On the single supervisory mechanism

Abstract

With the so-called banking union, the EU is currently pursuing the most important project in terms of European integration since the introduction of the euro in 1999. The centrepiece of the banking union is the ‘Single Supervisory Mechanism’ (SSM), a supranational banking supervisory body embedded into the organisational structure of the European Central Bank. If implemented properly, the banking union could contribute significantly to breaking the bank–sovereign nexus within the euro area, to reconciling control and liability with respect to cross-border banking supervision in the EU and to accomplishing the European internal market, strengthening the competitiveness of large complex European banking groups. However, there are some shortcomings in the legal and political construction chosen for the SSM, possibly reversing some of the desired positive effects.