Single Supervisory Mechanism
Trends and challenges
In May 2012, the outlook looked bleak for the Eurozone. In several Eurozone countries, banks and sovereigns were caught in a downward spiral, each undermining the strength of the other, driving indebtedness ever higher.
In order to restore confidence in banks and the Euro, policymakers concluded that a multi-pronged strategy was needed. The Banking Union was born, combining a supervisor for Eurozone banks that would be seen as neutral, strong and consistent, a common resolution authority and a fiscal backstop in case resolution funds were exhausted.
Fast-forward to November 2013 and the first pillar of the Banking Union became a reality, with EU Regulations setting up the Single Supervisory Mechanism (SSM) entering into force. The SSM, responsible for the prudential supervision of Eurozone banks, is designed to ensure that all stakeholders can have full confidence in
the quality and impartiality of banking supervision, and that there is a credible starting point for the measures necessary to recapitalise banks directly.
The other pillars of the Banking Union are a single
rulebook for banks in the single market, a harmonized deposit guarantee scheme, and a single European recovery and resolution framework (the Single Resolution Mechanism—SRM). Progress is being made on all fronts, however, the immediate priority for banks is the SSM.
Inside magazine issue 3, February 2014
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