Navigating Public International Law: ECB Banking Supervision and Cross-border On-site Inspections

Since the establishment of the Single Supervisory Mechanism (SSM), the European Central Bank (ECB) has exercised wide-ranging supervisory and investigatory powers over significant banks in participating Member States. These powers extend, at least textually, to foreign subsidiaries and third-country providers, raising acute tensions with the prohibition of extraterritorial enforcement jurisdiction under public international law. This article examines the legality of such extraterritorial inspections, situating the ECB’s mandate within the constraints of customary international law and the sovereignty of third (non-EU) States. We assess the legal basis provided by the international agreements – Memoranda of Understanding (MoUs) – concluded by the ECB with foreign supervisory authorities, and interrogate their sufficiency as instruments of consent. We argue that while MoUs facilitate cooperation in practice, their non-binding nature renders them a fragile legal basis, leaving the ECB and its inspectors exposed to potential international responsibility and diplomatic friction. Next, we evaluate alternative foundations for inspections, including inferred consent, contractual arrangements with third-country banks, countermeasures and indirect enforcement via EU-based affiliates. Moreover, the asymmetrical character of these arrangements underscores the broader political economy of extraterritorial enforcement, in which the ECB’s market power enables it to project regulatory authority beyond EU borders. The article concludes that although pragmatic cooperation currently mitigates conflict, the lack of a robust legal framework creates uncertainty for both States and supervised entities, warranting further institutional and doctrinal clarification.