Malacalza vs. ECB - On the liability of the European Central Bank for the exercise of its prudential supervisory functions

For many years, the stability of the financial sector has formed a paramount public interest, being the underlying reason for far-reaching discretion and extensive powers of the competent supervisory authorities. While swift manoeuvrability is often of the essence to counter systemic risks, the call for accountability in case of wrongful supervisory actions has also formed a recurring theme. In a recent opinion to the European Court of Justice (ECJ), advocate general Campos Sánchez-Bordona has made remarkable arguments that could rekindle discussions around a non-contractual liability of the ECB.

1. What happened so far 

The applicants (Malacalza Investimenti and Vittorio Malacalza, Case C‑557/24) were shareholders of Banca Carige, a publicly listed Italian bank. In 2016, the ECB imposed early intervention measures based upon Article 16(2)(a), (i), (j) and (k) of Regulation No 1024/2013 (SSM Regulation) to address, amongst others, a previously identified capital shortfall and requested the bank to provide a strategic plan and an operational plan to reduce non-performing loans. Tensions increased over the coming years, and the ECB refused to approve Banca Carige’s capital conservation plans, eventually placing the bank under temporary administration in 2019.

The applicants claimed for damages allegedly caused by the ECB’s exercise of its prudential supervisory functions over Banca Carige and based their claims on a non-contractual liability under article 340 para. 3 TFEU. Under this rule, the ECB can be held liable for damages caused by it or by its servants in the performance of their duties in accordance with the general principles common to the laws of the Member States.

The General Court (judgement of 5 June 2024, T-134/21) dismissed the action, reminding that a public liability of the EU and its institutions is subject to three cumulative requirements: (i) the unlawfulness of the conduct attributable to the institution or its servants in the performance of their duties, (ii) the fact of damage and (iii) the existence of a causal link between the alleged conduct and the damage.

Focussing solely on the first requirement, it reiterated that as per established case law, the conduct must involve a rule of law “intended to confer rights on individuals” and the breach of such rule must be “sufficiently serious”. Analysing eight instances of alleged unlawful supervisory measures, the General Court found that most of the instruments in question were not intended to grant rights to individuals but rather oriented at the public good. For the remaining measures in question, it held that the applicants had failed to demonstrate a sufficiently serious breach.

This judgement has been challenged before the ECJ based on seven grounds of appeal. Advocate general Campos Sánchez-Bordona was tasked to opine solely on one ground of appeal, namely the alleged undermining of confidence in the bank’s situation as a result of the ECB’s actions (in particular by means of early intervention measures).

2. The advocate general’s view: Respecting the rights of individuals in the exercise of prudential supervisory functions

While limited to the scope set out above, the advocate general’s opinion contains remarkable statements nonetheless. It rejects the view that the legal basis for the ECB’s early intervention measures does not confer any rights to individuals. Although the ECB may very well have pursued the public interest of maintaining the stability of the financial system, such focus is indeed present in all its decisions, which “does not mean that it can ignore the rights of the shareholders of that institution”. As the shareholders’ rights are “the reverse side of the obligations, positive and negative, that the EU rule imposes on the ECB”, the advocate general argues that failure of the ECB to comply with the rules governing early intervention measures must also enable the individuals affected by such actions to have recourse to the courts of the EU, be it by way of an action for annulment or for non-contractual liability. 

To underscore his opinion, the advocate general relies on an earlier decision by the ECJ accepting that a shareholder of an affected bank had locus standi to bring an action for annulment by the ECB before the General court, and infers that the shareholder must therefore also have the chance to claim non-contractual liability. He proceeds to test this finding against the EU case law which deals with rules of EU law that do not confer rights on individuals for the purposes of non-contractual liability of EU institutions. In this respect, he argues that the appeal to general objectives alone is not sufficient to reject the possibility that the rules implicitly attribute rights to individuals, but that a more detailed analysis of the relevant provisions is required. In case of the ECB’s early intervention measures upon Article 16(2) Regulation No 1024/2013 (SSM Regulation), the advocate general emphasizes that these measures – despite pursuing the general interest of safeguarding financial stability – directly and indirectly hindered the exercise of shareholders’ rights, thus affecting their legal and property situation. The advocate general specifically points to measures pursuant to Article 16(2)(i) SSM Regulation, which prohibited or restricted the distribution of dividends to shareholders, members or holders of Additional Tier 1 capital. However, the advocate does not limit his line of argument to that specific measure, but argued that all early intervention measures in scope of the decision had an impact on the rights of the shareholders. Although not stated expressly, this suggests that the advocate general effectively derives the scope of protection from the effects of the relevant measures.

3. A case for the ECB’s non-contractual liability?

The decisions made by financial supervisory authorities, such as the ECB, are characterised, on the one hand, by the fact that they are often made under time pressure and with a high degree of situational uncertainty. On the other hand, against this backdrop, the supervisory authorities are granted far-reaching powers and discretion to intervene in the rights of banks, their creditors and their shareholders. 

It goes without saying that the question of judicial review, whether through seeking annulment of the measure or through non-contractual liability for financial damages, will continue to be raised in light of the increasing supervisory activity of the ECB. Both means for judicial review are becoming increasingly interlinked. In July 2025, the ECJ ruled – also in connection with the ECB's 2019 decision to place Banca Carige under temporary administration – that minority shareholders can bring an action for annulment against measures taken by the ECB (judgement of 15 July 2025 - C-777/22 P and C-789/22 P (Corneli)). Pursuant to the ECJ, these decisions infringed the rights of “shareholders to elect the management and supervisory bodies of that bank, and their right to convene a general meeting of the shareholders and to set the agenda of that meeting” and “the possibility of an action for damages […], in so far as that interest is not hypothetical.” The advocate general explicitly refers to that case, calling it “highly relevant” and concluding that is “logical to infer that [Mrs Corneli] also had the possibility to claim that the ECB had non-contractual liability”.

Clarifying fundamental issues relating to the ECB's non-contractual liability for measures under the SSM Regulation would be an important step in enabling this liability to exert its behavioural influence in advance, and to enforce it efficiently in retrospective.

However, claims arising from non-contractual liability against the ECB remain subject to additional requirements, the existence of which will often be difficult to prove in individual cases. Most notably, there still must be a “sufficiently serious breach” of a rule of law. The Advocate General also addresses this point, noting that “given the discretion available to the ECB in adopting early intervention measures, it will probably not be easy to prove that there was a sufficiently serious breach of the applicable rules of EU law.” Even an affirmative ruling could therefore prove to be a Pyrrhic victory in complex decisions such as early intervention measures. Nonetheless, if the Advocate General's opinion prevails, this would open the door, at least a little, to the ECB being held liable for its actions in their function as banking supervisor. 

Importantly, this is more than what can be said for some Member States. In Germany, the non-contractual liability of the national competent authority, BaFin, in banking supervisory and financial markets regulation is per se excluded due to a special provision in the law confirming that BaFin performs its duties and exercises its powers “solely in the public interest” (Section 4(4) Financial Services Supervision Act, FinDAG). The scope of this provision has recently been examined in detail by various German courts that had to decide whether BaFin's ban on short selling in favour of Wirecard violated the interests of investors. Investors have not been successful in any of these cases to date. If the ECJ concurs with the advocate general, the question of the appropriateness of a fundamental exclusion of BaFin's official liability could also gain new momentum.