The single supervision mechanism is the first pillar of the european banking union. But first, we need to understand the need of a banking union. The banking union aims to ensure the stability of the financial system. The banking union aims to reduce too the effect of banks failure on european citizens.
It is an integrated supervision mechanism at european level.
It ensures the stability of banking and financial system
But what are the pillars of banking union?
The three pillars of banking union are:
*The signle supervision mechanism,
*The single resolution mechanism, and;
*The deposit guaranttee scheme.
In this article our main focus is only the single supervision mechanism.
The single supervision mechanism is a multi-level system of banking supervision. this mechansim is at the european level.
this mechanism involves the european central and national competent authority.
The single supervision mechanism benefits from the macroeconomic and the financial expertise of the European central bank.
It also benefits from the knowlege of national markets of national competent authority.
There is a huge number of banks at european level (~6000 banks).
The national competent authority facillitate the task for european central bank.
The single supersvision mechanism throught european central bank:
*control complex financial institutions.
*ensure the implementation of prudential supervision.
*ensure the application of the single rulebook.
*No more supervision forbearance.
*No more protection of national champions.
*protection of financial system.
As noted, the role of the single supervision mechanism consist on the control of the financial instituion, complex ones.
Also, the SSM ensure application of single rulebook. No more, National champion protection or supervision forbearnce.
SSM ensure prudential supervion.