1. Introduction

The Single Supervisory Mechanism (SSM) officially entered into operation marking a step towards greater European harmonisation through the promotion of the single rulebook approach to the prudential supervision of credit institutions. On the 4th November 2014, the European Central Bank (ECB) announced that it would be responsible for the supervision of euro area banks, following a year-long preparatory phase.1 Established as a response to the aftermath of the financial crisis, the SSM is based on commonly agreed principles and standards whose main objectives include ensuring the safety and soundness of the European banking system, increasing financial integration and stability, and ensuring consistent supervision.

This article proposes to provide some information on the role of the ECB together with the MFSA (as the national competent authority (NCA) for Malta) with regards to supervision of Maltese credit institutions following the coming into force of the SSM.

2. Composition of the SSM

The SSM is composed of the ECB and participating Member States' NCAs so as to combine the particular experience and expertise of each institution.2

Two pieces of legislation are key, namely:

  • Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institution (SSM Regulation);3 and
  • Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for co-operation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation).4

The ECB is responsible for the effective and consistent functioning of the SSM and exercises oversight over the functioning of the system, based on the distribution of responsibilities between the ECB and NCAs.

In carrying out its prudential tasks, the ECB applies all relevant EU laws and, where applicable, the national legislation trans-posing them. Where the relevant law grants options for Member States, the ECB also applies the national legislation exercising those options. The ECB is subject to technical standards developed by the EBA and adopted by the Commission, as well as the EBA's European Supervisory Handbook.

Moreover, in areas not covered by this set of rules, or if a need for further harmonisation emerges in the conduct of the day-to-day supervision, the SSM reserves the right to issue its own standards and methodologies, while considering Member States' national options and discretions under EU legislation.

To ensure efficient supervision, credit institutions are classified into two categories namely: 'significant' and 'less significant' institutions, with the ECB directly supervising 'significant' institutions and NCAs in charge of the supervision of 'less significant' institutions.

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Footnotes

1 The relevant ECB Press Release can be downloaded from the ECB website at: https://www.bankingsupervision.europa.eu/press/pr/date/2014/html/sr141104.en.html

2 All Euro area Member States participate automatically in the SSM. Non-euro area EU Member States may opt-in by entering into 'close-cooperation' with the ECB.

3 OJ L 287, 29.10.2013, p. 63-89

4 OJ L 141, 14.5.2014, p. 1–50

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