Purpose of the single supervisory mechanism
The single supervisory mechanism (SSM) is the first pillar of the banking union. Under the SSM, the European Central Bank (ECB) is the central prudential supervisor of financial institutions
- in the euro area
- in non-euro EU countries that choose to join the SSM
The ECB directly supervises the largest banks, while the national supervisors continue to monitor the remaining banks.
The ECB and the national supervisors work closely together to
- check that banks comply with the EU banking rules
- tackle problems early on
The EU has adopted a legislative package to set up the single supervisory mechanism.
- Council Regulation (EU) No 1024/2013 establishes the SSM as a system to supervise banks in the euro area and other participating EU countries.
- Regulation (EU) No 1022/2013 aligns the existing legislation on the establishment of the European Banking Authority (EBA) to the modified framework for banking supervision.