EU Agrees On Banking Single Supervisory Mechanism

By  |  December 13, 2012
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The Council set out its position on two proposals aimed at establishing a single supervisory mechanism (SSM) for the oversight of credit institutions. An agreed position will enable negotiation between the presidency and the European Parliament with the aim of adopting the legislation before the end of the year.

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    The proposals involve two regulations: one granting supervisory duties to the European Central Bank and the other modifying previous regulation (1093/2010) establishing the European Banking Authority.

    The SSM will be composed of the ECB and national competent authorities. The ECB will be responsible for the overall functioning of the SSM. Under the proposals, the ECB will have direct oversight of eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities. Non-eurozone member states wishing to participate in the SSM will be able to do so by entering into close cooperation arrangements.

    Earlier in 2012, eurozone heads of state and government stated that when an effective SSM is established, the European Stability Mechanism, which currently contributes to bank capitalisations via member state treasuries, could, following a regular decision, have the possibility to recapitalise banks directly. This will enable the vicious circle between banks and sovereigns.

    Following the announcement of the proposals, EC President Barroso voiced his agreement on the SSM. “Based on the proposal tabled by the Commission on 12 September, this is a crucial and very substantive step towards completion of the banking union and a timely step forward in the integration of financial supervision for the euro area and for the other Member States which the Commission hopes will also participate.” “We now hope that the co-legislators are able to finalize the agreement on the Single Supervisory Mechanism as quickly as possible. I want to underline that in four months we have moved from a Commission proposal to political agreement by the Council, which demonstrates once again that the European Union has the political will and capacity to act quickly on momentous issues,” he added.

    If the legislation is adopted, it will mark a huge step in terms of regulatory power of the European Union and the ECB particularly.

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