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The European Central Bank (ECB) is preparing to take on new banking supervision tasks as part of a Single Supervisory Mechanism (SSM).
The Single Supervisory Mechanism will create a new system of financial supervision comprising the ECB and the national competent authorities of participating EU countries. Among these EU countries are those whose currency is the euro and those whose currency is not the euro but who have decided to enter into close cooperation with the Single Supervisory Mechanism.
Specific tasks relating to the prudential supervision of credit institutions will be conferred on the ECB according to Article 127(6) of the Treaty on the Functioning of the European Union.
The main aims of the SSM will be to ensure the safety and soundness of the European banking system and to increase financial integration and stability in Europe.
The ECB will be responsible for the effective and consistent functioning of the SSM, cooperating with the national competent authorities of participating EU countries.
The ECB will assume its new banking supervision responsibilities in November 2014, 12 months after the SSM Regulation creating the supervisor enters into force.
More information on the steps toward banking union can be found on the key steps page.
Euro area countries participate automatically in the SSM. Map of euro area
Non-euro area EU Member States can also choose to participate in the SSM by their national competent authorities entering into “close cooperation” with the ECB. The procedures for entering into close cooperation are set out in an ECB Decision en.
The ECB and the competent authorities of other EU countries will conclude a memorandum of understanding describing how they will cooperate with one another in the performance of their supervisory tasks. The ECB will also sign a memorandum of understanding with the competent authority of each EU country that is home to at least one global systemically important institution.
According to the SSM Regulation, national competent authority (NCA) means a competent authority designated by a participating Member State in accordance with Regulation (EU) No 575/2013 (CRR) and Directive 2013/36/EU (CRD IV).
Some national central banks (NCBs) that are not designated as an NCA but are conferred certain supervisory tasks and competences under national law continue to exercise these competences within the SSM.
Under the new system of supervision, the ECB will directly supervise significant credit institutions. It will work closely with the national competent authorities to supervise all other credit institutions under the overall oversight of the ECB. The ECB may decide at any time to take responsibility for a less-significant credit institution.
The ECB will directly supervise significant credit institutions, representing almost 85% of total banking assets in the euro area.
Credit institutions are considered significant by the ECB according to specific criteria. In each participating country, at least the three most significant credit institutions will be subject to direct supervision by the ECB, irrespective of their absolute size.
The ECB has published a draft list of credit institutions which have been notified of its intention to consider them significant. This list presents such credit institutions together with their euro area subsidiaries, forming a single banking group. The final list will be published in September 2014 and will be reviewed on a regular basis.
Preliminary list of supervised institutions:
All other credit institutions in the participating countries will continue to be supervised by the national competent authorities. The ECB can decide at any time to exercise direct supervision of any one of these credit institutions in order to ensure consistent application of high supervisory standards.
The “significance” of credit institutions will be based on:
A Supervisory Board has been established to plan and carry out the ECB’s supervisory tasks, undertake preparatory work, and propose complete draft decisions for adoption by the ECB’s Governing Council.
In the period before the ECB assumes its supervision role, it is consulting with stakeholders on the supervisory framework to be established (see Public consultations).