On 25 April 2013, the Council of the EU published the final compromise texts of a regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions and the proposed regulation amending Regulation 1093/2010 (which established the European Banking Authority). Together these texts establish the EU single supervisory mechanism (SSM).
Broadly, under the new regime, the European Central Bank (ECB) will assume responsibility for the supervision of “significant” credit institutions, with “less significant” credit institutions to remain subject to regulation by national supervisors. “Significance” is to be based on the following criteria:
- importance for the economy of the EU or any participating Member State; and
- significance of cross-border activities.
In addition, any credit institution will be regarded as “significant” if:
- it has total assets of EUR 30 billion or more; or
- the ratio of its total assets to the GDP of the participating Member State of establishment exceeds 20% (unless the total value of its assets is below EUR 5 billion); or
- the ECB considers it to be of significant relevance; or
- it has requested or received public assistance directly from the European Financial Stability Facility or the European Stability Mechanism;
- it ranks amongst the three most significant credit institutions in a participating Member State.
The ECB will assume responsibility for, inter alia:
- authorisations and withdrawal of authorisations;
- the administration of certain activities currently carried out by home state regulators, such as the establishment of branches in non-participating Member States;
- the assessment of applications for the acquisition and disposal of “qualifying holdings” (i.e. involving 10% or more of capital or voting rights);
- the regulation of own funds requirements, securitisations, large exposure limits, liquidity, leverage, and reporting and public disclosure of information on those matters;
- the enforcement of governance arrangements, risk management processes, internal control mechanisms, remuneration policies and internal capital adequacy assessment processes;
- conducting supervisory reviews and stress testing;
- consolidated supervision where parent companies are established in participating Member States; and
- supervisory tasks in relation to recovery plans, early intervention and structural changes required to prevent financial stress or failure (but excluding any resolution powers).