Single Supervisory Mechanism
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Single Supervisory Mechanism (SSM) is the tentative term for the mechanism through which, per the European Commission's proposal, the European Central Bank shall assume ultimate responsibility for specific supervisory tasks related to the financial stability of the biggest and most important Eurozone based banks.
Proposal and Reactions
On 12 September 2012, the European Commission revealed a proposal, on the basis of article 127(6) of the Treaty of Lisbon that would assign the supervision of the Eurozone area's banks to the European Central Bank. The Commission called on the Council and the European Parliament to adopt the proposal "by the end of 2012," together with other components of what is intended to be "an integrated banking union." An important part of this integration would be the adoption of a "single rulebook in the form of capital requirements,...harmonized deposit protection schemes...and a single European recovery and resolution framework."
President of the European Commission José Manuel Barroso stated that the proposed mechanism "will restore confidence in the supervision of all banks in the euro area," emphasizing that the European Union intends to "break the vicious link between sovereigns and their banks."
"In the future," Barroso added, "bankers' losses should no longer become the people's debt, putting into doubt the financial stability of whole countries."
The EU's Internal Market Commissioner Michel Barnier stated that the "ultimate aim is to stop using taxpayers' money to bail out banks," adding "We...made sure that the ECB will be accountable to the European Parliament for supervisory decisions".
On the occasion of the Commission's SSM proposal, Commission President José Manuel Barroso, addressing the EU parliament in Strasbourg, called for the EU to evolve into a "federation of nation-states". Barroso said he was not calling for a "superstate", but rather "a democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty," acknowledging that such a federation "will ultimately require a new treaty."
ECB "welcomed" the proposal,  but Chancellor of Germany Angela Merkel questioned "the capacity of ECB to monitor 6,000 banks." The vice-president of the European Commission, Olli Rehn, responded that the majority of European banks would still be monitored by national supervisory bodies, while "ECB would assume ultimate responsibility over the supervision, in order to prevent banking crises from escalating."
The European Banking Federation (EBF), representing the interests of over five thousand European banks in 32 countries, with its members combining assets of over 30,000 billion Euro and around 2.4 million employees, stated that it welcomes the European Commission’s proposals and supports "the clear commitment towards a single rule book". Guido Ravoet, EBF Chief Executive stated that the federation remains "keenly aware" that further steps will be required to create "a common resolution mechanism and a harmonised deposit guarantee framework," which EBF considers as "necessary to complete an effective single supervisory mechanism."
According to BBC reports, Britain does not want to take part in the Single Supervisory Mechanism, but will support the idea of a single supervisor for the Eurozone, "as long as it does not affect the integrity of the wider EU single market."
Some economists remained skeptical, some pointing out to the composition of the SSM board as an issue in itself.  The Commission proposes a board consisting of a total of 23 members, with 17 representatives of bank supervisors of member-states plus one chairman, one vice-chairman and four other members. Thus, the large majority of the SSM board would consist of national supervisors who "do not appreciate ECB interference in their daily national supervisory activities."
The European Parliament and member states agreed on specifics of European Central Bank (ECB) oversight of eurozone banks on March 19, 2013; however, no agreement has been made regarding an EU-wide common deposit scheme, with the solvency of national deposit guarantee schemes irrevocably tied to that of the sovereign. 
On October 15, 2013, the Council of the European Union (“Council”) reached an agreement on the Single Supervisory Mechanism, the first of the three pillars of Eurozone’s banking union. Under this agreement, the European Central Bank (“ECB”) is charged with Eurozone -wide supervisory authority, and will directly supervise approximately 130 financial institutions in 18 countries, covering 85% of total banking assets in the Eurozone. 
The SSM will put in place a system of common bank supervision in the EU that involves national supervisors and the European Central Bank. Not all EU member states will participate in the SSM: participation in the SSM is mandatory for the eurozone countries, while the other EU member states have the option whether to join. In the SSM, the ECB is endowed with final supervisory authority while national supervisors are in a supporting role.
Division of labour
A division of labour has been established between the ECB and national supervisors. Banks deemed “significant” will be supervised directly by the ECB. A bank is deemed significant when it meets one of the following 5 conditions:
- The value of its assets exceeds € 30 billion.
- The value of its assets exceeds both € 5 billion and 20% of the Gross Domestic Product of the member state in which it is located.
- The bank is among the three most significant banks of the country in which it is located.
- The bank has large cross-border activities.
- The bank receives assistance from a eurozone bailout fund.
Around 150 banks will be supervised directly by the ECB, representing approximately 80% of bank assets. All other banks in the SSM (more than 6.000 in the eurozone alone) will be supervised by the national supervisor, although the ECB will keep final supervisory authority over these banks.
Organisational structure ECB
A Supervisory Board will draft supervisory decisions. The Supervisory Board will consist of the national supervisors participating in the SSM, in addition to a chair, vice-chair and 4 ECB representatives.
