On 20 November 2013, the European Central Bank (ECB) published a speech given by the ECB executive board member, Yves Mersch, on the ECB’s perspective on the future of the European banking union.
Mr Mersch provided further details on the comprehensive assessment of the major banks in the Single Supervisory Mechanism (SSM), which will be the focus of the ECB’s new supervisory function. In October 2013, the ECB published a note setting out details of the comprehensive assessment which will consist of a risk assessment, a balance sheet assessment and a stress test. He stated that conducting the stress test over a period of three years should be sufficient as will the use of a baseline scenario and one stress scenario. The ECB is currently discussing internally the question of how exposure to government bonds is to be valued.
Mr Mersch also summarised the ECB’s proposal to directly supervise the most important banks in the euro area. Each significant bank will be supervised by a team of ECB supervisors and national supervisors, led by a central ECB coordinator who is responsible for reporting to the ECB supervisory board. The team will also include a sub-coordinator from the relevant national supervisory authority for each euro area country where the major bank is active.
On the same day, the Council of the European Union published a note regarding a Memorandum of Understanding (MoU) (15963/13) to be entered into with the ECB on procedures related to the SSM. The SSM Regulation No 1024/2013 contains provisions on the ECB’s accountability and reporting under the SSM (Article 20) and on the appointment and removal of the Chair and vice-Chair of the ECB’s Supervisory Board (Article 26). Earlier this month, the European Parliament and the ECB signed an Interinstitutional Agreement on the implementation of the related provisions in the Regulation. The General Secretariat therefore considers that the Council and the ECB should also sign an MoU for the same purpose.