ECB publishes final SSM framework

The European Central Bank (ECB) published the legal framework that will underpin its Single Supervisory Mechanism (SSM) today, after completing a public consultation on an earlier draft.

The framework sets out the basis for cooperation between the ECB and the national competent authorities (NCAs) within the SSM, and the criteria that will be used for determining the significance of supervised entities.

"The SSM framework regulation lays the basis for the work of the SSM when it takes over as supervisor of euro area banks in November 2014," the ECB said. "This is an important milestone in the set-up of the SSM, which is being delivered as scheduled."

The ECB published a draft framework in February and held a public hearing in Frankfurt – with the chair and the vice-chair of the supervisory board, Danièle Nouy and Sabine Lautenschläger, in attendance – to solicit feedback from industry participants.

It also called for written comments, and received responses from a range of institutions, including four central banks and supervisory authorities. The majority of respondents were, however, market and banking associations.

Few substantial changes have been made. The framework now specifies that the ECB and the NCAs "shall consult with each other and agree" on how NCA resources will be used in the joint supervisory teams (JSTs) that will monitor the eurozone's significant banks.

The ECB reasserted that there will only be one JST allocated to each significant institution or group, and that the significance of any entity would be determined "at the highest level of consolidation" within the SSM member states.

"This means there will only be a single JST for all supervised entities belonging to a supervised group if that group has its head office in a participating member state," the ECB said.

The framework does not address rules on governance or decision-making procedures within the ECB, nor does it address the separation of the supervisory and monetary policy functions at the central bank – these issues will be addressed in separate legal acts.