After the draft decision, the formal decision is to be made by the ECB’s ultimate decision-making body: the Governing Council. The Governing Council consists of the national central banks of the eurozone and the ECB’s Executive Board.
A strict administrative separation is foreseen between the ECB’s monetary and supervisory tasks. Final decision-making on both matters, however, takes place in the same body (the Governing Council).
Under the European Treaties, non-eurozone countries do not have the right to vote in the ECB’s Governing Council and in return are not bound by the ECB’s decisions. Non-eurozone countries furthermore cannot become full members of the SSM, in the sense of having the same rights and obligations as eurozone SSM members.
As a consequence, non-eurozone EU member states can enter into a “close cooperation agreement” with the ECB. The banks in that country are then supervised by the ECB and the country gains a seat in the ECB’s Supervisory Board. A “close cooperation agreement” can be ended by the ECB or by the member state that signed the agreement.
Single Resolution Mechanism
The final measure proposed by the European Commission is a Single Resolution Mechanism or SRM, which if approved would enact at the end of 2014. The measure will allow the European Central Bank to directly supervise banks within the Eurozone and other member states choosing to join. This mechanism will allow for troubled banks from sovereign nations to receive bailout funds from the central bank to alleviate the impact on one nation's banks.
The initiative will limit fragmentation of financial markets and help to guarantee financial stability. Internal Market and Services Commissioner Michel Barnier stated "We have seen how bank crises can quickly spread across borders, sending confidence into a downward spiral throughout the euro area. We have also seen how the collapse of a major cross-border bank can lead to a complex and confusing situation." He went on to say European nations "need a system which can deliver decisions quickly and efficiently, avoiding doubts on the impact on public finances, and with rules that create certainty in the market. That is the point of today's proposal for a Single Resolution Mechanism: by ensuring that supervision and resolution are aligned at a central level, whilst involving all relevant national players, and backed by an appropriate resolution funding arrangement, it will allow bank crises to be managed more effectively in the banking union and contribute to breaking the link between sovereign crises and ailing banks."
The resolution would establish a 55 billion Euro reserve fund for this purpose. Ratings Agencies have stated their approval of the measure and believe it will cause European ratings and credit to rise as it will limit the impact of a bank failure.
Germany, in particular, has stated its disapproval of the mechanism, as it sees it as incompatible with current EU treaties. Critics have stated their concerns that this mechanism will result in sovereign states' taxpayers' money being used to pay off other nation's bank failures.
Limits to supervision by the SSM
A first limit to the scope of the SSM is geographical: the SSM will only cover a part of the EU member states. It will hence contribute to what is known as multi-speed Europe. A second limit is the fact that the SSM only deals with bank supervision. Supervision of the rest of the financial sector (for example insurance firms) remains a national competence. In addition, some aspects of bank supervision (for example consumer protection) remain a task for national supervisors. 
- "First the Governance, Then the Guarantees", by Ivo Arnold, EconoMonitor, 19 September 2012
- "Commission proposes new ECB powers for banking supervision as part of a banking union" (Press release). Communication department of the European Commission. 12 September 2012. Retrieved 22 July 2013.
- "EU Commission chief Barroso calls for 'federation'", BBC News, 12 September 2012
- "ECB welcomes Commission’s proposal for a single supervisory mechanism", ECB press release, 12 September 2012
- "Rehn: Schedule for single supervisory mechanism feasible", Helsinki Times, 13 September 2012
- "EBF welcomes steps towards Single Supervisor" (Press release). European Banking Federation. 12 September 2012. Retrieved 22 July 2013.
- "Wanted: EU banking union as Cyprus kills off deposit-insurance dream", Euromoney, 19 March 2013
- "EU regulatory outlook". http://www.pwc.com/us/en/financial-services/regulatory-services/publications/eu-bonus-cap-crd-iv-emir-aifmd.jhtml, January, 2014.
- "Commission proposes Single Resolution Mechanism for the Banking Union". European Commission.
- "EU unveils plans to wind down failed banks". BBC. July 10, 2013.
- "Brussels unveils Single Resolution Mechanism for banking union". Euractiv. Jul 11, 2013.
- Harlow, Chris (July 12, 2013). "Single resolution mechanism a positive for sovereign credit says Fitch". City A.M.
- Verhelst, Stijn. "Assessing the Single Supervisory Mechanism: Passing the point of no return for Europe’s Banking Union". Egmont – Royal Institute for International Relations. Retrieved 12 June 2013.
- Proposal for a Regulation for the creation of a single supervisory mechanism
- Proposal for a Regulation with changes to the setting up of the European Banking Authority, drawn up "to ensure a balance in its decision making structures between the euro area and non-euro area Member States"
- Communication outlining the Commission's "overall vision for rolling out the banking union"