Opinion of the European Central Bank of 19 August 2026 on supervisory independence and prevention of conflicts of interest (CON/2026/27)

OPINION OF THE EUROPEAN CENTRAL BANK of 19 August 2026 on supervisory independence and prevention of conflicts of interest (CON/2026/27) Introduction and legal basis

On 8 July 2026 the European Central Bank (ECB) received a request from the Luxembourg Ministry of Finance for an opinion on a draft law amending, inter alia, the Law of 23 December 1998 on establishing a Commission for the Supervision of the Financial Sector (hereinafter the ‘Law on the CSSF’) and transposing certain amendments to Directive 2013/36/EU of the European Parliament and of the Council (hereinafter the ‘CRD’) introduced by Directive (EU) 2024/1619 of the European Parliament and of the Council (hereinafter the ‘CRD6’), in particular Article 4(4), Article 4a and Article 70(4) of the CRD as amended by the CRD6 (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 Article 2(1) of Council Decision 98/415/EC , as the draft law relates to the specific tasks conferred upon the ECB concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In addition, pursuant to Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank, the ECB may offer advice to and be consulted by the competent authorities of the Member States on the implementation of Union legislation relating to the prudential supervision of credit institutions, amongst other matters. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 One of the main objectives of the draft law is to transpose into Luxembourg law the amendments to the CRD introduced by the CRD6 that have not yet been transposed by the Law of 5 May 2026 implementing, inter alia, the CRD6 in Luxembourg, in particular Article 4(4), Article 4a and Article 70(4) of the CRD. 1.2 The draft law implements Article 4(4) and Article 4a of the CRD on enhanced governance, accountability and independence requirements and safeguards for competent authorities in supervisory matters by amending and supplementing the Law on the CSSF, according to which the Luxembourg Commission de Surveillance du Secteur Financier (CSSF, Commission for the Supervision of the Financial Sector) was created as a public body with legal personality and financial autonomy, placed under the direct authority of the Minister responsible for the financial centre. The measures aimed at strengthening independence and conflict-of-interest safeguards introduced by the draft law include cooling-off periods, restrictions on trading instruments issued by supervised entities, and limits on the duration of management mandates. The changes to the governance structure of the CSSF introduced by the draft law include more detailed appointment and dismissal criteria for members of the Executive Board and an increase in the maximum number of Executive Board members. 1.3 The draft law further seeks to supplement the Law on the CSSF by introducing a cooperation mechanism between the CSSF and the State Prosecutor in order to transpose Article 70(4) of the CRD . This especially targets cases where administrative misconduct may also give rise to criminal offences. 1.4 Other features of the draft law unrelated to the CRD include the modernisation of the governance framework of the CSSF, including various legislative updates, harmonisation measures and incorporation of public governance best practices, recognition and formalisation of key functions, including the CSSF’s contribution in ensuring financial education, independent internal audit functions and whistleblowing arrangements. 1.5 As part of these other governance framework modernisation measures, the draft law also introduces specific safeguards to reinforce due process and independence in administrative sanctioning procedures. In particular, the draft law establishes guarantees of independence and impartiality in the process leading up to the imposition of administrative sanctions . Under these safeguards, an

