Financial Supervision Authority explains Single Supervisory Mechanism for Eurozone banks
The Financial Supervision Authority held a one-day information event on 26 February where the framework regulation for the Eurozone banks’ SSM and aspects related to implementation were introduced.
As to how Eurozone banking supervision will work starting 4 November 2014, representatives of banks, Parliament, ministries and Bank of Estonia were briefed by Financial Supervision Authority expert Piret Laiverik, Financial Supervision Authority Chairman of the Board Kilvar Kessler and European Central Bank Legal Services Directorate official Jean-Christophe Cabotte.
On 7 February, the European Central Bank (ECB) submitted the draft SSM Framework Regulation for public comment. All of the Eurozone members take part in the SSM and non-members can also join the SSM under contract.
“We would like the future SSM to be as open and efficiently functioning a supervisory institution as possible. As the framework regulation is the backbone of the future single supervision system, the Financial Supervision Authority considers it very important for interest groups to thoroughly familiarize themselves with it and express their opinions,” said Financial Supervision Authority Chairman of the Board Kilvar Kessler.
Single supervision pertains only to supervision in the field of compliance with fiduciary requirements for banks. SSM supervision does not encompass supervision in the field of financial services or capital supervision of other financial intermediaries. At least three banks in each Eurozone country will be under direct SSM supervision – in Estonia these are Swedbank, SEB and DnB. In the case of other banks, decisions will generally be made by the Financial Supervision Authority in adherence to ECB SSM guidelines.
The draft Framework Regulation now opened by the ECB for comment specifies whether banks are subject to direct or indirect supervision. It also sets forth the general principles for supervision proceedings and administrative penalties for violation of the relevant law. It also describes the nature of cooperation between the ECB and national financial supervision authorities for the purpose of ensuring a smooth functioning of the SSM.
The public consultations on the regulation run until 7 March. After the consultations, the ECB’s Supervisory Board of the SSM will prepare the final Framework Regulation and submit it to the ECB Governing Council for adoption. The final version will be published by 4 May 2014. Participating in the work of the ECB’s Supervisory Board of the SSM are Financial Supervision Authority Chairman of the Board Kilvar Kessler and, representing the central bank, Bank of Estonia Deputy Governor Madis Müller.
The pillars of the new European banking union being established is, besides the SSM, a common framework for guarantees of deposits and a Single Resolution Mechanism for restoring bank capitalization and resolving bank crises.