Set-up and start of the Single Supervisory Mechanism
Fudan-Frankfurt Financial Research Forum
Frankfurt am Main, 25 September 2015
Giacomo Caviglia
Head of Division Supervisory Oversight &
NCA relations
Directorate General Micro-Prudential
Supervision III
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Euro Area Banking Union
Supervision Resolution
Common Rules EU28 (Single Rulebook)
Deposit
Guarantee
Prudential
Requirements
Recovery &
ResolutionState-aid
Single
Supervisory
Mechanism
(SSM)
ECB
NCA NCA NCA
Single Resolution
Authority and
Fund
NRA NRA NRA
Elements of the Banking Union
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Single
Supervisory
Mechanism
Single
Resolution
Mechanism
(SRM)
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Achievement of key milestones laid the
foundations for the start of the SSM operations on
4 November 2014
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SSM Preparatory Work
Legal framework
SSM Supervisory
Model
Compre-hensive
Assessment
Data reporting
frameworkStaffing
IT systems
• First preparatory work for the
SSM initiated following euro
area summit of 29 June 2012
• Entry into force of SSM
Regulation on 3 November
2013
one transitional year to finalise
preparations for the operational
start
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Enhance financial integration
Leverage on the best (of the
national) supervisory practices
Reduce (crisis) coordination
failures among national supervisors
Reduce the supervisory ‘burden’
through the harmonization of
supervisory practices
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Restore confidence in a
healthier banking system
Make customers’ deposits
safer through three
mechanisms
Help the economy recover,
building on a more stable
banking system
SSM goals and expected benefits
Intrusive, tough and fair supervision
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Total assets: ~ EUR 26,000 bn (for
comparison: USA USD 14,700 bn)
Direct supervision of ~ 120 significant
institutions (comprising ~ 1,200
individual institutions) and ~ 3,400 less
significant institutions
Total assets of the significant
institutions amount to ~ EUR 21,000
bn, those of LSIs to ~ EUR 5,000 bn
9 global systemically important
banks (G-SIBs) are headquartered
within the SSM
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Overview of the SSM scope
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Significant Institutions (SIs) Less Significant Institutions (LSIs)
Direct supervision by Joint Supervisory
Teams (JSTs)Indirect supervision by the ECB
Joint Supervisory Teams comprise staff
from the ECB and from National
Competent Authorities (NCAs)
NCAs carry out supervision in practice,
the ECB conducts oversight of the
supervisory system and high priority
institutions
Important: peer group analysis and
benchmarking of institutions
Important: specific national / regional
knowledge
Consistent supervision
Guidance provided by the ECB
SSM Risk Assessment System
SSM covers SI and LSI institutions in one integrated
supervisory system
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ECBdirect
supervisionindirect
supervisionoversees the system
Joint Supervisory Teams
(JSTs)
National Competent Authorities
(NCAs)
Less significant institutionsSignificant institutions
supports
Principles of coordination between ECB and NCAs:
assisting, instructing, cooperating, exchanging information
The SSM functions as one integrated system of national and
ECB supervisors
Horizontal divisions
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Horizontal
Supervision &
Specialised Expertise
Secretariat
This organisational chart shows the first two layers of the organisational structure.
DG (Directorate General)
D (Directorate)
Supervisory
Oversight &
NCA Relations
Institutional &
Sectoral
Oversight
Analysis &
Methodological
Support
Authorisation
Centralised
On-site
Inspections
Crisis
Management
Enforcement &
Sanctions
Methodology &
Standards
Development
Planning &
Coordination
of Supervisory
Examination
Programme
Supervisory
Policies
Supervisory
Quality
Assurance
Internal Models
Risk Analysis
Decision-Making
Process
Decision-Making
Policy
Direct Supervision Indirect Supervision
Micro-prudential
Supervision I
Micro-prudential
Supervision II
Micro-prudential
Supervision III
Micro-prudential
Supervision IV
Secretariat to the
Supervisory Board
± 90 credit
institutions
Joint Supervisory
Teams
Joint Supervisory
Teams
± 30 credit
institutions
SSM operating structure
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JST coordinator
(Chair)
Core JST
Sub-coordinators
(support JST coordinator)
Team of experts
from NCAs and
ECB
approval / validation
of high-level
decisions
support JSTs
ECB intermediate
structure (DGs)
Governing
Council
Supervisory
Board
Horizontal
divisions
Established for every significant banking group
Responsible for day-to-day supervision and for implementing the annual examination programme (SEP)
Deep integration between ECB and NCAs
Joint understanding of bank’s conditions
JSTs are key structure of the SSM
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• Continuous evaluation of quantitative and qualitative information Business Model Analysis
Internal Governance and Risk Management Analysis
Risk level and risk control analysis for capital related risks
Risk level and risk control analysis for liquidity risk
Own Funds analysis
• ICAAP / ILAAP reviews are essential element of the overall analysis
• Quantitative supervisory tools are used to challenge and verify
Benchmarking
Stress testing
• Supervisory measures are taken as necessary
Quantitative capital measures
Quantitative liquidity measures
Other supervisory measures
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The SSM Risk, Capital and Liquidity assessment leverages
information from several building blocks
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Establishment of the framework for indirect
supervision of less significant institutions
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Indirect Supervision
Indirect Supervision
Supervisory
Oversight
Institutional and
Sectoral Oversight
Analysis and
Methodological Support
Promote best
supervisory
practices and
develop common
standards
Ensure
consistency of
supervisory
outcomes
Oversee sectors
and country-
specific
institutional
arrangements
Exchange
information with
NCAs on high-
priority LSIs
Participate in crisis
management
Prepare
methodologies for
LSI supervision
(e.g. risk-based
prioritisation of
banks, SREP
application)
Analyse common
sources of risk
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Applying the ECB’s tools for indirect supervision
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Indirect Supervision
Ex ante notification of procedures and draft decisions by NCAs to ECB ECB assessment of draft material decisions and procedures
Regular ex post reporting by NCAs’ on their supervisory activities
Issuance of ECB regulations, guidelines or general instructions to NCAs
Thematic reviews: deep dives into specific risk areas
Possibility to request information and to perform on-site inspections
Possibility to take over supervision of individual LSIs at any time
Staff exchanges
Tools at the ECB’s disposal :
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Thank you for the attention
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