3rd FIN-FSA Conference on EU Regulation and Supervision: The Single Supervisory Mechanism is built on a strong foundation, any implications for Nordic banking supervision and regulation must be closely monitored
In her opening address at the conference on the banking union, Director General Anneli Tuominen emphasised that the Single Supervisory Mechanism (SSM) is being built on a strong foundation. – The significant banks will undergo a thorough asset quality review and stringent stress tests before the SSM commences operations.
Any capital shortfalls must be covered within a fairly short period of time. – The decision making process of the SSM is also designed to underline supervisory independence from national interests, says Director General Tuominen. – By acting assertively and efficiently the SSM will strengthen confidence in its ability to deliver.
– The practical supervisory work will be undertaken by national supervisors in cooperation with and under the lead of the ECB. This will deliver better quality, but also generate higher costs of supervision, not least from the increase in reporting. Hence, measures must be taken to ensure that supervision remains cost efficient overall. Because supervision will be carried out as a joint effort, it is necessary to ensure that appropriate operating conditions for national supervisors will remain in place, Director General Tuominen points out.
The key issue from the Finnish and Nordic perspective is the impact of SSM on the supervision, regulation and business models of banking groups that will partly fall outside the scope of SSM. There is a risk that the supervisory and regulatory regimes of non-SSM countries will differ from those of SSM countries and induce regulatory arbitrage across countries. – Rather than being a dividing force, the SSM should be a unifying force that strengthens the single market, Director General Tuominen concludes. Developments in European banking supervision must, therefore, be closely monitored.
For interviews with Director General Anneli Tuominen, please contact Ms Terhi Lambert-Karjalainen, Head of Communications, tel. +358 50 351 9574