National bank supervisors are transferring some of their key tasks to the European Central Bank (ECB), which as of today (November 4) effectively assumes full responsibility as the Single Supervisor. Along with the Single Resolution Fund, the Single Supervisory Mechanism (SSM) is one of the main building blocks of the Banking Union (see picture below).
From now on, the most important banks in the Eurozone are subjected to ECB supervision. For banks outside the euro area, the ECB's competence is indirect. In total, 3 600 banks will be supervised. “Since already before the financial crisis, national supervisors have failed dramatically,” says Sven Giegold (MEP, Group of the Greens/European Free Alliance). Instead of working towards financial stability and to the benefit of the tax payer, the national authorities have a history of defending the interests of their national banking centres. In this respect, the Single Supervisory Mechanism could prevent future bail-outs of banks via EU citizens' pockets.
However, adding the role of the single supervisor on top of the ECB's existing monetary and fiscal policy competences leads to at least two undesirable side effects: concentration of power and a potential for a conflict of interests inside the ECB. Also, the Single Supervisory Mechanism does not cover big banking and insurance conglomerates.