Single Supervisory Mechanism

Key objectives:

• to ensure enhanced supervision of Europe's banking sector in accordance with a single set of high-level standards and requirements
• to ensure robustness of the European banking sector
• to contribute to financial stability and financial integration of the euro area and the single market as a whole

The Single Supervisory Mechanism (SSM) - a key pillar of the banking union - is an EU-level system for prudential supervision of credit institutions in the euro area and in those non-euro area EU member states that choose to join the mechanism.

Its purpose is to ensure enhanced supervision of Europe's banking sector.

The supervision is carried out through an integrated architecture combining a supranational authority  - the European Central Bank - and national supervisory authorities, cooperating closely in accordance with a single set of high-level standards and requirements.

The Single Supervisory Mechanism's activities are supported by another key pillar of the banking union - the Single Resolution Mechanism, which consists of a single resolution authority (the Board) and a Single Resolution Fund to help resolve failing banks.

Main tasks 

• to supervise credit institutions' compliance with prudential requirements
• to detect weaknesses at an early stage
• to ensure action is taken to correct those weaknesses, in order to prevent the situation from developing into a threat to overall financial stability

Structure

The Single Supervisory Mechanism is composed of the European Central Bank (ECB) and the national supervisory authorities of the participating EU member states.

Legal acts

The SSM's founding texts consist of a regulation that confers supervisory tasks on the ECB and an amended regulation on the establishment of the European Banking Authority.

• Uredba Sveta o prenosu posebnih nalog, ki se nanašajo na politike bonitetnega nadzora kreditnih institucij, na Evropsko centralno banko
• Spremenjena uredba 1093/2010 o ustanovitvi Evropskega bančnega organa (EBA)
• Izjava Sveta v zvezi z ureditvijo glasovanja v EBA

Cooperation arrangements

The practical arrangements of cooperation between the European Central Bank and the national supervisory authorities are established by the ECB regulation, known as the 'SSM framework regulation'.

• SSM framework regulation (EUR-Lex)

Similar cooperation arrangements were made between the Council of the EU and the ECB, as well as between the European Parliament and the ECB.

• Memorandum o soglasju med Svetom EU in ECB o sodelovanju pri postopkih v zvezi z enotnim mehanizmom nadzora (EMN)
• Medinstitucionalni dogovor med Evropskim parlamentom in ECB v zvezi z enotnim mehanizmom nadzora

Who does what in the Single Supervisory Mechanism?

 

European Central Bank

The ECB is responsible for the overall functioning of the Single Supervisory Mechanism.

It directly oversees all 'significant' euro area banks (and in particular large, systemic banks) in close cooperation with national supervisory authorities.

Banks subject to direct supervision are those which have assets of more than €30 billion or which account for at least 20% of their home country's GDP. At present there are around 120 such banks in the euro area, representing almost 85% of its total banking assets.

• Seznam bank, ki jih nadzoruje ECB

Supervision means conducting regular checks in order to ensure that banks are fit to operate. This includes an examination of how they lend, borrow and invest or, more generally, how they comply with the single rulebook.

The ECB assumed its supervisory tasks in full in November 2014.

In the preparatory phase, banks' soundness was checked in the form of a 'comprehensive assessment', including the reviews of banks' balance-sheets, especially the asset quality, and the 'stress tests', which are designed to test whether banks are sufficiently capitalised and ready to withstand crises.

The ECB carries out such reviews in cooperation with the European Banking Authority, where appropriate. 

• Vodnik ECB o nadzoru nad bankami

The ECB also has the power to grant or withdraw bank licences, in cooperation with national supervisory authorities, and to sanction banks in cases of non-compliance.

In addition, it monitors the supervision of smaller banks carried out by national supervisory authorities. It may decide to directly supervise any bank in member states that participate in the SSM to ensure consistent application of the supervisory standards.

The ECB is accountable to the Council of the EU and to the European Parliament for the implementation of these rules. It has entered into specific arrangements on transparency and accountability with both the European Parliament and the Council.

• Celovita ocena (ECB)

ECB Supervisory Board

The ECB's supervisory tasks are carried out by a specially established Supervisory Board. The board's decisions are considered to be adopted unless the ECB's Governing Council rejects them.

The Board is composed of:

• the chair
• vice-chair
• 4 representatives of the ECB
• 1 representative from each national supervisory authority in the participating EU member states

Non-euro area countries participating in the SSM are granted full and equal voting rights with the euro area members on the Supervisory Board.

Danièle Nouy was appointed as chair of the ECB Supervisory Board in December 2013 and Sabine Lautenschläger was appointed as vice-chair of the Supervisory Board in February 2014. Both were appointed for a term of 5 years, which is not renewable.

• Danièle Nouy imenovana za vodjo Nadzornega odbora ECB (sporočilo za javnost)
• Imenovanje Sabine Lautenschläger za podpredsednico nadzornega sveta ECB (sporočilo za javnost)
• Imenovanje članov nadzornega sveta (sporočilo za javnost)

National supervisory authorities

The national supervisory authorities are responsible for overseeing smaller banks and carry out other day-to-day supervisory tasks relating to consumer protection, money laundering, payment services and the branches of third country banks.

The Council of the EU

The Council appoints the Supervisory Board's chair and vice chair. The candidates are proposed by the ECB and the European Parliament has to give its approval.

In addition, the Parliament and the Council have the right to initiate a procedure for the removal of the chair, although any action to be taken in response is at the ECB's discretion.

European Banking Authority

The EBA is responsible for ensuring the effective and consistent implementation of the single rulebook in the banking sector. It also participates in the preparation of bank stress tests to be carried out by the ECB, as the EBA coordinates the EU-wide stress-test exercise as a whole.

• Vloga EBA pri stresnih testih

Why Single Supervisory Mechanism?

Integrated EU-level banking supervision was necessary in order to address the increased risk of cross-border spill-overs and contagion in cases of bank crises in the EU. This risk has grown, as have the European banking sector's cross-border activities and ensuing inter-dependencies.

The risk proved to be particularly acute in the euro area, where the recent financial crisis demonstrated that the mere coordination of national banking supervision was not sufficient to manage crises and ensure financial stability. The member states therefore decided that a single banking supervisory system was needed.