independent head of mission is designated by the director primarily in charge of the supervision of the controlled person or, as the case may be, the director for resolution, for each on-site inspection. The head of mission, as well as the agents conducting the on-site control, must be agents distinct from those in charge of the permanent individual supervision of the controlled person, thereby ensuring structural separation between ongoing supervisory functions and investigative and sanctioning functions. The head of mission investigates both inculpatory and exculpatory elements, acts independently and may not receive instructions from the CSSF’s Executive Board, or, as the case may be, the Resolution Board, regarding the organisation, conduct and management of the onsite inspection. Following completion of the investigation, the head of mission draws up a draft report setting out, inter alia, the facts, findings of the on-site inspection, relevant legal or regulatory provisions, and inculpatory and exculpatory elements discovered, with a view to enabling the Executive Board or the Resolution Board, as appropriate, to take a decision on whether or not to impose an administrative sanction. The draft report is examined together with the controlled person, who is invited to present initial observations at a closing meeting. Additionally, to further enhance the separation of supervisory and sanctioning functions, the director primarily in charge of the supervision of the controlled person, or, as the case may be, the director for resolution is precluded from sitting or deliberating when the Executive Board or the Resolution Board decides on the imposition of an administrative sanction. 1.6 In respect of these other governance framework modernisation measures, the draft law also introduces a settlement procedure for administrative sanctions . Under this procedure, the CSSF may accept a settlement for a violation of applicable rules of sufficient seriousness to attract an administrative sanction. Such settlement is only possible if the perpetrator of the violation in question has cooperated throughout the investigation and has given prior written consent to the settlement, including an acknowledgement of the facts that constitute the violation as described in the settlement. The benefitting party must waive its right of appeal prior to submission of the draft settlement to the Executive Board or, as the case may be, the Resolution Board. On acceptance by the CSSF, the settlement acquires the force of a final decision and may no longer be appealed. All settlements are published on the CSSF’s website in accordance with the applicable rules on publication of sanctions. 1.7 The draft law also provides for the transfer of the proceeds of the monetary penalties imposed by the CSSF to the State budget, with collection of these penalties by the Luxembourg tax administration. 1.8 Lastly, the draft law amends the Law of 7 December 2015 on the insurance sector to provide the Luxembourg Commissariat aux assurances (CAA, Insurance Commissariat) with tools and remedies similar to those given to the CSSF in the draft law.

2. Supervisory independence and prevention of conflicts of interest

2.1 General observations 2.1.1 Article 19 of Council Regulation (EU) No 1024/2013 (hereinafter the ‘SSM Regulation’) provides that when carrying out the tasks conferred on it by the SSM Regulation, the ECB and the national competent authorities acting within the Single Supervisory Mechanism (SSM) must act independently. Article 31(3) of the SSM Regulation furthermore requires the ECB, in cooperation with the national competent authorities, to: (a) establish and maintain comprehensive and formal procedures including ethics procedures and proportionate periods to assess in advance and prevent possible conflicts of interest resulting from subsequent employment within two years of members of the Supervisory Board; and (b) provide for appropriate disclosures. Those procedures are without prejudice to the application of stricter national rules . The legal basis for those provisions of the SSM Regulation is Article 127(6) of the Treaty. 2.1.2 In view of this independence and these requirements of the SSM Regulation, the ECB has established an ethics framework to ensure the independence of national competent authorities, such as the CSSF, when assisting the ECB in carrying out the tasks conferred on it by the SSM Regulation. This ethics framework includes the ECB’s Code of Conduct for high-level ECB officials (hereinafter the ‘Single Code’), which applies, among others, to the members of the Supervisory Board of the ECB when exercising their functions as members of a high-level ECB body, and Guideline (EU) 2021/2256 of the European Central Bank (ECB/2021/50) , which is addressed to the national competent authorities of the SSM and establishes ethics requirements applicable to the members of their bodies and the members of staff of the national competent authorities. In view of the responsibility of the ECB for the effective and consistent functioning of the SSM , the national competent authorities must comply with Guideline (EU) 2021/2256 (ECB/2021/50) . 2.1.3 In contrast to the ethics framework, which is ultimately based on Article 127(6) of the Treaty, the CRD6, including its provision on the supervisory independence of competent authorities , is based on Article 53(1) of the Treaty. A legal act based on this provision cannot alter the rights and obligations of the ECB and the national competent authorities when carrying out the tasks conferred on them by the SSM Regulation based on Article 127(6) of the Treaty. It follows from settled case-

