MIL OSI – Source: German Ministry of Finance – in English –
Headline: ECB assumes supervision of banks in euro area
The European Central Bank has assumed supervisory responsibility for banks in the euro area as of today, 4 November 2014. The ECB now directly supervises approximately 120 banks and banking groups, including 21 in Germany. These banks account for roughly 85% of total banking assets in the euro area.
The ECB is the lead institution in Europe’s Single Supervisory Mechanism (SSM). The SSM also comprises the national supervisory authorities, which support the ECB as part of joint supervisory teams set up for each bank. National authorities continue to hold supervisory responsibility for domestic banks that do not fall under the SSM’s purview. This means that Germany’s bank supervisor – the Federal Financial Supervisory Authority (BaFin) – retains responsibility for roughly 2,000 smaller credit institutions.
Minister Schäuble stated:
“The financial and banking crisis showed that purely national authorities are no longer in a position to supervise large, cross-border banks adequately. So it’s the right thing for the ECB to assume supervisory responsibility for large European banks. This means that a crucial part of the European banking union is now complete.
Today, the financial sector in the euro area has become more resilient. We’re now better equipped to deal with distressed banks. That’s good news for taxpayers too.”
In its role as bank supervisor, the ECB will have far-reaching supervisory and investigative powers. It will have exclusive responsibility for issuing or revoking bank licences under EU law. It will also assess applications for acquisitions of holdings of 10% or more and will monitor capital and liquidity requirements at the banks that it supervises directly. It can impose stricter capital requirements, levy fines and intervene at an early stage in the event of inappropriate behaviour by banks. In addition, the ECB will have limited legislative powers that enable it to issue regulations and publish guidelines and recommendations.
The ECB is now responsible for both monetary policy and bank supervision. In order to avoid potential conflicts of interest between these two functions, the ECB’s governance structure has been expanded. To help it perform its new tasks, it now has a Supervisory Board comprised of representatives from the ECB and national supervisory authorities. The Supervisory Board will be supported by a Steering Committee made up mainly of a subgroup of Supervisory Board members.