The Single Supervisory Mechanism

The SSM is examined in Chapter 11, which considers the role of the ECB and its relationships with the central banks and supervisory authorities of the member states participating in the banking union. As the author explains, in response to the euro-crisis and with the aim of breaking the doom loop between sovereign defaults and bank defaults, supervision of significant financial lending institutions was shifted from the national to the supranational level, and vested in a new branch of the ECB: the SSM. Nevertheless, as he points out, national competent authorities have preserved an important responsibility in supervision, and they have a major voice within the SSM decision-making system, as they outweigh the ECB representatives on the Supervisory Board. Moreover, as the author claims, the institutional solution found for supranational supervisions of banks creates challenges, notably due to the separation between the SSM and the SRM: while this choice was ultimately made to shield the ECB from the fiscal consequences of bank failures, it raises difficulties of coordination - a situation which is further complicated by the continuing role of EBA as a standard setter for banking rules for the whole EU. Nevertheless, as the chapter concludes, the SSM is very much a project of the EMU, and there are limited incentives for non-Eurozone countries to join, which suggests that adjustments may occur in the near future, also as a result of Brexit.