The Single Supervisory Mechanism (SSM) has been saved
The Single Supervisory Mechanism (SSM)
Banking on the Banking Union
This third Deloitte report on the SSM provides a view on three questions we believe Eurozone banks should now consider without delay.
The Single Supervisory Mechanism (SSM) is rapidly becoming a reality and will take over prudential supervision of banks in the Eurozone from November 2014. At the European Parliament's mid-April plenary session, a harmonised resolution regime and a Single Resolution Mechanism (SRM) were agreed; negotiations on harmonised rules for deposit guarantee scheme across the EU were concluded too. The EU Single Rulebook in other areas is also being developed at full throttle.
There remains a significant amount of detail still to emerge. How operational arrangements will work in practice is yet to be seen; important technical standards related to the resolution framework need to be developed. But the scope of the changes and the speed with which they will be implemented are such that banks do not have the luxury of time to wait for the details to be clarified before they need to prepare.
We put forward three questions that banks should begin to address without delay:
1. How are regulatory relationships going to change?
Banks place a lot of reliance on long-established na dmulti-dimensional relationships with their current supervisors. New relationships need to be established with SSM supervisors, many of whom are only now being appointed.
2. How will changes to the supervisory approach, and in turn supervisory decisions, affect banks?
What decisions, for example, on waivers or partial exemptions, are most critical? How will the Supervisory Review and Evaluation Process (SREP) evolve? Will banks need to alter their own process and procedures for addressing prudential issues?
3. What are the implications of the changing resolution process?
How will changes to resolution arrangements affect resolution planning and resolvability assessments? Will there be any spillover effect over and above what banks might otherwise expect, to the cost of capital?