Opinion of the European Central Bank of 28 March 2022 on authorisation of credit institutions to provide crowdfunding services (CON/2022/13)

OPINION OF THE EUROPEAN CENTRAL BANK of 28 March 2022 on authorisation of credit institutions to provide crowdfunding services (CON/2022/13) Introduction and legal basis

On 21 February 2022 the European Central Bank (ECB) received a request from the Bulgarian Minister for Finance for an opinion on a draft law amending the law on public offering of securities and other laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to Българска народна банка (Bulgarian National Bank, BNB) as well as the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

The main purpose of the draft law is to introduce into Bulgarian law technical implementing measures necessary in order to comply with Regulation (EU) 2020/1503 of the European Parliament and of the Council . In particular, the draft law designates Комисия за финансов надзор (Financial Supervision Commission (FSC)) as the competent authority responsible for authorising an entity as a crowdfunding service provider and confers on the FSC supervisory, investigatory and sanctioning powers in relation to compliance with the requirements of Regulation (EU) 2020/1503 and of the draft law. The draft law introduces one exception to this general rule, by conferring on BNB the task to authorise and withdraw the authorisation for credit institutions to perform the activity of crowdfunding service providers. To this end the draft law supplements Articles 2(2) and 103(10) of the Law on credit institutions .

2. Specific observations

2.1 Regulation (EU) 2020/1503 must be interpreted in line with Directive 2013/36/EU of the European 5 6 Parliament and of the Council , to which it refers . In particular, while Regulation (EU) 2020/1503 refers to credit institutions acting as crowdfunding service providers , it does not affect in any way the authorisation requirements under Directive 2013/36/EU. Whether a credit institution has applied for and has obtained an authorisation to provide crowdfunding services or whether authorisation to provide such services has been withdrawn does not affect the authorisation of such credit institution granted in accordance with Directive 2013/36/EU . 2.2 Within the Single Supervisory Mechanism Article 4(1)(a) of Council Regulation (EU) No 1024/2013 gives the ECB the exclusive task of authorising credit institutions and withdrawing authorisations of credit institutions. Close cooperation between the ECB and BNB started on 1 October 2020 and the Republic of Bulgaria is a participating Member State within the meaning of Regulation (EU) No 1024/2013. 2.3 The draft law’s provisions laying down technical implementing measures for Regulation (EU) 2020/1503 regarding the authorisation and the withdrawal of the authorisation for credit institutions to perform the activity of crowdfunding service providers must be interpreted in accordance with Directive 2013/36/EU and Regulation (EU) No 1024/2013. In accordance with Article 6(4) of Regulation (EU) No 1024/2013, the ECB exercises its responsibility under Article 4(1)(a) of that Regulation in respect of both significant and less significant institutions. This task is exercised for all banking activities listed in Annex I to Directive 2013/36/EU as well as for any additional activity for which an authorisation is required under national law , insofar as this authorisation requirement underpins a prudential supervisory function under Union law . 2.4 The provision of crowdfunding services is not included in Annex I to Directive 2013/36/EU, and the authorisation requirement for crowdfunding services does not underpin a prudential supervisory function under Union law.

2.5 The main objective of Regulation (EU) 2020/1503 is to foster cross-border crowdfunding services by addressing the existing obstacles to the proper functioning of the internal market in crowdfunding services and ensuring a high level of investor protection . The supervision of the activities under Regulation (EU) 2020/1503 is distinct from and without prejudice to the ECB’s prudential supervisory tasks under Regulation (EU) No 1024/2013. Accordingly, the purpose of the authorisation requirement set out in Article 12 of Regulation (EU) 2020/1503 is to facilitate cross-border provision of those services, reduce operational risks, and ensure a high degree of transparency and investor protection . In this regard the competent authority assesses the quality of the crowdfunding service provider’s management, internal organisation and procedures established to ensure compliance . The requirements set out in Regulation (EU) 2020/1503 including the authorisation and withdrawal of authorisation for credit institutions to provide crowdfunding services, are therefore aimed at protecting investors. Accordingly, those requirements fall under the remit of national competent authorities and not of the ECB. 2.6 Accordingly, the competence conferred on BNB by the draft law to authorise and to withdraw the authorisation for credit institutions to provide crowdfunding services must be without prejudice to the ECB’s competence to issue or withdraw authorisations of credit institutions pursuant to Directive 2013/36/EU and Regulation (EU) No 1024/2013.

3. Tasks of BNB

3.1 The provisions of the draft law relating to the new powers of BNB do not extend the current supervisory mandate of BNB. BNB is responsible for supervising credit institutions and the tasks carried out by BNB in this regard are not limited to prudential supervisory purposes . 3.2 The authorisation and the withdrawal of authorisation for credit institutions to provide crowdfunding services are not intrinsically distinct from the tasks already carried out by BNB with respect to the authorisation of other activities of credit institutions . Moreover, in accordance with the proposed amendments to Articles 14(2) and 103(10) of the Law on credit institutions, BNB will rely on the assessment undertaken by the FSC where it has been called upon to both authorise and to withdraw the authorisation for credit institutions to provide crowdfunding services . BNB’s tasks in relation to such authorisation are therefore rather limited. 3.3 It follows that the draft law does not confer genuinely new tasks on BNB, but rather specifies certain new powers that BNB may exercise when carrying out the same category of tasks already discharged in accordance with the Law on credit institutions. Consequently, it is not necessary to assess whether

the conferral of new tasks on a national central bank complies with the prohibition of monetary financing in this case . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 28 March 2022. [signed]

The President of the ECB

Christine LAGARDE