The Economic and Financial Affairs Council of Ministers (ECOFIN) adopted on Tuesday regulations creating a single supervisory mechanism (SSM) for the oversight of banks and other credit institutions.
SSM comprises one of two pillars of Europe’s banking union. A total of 150 European banks, deemed “systemic” for the member states’ economy, will be under ECB supervision from November 2014 onwards.
The remaining banks will be under competent national and European supervision authorities, however the ECB will be able to intervene if necessary.
Last September, the European Parliament gave the “go ahead” for the SSM. The supervision mechanism of banks will be mandatory for all Eurozone banking institutions, while non-Eurozone countries will be able to participate as equal partners, after accepting the agreements concerning the SSM’s operation.
Under the new mechanism, important supervision competences will be conferred to the ECB from the national level. The European Parliament will retain access to information, while the chairman of the supervisory council will appear at European Parliament sessions.
The European Parliament, along with the Council, will have the power to approve and dismiss the chairman and vice chairman of the supervisory council.
Before the SSM becomes operational, Europe-wide stress tests will take place for all banks, to assess their financing needs.
After the establishment of the SSM, the second pillar is expected to follow suit, concerning the Single Resolution Mechanism, although disagreements continue to prevail.
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