29 September 2014

European Central Bank: Guide to banking supervision

The SSM, which will officially enter into operation in November 2014, is itself a step towards greater European harmonisation. It promotes the single rulebook approach to the prudential supervision of credit institutions in order to enhance the robustness of the euro area banking system. Established as a response to the lessons learnt in the financial crisis, the SSM is based on commonly agreed principles and standards. Supervision is performed by the ECB together with the national supervisory authorities of participating Member States. The SSM will not “reinvent the wheel”, but aims to build on the best supervisory practices that are already in place. It will work in cooperation with the European Banking Authority (EBA), the European Parliament, the Eurogroup, the European Commission, and the European Systemic Risk Board (ESRB) within their respective mandates and will be mindful of cooperation with all stakeholders and other international bodies and standard-setters.

The SSM is composed of the ECB and the NCAs of participating Member States and therefore combines the strengths, experience and expertise of all of these institutions. The ECB is responsible for the effective and consistent functioning of the SSM and exercises oversight over the functioning of the system, based on the distribution of responsibilities between the ECB and NCAs, as set out in the SSM Regulation. To ensure efficient supervision, credit institutions are categorised into “significant” and “less significant” institutions, with the ECB directly supervising significant banks, while NCAs are in charge of the supervision of less significant banks. This guide explains the criteria used to assess whether a credit institution falls within the significant or less significant institution category.

This guide is issued in accordance with the Inter institutional Agreement between the European Parliament and the ECB. The ECB is publishing this guide before it takes over its supervisory tasks (on 4 November 2014) to provide practical guidance and to support stakeholders in their preparation.

The procedures described in the guide may have to be adapted to the circumstances of the case at hand or the necessity to set priorities. The guide is a practical tool that will evolve through regular updates to reflect new experiences that are gained in practice.

This guide is not a legally binding document and cannot in any way substitute for the legal requirements laid down in the relevant applicable EU law. In case of divergences between these rules and the guide, the former prevail.

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