europa.eu/press/pr/date/2014/html/pr140703_1.en.html>, visited 19 April 2018.

131 Gandrud, C. and Hallerberg, M., ‘Does Banking Union Worsen the EU’s Democratic Deficit? The Need for Greater Supervisory Data Transparency’, 53 JCMS: Journal of Common Market Studies (2015) p. 769 Google Scholar.

132 See A. Barker et al., ‘Brussels and ECB split on Monte dei Paschi’s capital proposals’, Financial Times, 23 February 2017, <www.ft.com/content/9635b04c-f923-11e6-bd4e-68d53499ed71>, visited 19 April 2018.

133 Cf DIEM25, supra n. 120.

134 Instructive: Grant, R.W. and Keohane, R.O., ‘Accountability and Abuses of Power in World Politics’, 99 American Political Science Review (2005) p. 29 at p. 36CrossRefGoogle Scholar.

135 Moloney, supra n. 2, p. 1611; cf also Recital 48, SSM Regulation.

136 Cf Art. 284(3) TFEU; Art. 20 of the SSM Regulation, in conjunction with the Interinstitutional Agreement between the European Parliament and the European Central Bank on the practical modalities of the exercise of democratic accountability and oversight over the exercise of the tasks conferred on the European Central Bank within the framework of the Single Supervisory Mechanism.

137 G.L. Schiavo, ‘From National Banking Supervision to a Centralized Model of Prudential Supervision in Europe? The Stability Function of the Single Supervisory Mechanism’, 21 Maastricht Journal of European and Comparative Law (2014) p. 110 at p. 125.

138 Curtin, D., ‘Democratic accountability of EU executive power. A reform agenda for parliaments’, in F. Fabbrini (ed.), What form of government for the European Union and the Eurozone? (Bloomsbury 2015) p. 171 Google Scholar at p. 171, 185.

139 T. Beukers, ‘Constitutional changes in Euro government and the relationship between the ECB and the executive power in the Union’, in Fabbrini, supra n. 138, p. 95, 109 (on Draghi defying accountability before national parliaments).

140 Ibid., p. 109.

141 Vauchez (2014), supra n. 125, p. 83. Along similar lines with respect to the Federal Reserve: J. Stiglitz, ‘Central Banking in a Democratic Society’, 146 De Economist (1998) p. 199 at p. 217 ff.

142 Vauchez (2014), supra n. 125, p. 90 ff.

143 Habermas, J., ‘The Crisis of the European Union in the Light of a Constitutionalization of International Law’, 23 European Journal of International Law (2012) p. 335 CrossRefGoogle Scholar at p. 344.

144 Habermas, supra n. 110, Ch. 9.