ECB Consults on Draft SSM Framework Regulation

On 7 February 2014, the European Central Bank (ECB) published a consultation paper on a draft of the ECB Single Supervisory Mechanism (SSM) Framework Regulation.

Pursuant to the SSM, from 4 November 2014, the ECB will assume responsibility for the supervision of significant supervised entities (SSEs) and national competent authorities (NCAs) will remain responsible for the supervision of less significant supervised entities (LSSEs).  The draft framework regulation specifies a number of procedures relating to the practical implementation of the SSM, including:

  • Organisation of the SSM, specifically addressing the supervision of SSEs and LSSEs and the establishment of joint supervisory teams from the ECB and NCAs;
  • Rights of establishment and freedom to provide services;
  • Determination of ‘significance’, based on:
    • Size: entities are regarded as ‘significant’ if the total value of their assets exceeds EUR 30 billion;
    • Economic importance: entities are regarded as being economically important:
      • At a national home state level if:
        • The ratio of total value of assets of the entity to GDP of the Member State in which the entity is established is equal to or greater than 20%; and
        • The total assets of the entity is equal to or greater than EUR 5 billion;
      • At a European or host state level if:
        • The entity is assessed as such on the basis of:
          • Sectoral importance;
          • Interconnectednesss;
          • Substitutability; and
          • Business, structural and operational complexity;
    • Cross-border activities: a supervised group may be considered ‘significant’ on the basis of its cross-border activities only when the parent undertaking of a supervised group has established subsidiaries, which are themselves credit institutions, in more than one other participating Member State and its ratio of cross-border assets (liabilities) to total assets (liabilities) is above 10%;
    • Receipt of direct public financial assistance;
    • Whether it is one of the three most significant credit institutions in a participating Member State, based on size;
  • Annual reviews confirming status of LSSEs as being ‘less significant’;
  • Micro-prudential tasks such as consolidated supervision (particularly whether the ECB will assume direct supervision of an LSSE) and passporting issues;
  • Macro-prudential tasks i.e. measures not typically addressed to an individual institution;
  • Supervisory powers (including powers of investigation, the granting and withdrawal of authorisations and the assessment of the acquisition of qualifying holdings);
  • Administrative penalties;
  • Cooperation between the ECB and NCAs
  • Cooperation with Member States not currently within the Euro but which wish to participate in the SSM; and
  • Transitional provisions.

The consultation paper is open for comment until 7 March 2014, with a final version of the regulation to be published by 4 May 2014.

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