The European Parliament (EP) voted on 12 September 2013, in favour of the Regulation setting up a Single Supervisory Mechanism (SSM) in the Eurozone. The outcome of this legislative process, which formally began exactly one year ago with a proposal from the European Commission (EC), is the transfer of prudential regulatory powers from Eurozone national authorities to the European Central Bank (ECB). As a result, approximately 130 of the Eurozone’s biggest banks will be directly supervised by the ECB. The ECB will also be responsible for the overall oversight of prudential supervision in the Eurozone. Non-Eurozone EU member states can opt-in to the SSM.
In reality, agreement on nearly all aspects of the SSM was reached in the trialogues between the EP, the Council and the EC in March this year.
The EP’s final Plenary vote was however postponed until 12 September 2013, due to MEPs’ concerns that the existing accountability mechanisms of the ECB were insufficient, particularly in order to maintain the separation between the ECB’s monetary policy function and its newly acquired supervisory role.
In the lead up to EP vote, an institutional agreement between the ECB and the European Parliament was reached to address these concerns. The key terms of the agreement are reported to be:
This summary was made available in a press release from the Greens/European Free Alliance. The agreement is now expected to be officially signed by the EP and the ECB and published shortly.
The SSM Regulation now needs to be officially approved by the Council. As referred to by the European Commissioner Michel Barnier during today’s Plenary, this issue could be addressed at the EU Finance Ministers’ meeting that will be held on 13 September in Vilnius. Following the Council’s agreement, it can enter in the Official Journal (OJ). Publication in the OJ typically takes a few weeks. On this occasion, the publication in the OJ is an important trigger point not only because it marks the entry into force of the SSM Regulation, but because it enables the ECB to formally begin relevant preparatory work:
The SSM is only one of the pillars of the Banking Union. Following the SSM agreement, attention will now increasingly turn to the Single Resolution Mechanism (SRM), proposed by the EC on 10 July. Commissioner Barnier reiterated his commitment to seek agreement on SRM by the end of 2013 or by March 2014 at the latest.