Filed at the European Court of Justice on 12 March, the lawsuit would be a vital test case for both parties as the developments are being watched by several other smaller banks.
At the end of 2013, L-Bank which had assets of €70.7bn ($77bn), was placed on ECB’s list of 123 significant financial institutions that are said to be directly supervised by it, starting November.
According to L-Bank, it backed the ECB’s supervisory mechanism goals and conducted only low risk development lending itself, excluding the international and complex banking activity.
Reuters quoted L-Bank as saying: "It is our view that the ECB’s mechanical approach to the selection of institutions for supervision does not apply to L-Bank."
The lender said that the supervision would bring significant bureaucracy and costs, hindering its capacity to provide low interest loans for housing or new business start-ups.
Following the judicial review, L-Bank expects that it would be relieved from such supervision and return to national supervision by Bafin, the financial watchdog of Germany.
L-Bank argues that it has a simple and clear business model and said higher costs that are tied to the supervision by ECB would undermine its ability to support local families and businesses.
Further the lender said, being under ECB scrutiny "goes against the guidelines of the single supervisory mechanism," The Wall Street reported.
