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Council Adopts Regulations on Single Supervisory Mechanism (SSM)

The SSM, one of the components of the banking union, will supervise credit institutions in the euro area and in those non-eurozone countries that choose to participate.

The single supervisory mechanism

The SSM is designed to strengthen supervision of the financial services sector. It will detect weaknesses early on and make sure action is taken to strengthen ailing financial institutions. It is also designed to help break the connection between the member states’ budgets and some of their banks.

A functioning SSM is a precondition for the European Stability Mechanism (ESM) – the euro area’s permanent bailout fund – to recapitalise banks directly, as agreed by the euro area leaders in June 2012.

The ministers were also updated on the progress on other dossiers relating to the banking union under construction, namely the bank recovery and resolution directive and the proposal on the Single Resolution Mechanism.

At an informal breakfast before the Council meeting the ministers discussed backstop arrangements for banks in the context of forthcoming asset quality review and stress test exercises and the proposed single resolution mechanism.

The SSM legislative package and the statement by the Council:

Main features of the SSM

  • It consists of the European Central Bank (ECB) and the supervisory authorities of the member states; the ECB is responsible for the overall functioning of the SSM
  • The ECB will assume its supervisory tasks 12 months after the legislation enters into force, subject to operational arrangements
  • The ECB will have direct supervision of euro area banks that have assets of more than €30 billion or constitute at least 20% of their home country’s GDP, in close cooperation with national supervisory authorities
  • National supervisors will take the lion’s share of the supervision of smaller banks and carry out day-to-day supervisory tasks relating to consumer protection, money laundering, payment services, etc.
  • It is open to all non-eurozone countries willing to participate
  • The European Banking Authority (EBA) will be responsible for ensuring effective and consistent implementation of the “single rulebook” for the banking industry; it will promote consistency in supervisory practice, thus protecting the integrity of the internal market, and help maintain the stability of the financial system

Other topics on the agenda

  • Indicators and policy areas for greater economic policy coordination in preparation for the upcoming European Council meeting on 24-25 October.
  • Initiative by the European Investment Bank and the European Commission to improve access to finance for small and medium-sized enterprises

The ministers discussed the parameters of risk-sharing instruments that would be co-financed by the EU’s structural funds to leverage the private sector and incentivise capital market investments in SMEs. These instruments are expected to be operating in January 2014.

  • European Semester: lessons learned from 2013 Semester exercise.
  • Follow-up to international finance-related meetings: the outcome of the G20 finance ministers and central bank governors’ meeting and of the annual meeting of the IMF and World Bank Group.
  • Climate change: the Council adopted conclusions in preparation for the 19th conference of the parties to the UN framework convention on climate change, to be held in Warsaw on 11-22 November.