law of the Court of Justice of the European Union that the different legal bases, namely Article 53(1) and Article 127(6) of the Treaty, cannot be combined as the legal basis for a legal act, in view of the different procedures involved. In particular, measures under Article 53(1) of the Treaty are adopted by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, and after consulting the Economic and Social Committee (and, if relevant, the ECB in accordance with Articles 127(4) and 282(5) of the Treaty). By contrast, regulations under Article 127(6) of the Treaty are adopted by the Council alone, by way of a special legislative procedure, in which the Council acts unanimously, after consulting the European Parliament and the ECB . 2.1.4 Hence, the amendments made by the CRD6 are without prejudice to the ethics framework, which the ECB has established to ensure the independence of the national competent authorities in the context of the SSM, as both frameworks have their own scope and legal basis. The Union legislator acknowledged this through the CRD6’s amendments to the CRD, which provide that Article 4a(2) of the CRD is without prejudice to the rights and obligations of the national competent authorities pursuant to the SSM established by the SSM Regulation . For the avoidance of doubt, the national legislator may wish to clarify this within the text of the draft law. From an ECB perspective, the CRD6 provisions may nevertheless serve as guidance for establishing safeguards for the independence of the ECB and the national competent authorities when carrying out the tasks conferred on them by the SSM Regulation . 2.2 Specific observations 2.2.1 The Single Code applies, inter alia, to the members of the Supervisory Board of the ECB, including the CSSF representative, when exercising their functions as members of the Supervisory Board of the ECB. It also applies to persons replacing the members in meetings of the Supervisory Board in the performance of their duties and responsibilities relating to that high-level body where explicitly provided for in the Single Code. 2.2.2 National competent authorities, including the CSSF, are required to take the necessary measures to implement and comply with Guideline (EU) 2021/2256 and must inform the ECB of any obstacles that national law poses to their implementation. 2.2.3 Regarding independence, the draft law highlights that the existing legal framework already provides that the CSSF enjoys independence in view of its status as an independent public institution with

the possibility of imposing and extending a cooling off period of a maximum of two years to members of the CSSF’s Executive Board that serve as members of the ECB’s Supervisory Board when such an extended period is applied based on the Single Code . 2.2.5 In addition, the Single Code sets limits on the establishment of post-employment relationships not only directly with significant or less significant credit institutions, but also with other financial institutions and with ‘any entity engaged in lobbying in relation to the ECB, or consultancy and/or advocacy for the ECB or for any [supervised] institution’ . The ECB notes that, under the draft law, the cooling-off period only applies in respect of employment or the provision of professional services with (a) credit institutions with which the member of staff or the member of the CSSF’s Executive Board has been directly involved for the purposes of supervision or decision-making, including the direct or indirect parent undertakings, subsidiaries or affiliates of those institutions; (b) entities providing services to entities referred to in (a); and (c) entities conducting lobbying or advocacy activities directed at the CSSF on matters for which the member of the CSSF’s Executive Board or the member of staff of the CSSF was responsible during their employment or term of office. The broader category of ‘other financial institutions’ is not included . Furthermore, the draft law does not cover lobbying and advocacy activities for supervised institutions. The ECB therefore considers that the requirements of the draft law are less restrictive than those of the Single Code. The ECB highlights that the draft law should be without prejudice to the Single Code, as it may be amended from time to time, and must allow the application of the cooling-off period also with respect to other financial institutions and entities conducting lobbying and advocacy activities for supervised institutions with regard to members of the CSSF’s Executive Board that serve as members of the ECB’s Supervisory Board. 2.2.6 The draft law limits the prohibition to financial instruments issued by entities subject to the supervision of the CSSF, their direct or indirect parent companies, their subsidiaries or affiliated companies, save for some exceptions, and does not extend to instruments issued by other regulated entities not supervised by the CSSF . The ECB therefore considers that the requirements of the draft law are 35 36 less restrictive than the requirements set out in the Single Code and Guideline (EU) 2021/2256 . The ECB highlights that the draft law should be without prejudice to the Single Code, as it may be amended from time to time, and to Guideline (EU) 2021/2256, and must not prevent the possibility of extending such prohibition to financial instruments issued by other regulated institutions. 2.2.7 The Single Code also contains rules, inter alia, on declarations of interests , which are more restrictive than the provisions of the draft law . The ECB notes that the application of the draft law’s

less restrictive provisions would be without prejudice to the application of the stricter rules of the Single Code to those individuals who are subject to the Single Code. 2.2.8 The CSSF’s Supervisory Board must also approve Internal Rules and Regulations for the Executive Board and the Executive Board or, as the case may be, the director for resolution, specifies in Internal Rules and Regulations the modalities for the prevention of conflicts of interests between, on the one hand, members of the CSSF’s Executive Board and members of its staff and, on the other hand, supervised entities . The ECB notes the draft law could be amended to explicitly empower the competent bodies of the CSSF to adopt further provisions on conflicts of interest and incompatibilities following termination of office by means of internal regulatory acts (such as the Internal Rules and Regulations) to fulfil the CSSF’s obligations arising from its membership in the SSM specifically .

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 19 August 2026.

[signed]

The President of the ECB

Christine LAGARDE