The Single Supervisory Mechanism for Banks in the EU
This paper looks at the background and intended objectives of setting up a single supervisory mechanism for the Eurozone, and also attempts to explore some of the challenges likely to be faced by both the single supervisor and the supervised banks.
Just over a year after the unveiling of the proposal to set up a single banking supervisor for the Eurozone, the legislative process is coming to a close. Whilst this has been completed extremely fast by EU standards, the work that lies in front of the European Central Bank (ECB) as the new prudential supervisor of Eurozone banks will take longer, especially given the expectations placed on the new framework.
The most immediate challenge, but one with the potential to have long-term effects on the common supervisor, is its balance sheet assessment of all banks that it will directly supervise.
No less important are the challenges that lie beyond that: the need for a common supervisory approach, data and analytics related issues, and managing the talent agenda.
Banks will need to make sense of this brave new world, and for them the greatest challenge of all will be managing the unknown - an institution with which they are likely to have had little or no supervision interaction to date.