The Single Supervisory Mechanism within the Banking Union – Novel Features and Implications for Austrian Supervisors and Supervised Entities

Over the past decades, the internal market for banking services has flourished. The financial crisis and contagion from banks to sovereigns and across borders has underlined the need to match the size and level of cross-border activities of banks with the integration of banking supervision. To align supervisory and political responsibilities with the competence to provide a financial backstop, the heads of government of the euro area have proposed a three-pillar model for a banking union. As a first step in implementing banking union, supervisory responsibility for banks in participating Member States will be conferred on the ECB. Within the framework of a single supervisory mechanism (SSM), the ECB will share duties with the national authorities. The ECB will be responsible for the overall functioning of the SSM. At the same time, national authorities retain certain responsibilities, including the supervision of less significant banks. The changes to the supervisory process require a suitable organizational setup and procedures that account for the roles and responsibilities of the ECB and national authorities within the SSM and vis-à-vis supervised institutions. JEL classification: K230, K330