European Parliament Agrees Single Supervisory Mechanism Regulation

Long-awaited agreement on SSM reached

The European Parliament (EP) voted today, 12 September 2013, in favour of the Regulation setting up a Single Supervisory Mechanism (SSM) in the Eurozone. The outcome of this legislative process, which formally began exactly one year ago with a proposal from the European Commission (EC), is the transfer of prudential regulatory powers from Eurozone national authorities to the European Central Bank (ECB). As a result, approximately 130 of Eurozone's biggest banks will be directly supervised by the ECB. The ECB will also be responsible for the overall oversight of prudential supervision in the Eurozone. Non-Eurozone EU member states can opt-in to the SSM.

What was discussed today?

In reality, agreement on nearly all aspects of the SSM was reached in the trialogues between the EP, the Council and the EC in March this year.

The EP's final Plenary vote was however postponed until today, due to MEPs' concerns that the existing accountability mechanisms of the ECB were insufficient, particularly in order to maintain the separation between the ECB's monetary policy function and its newly acquired supervisory role.

In the lead up to today's EP vote, an institutional agreement between the ECB and the European Parliament was reached to address these concerns. The key terms of the agreement are reported to be:

The ECB must submit the most important information from the minutes of the Board of Supervisors to the European Parliament; If the Governing Council of the ECB rejects a decision of the Board of Supervisors, the President of the European Parliament or the chairperson of the relevant committee must be informed; The Chair of the Single Supervisory Mechanism must be appointed by the Parliament and the Council. The Parliament can initiate the dismissal of the Chair; The vice chair (a member of the ECB Governing Council) must also be approved by the Parliament; The ECB has to answer oral and written questions by the European Parliament. If certain points need to be kept confidential, in camera discussions are possible; If the Parliament initiates inquiries the ECB has to cooperate as for a committee of enquiry. This makes scrutiny much easier for the Parliament; and The ECB must...