The European Central Bank has assumed responsibility for the supervision of euro area banks. From now on its new watchdog will directly supervise 120 "significant banking groups", which represent 82 percent (by assets) of the euro area banking sector.
It's hoped that the so-called Single Supervisory Mechanism (SSM),
the Frankfurt-based body, will help "improve and
strengthen" financial stability. The aim of the European
Central Bank (ECB) supervisor is to boost safety of credit
institutions and the stability of the European financial system
as a whole.
"We now have a unique opportunity to develop a culture of
supervision that is truly European, building on the best
practices of supervisors from across the euro area," the
chairperson of the supervisory board of the ECB, Danièle Nouy,
said. She revealed that the ECB has hired over 900 banking
experts for its new supervisory unit.
The European Parliament’s Green economic and finance
spokesperson, Sven Giegold, described it as "a milestone for
more financial stability in Europe", which could
"finally draw a line under the often lax national banking
supervision, which played a significant contributory role in the
financial crisis and led to €5 trillion of European taxpayers'
money being put on the line to rescue failing banks."
An audit of the EU's 130 largest banks in October revealed that
25 lenders across the EU bloc had failed their stress tests
designed to find out whether banks would have enough capital to
confront future financial crunches. The worst results were
concentrated in Italy, Greece and Cyprus, the ECB said. The banks
showed a combined capital shortfall of 25 billion euros (about
$31 billion).
While the ECB will supervise 120 significant banking groups, for
all other 3,500 banks it will also set and monitor the
supervisory standards and work closely with the national
competent authorities in the supervision of these banks.