The ECB has become Europe’s main watchdog for banking institutions, the organisation will monitor over three thousand six hundred banks in eighteen countries. The uniform approach aims to create a single resolution of key matters, with a particular focus on strengthening the banking environment post fixing cases.
The new measures will cover the three key principles that the central bank aims to strengthen; ensure the safety and soundness of the European banking system; increase financial integration and stability and ensure consistent supervision.
The new practises will be set in stone over a one year period, the transition period allowing the ECB to prepare itself and to carry out a thorough comprehensive assessment.
Under the terms, the bank will bring forward key initiatives that support its uniform code of practise, including; the Banking Union will also include a Single Resolution Mechanism (SRM) consisting of a Single Resolution Board and a Single Resolution Fund, underpinned by a Single Rulebook. The Single Resolution Board will be operational on January 1, 2015.
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The Single Supervisory Mechanism (SSM) applies to all the euro area Member States, and is open to the participation of all other Member States.
Within the SSM, the ECB is responsible for the supervision of 3,600 banks, directly and indirectly. It will ensure the coherent and consistent application of the Single Rulebook in the euro area.
The ECB directly supervises banks holding assets of more than $37 billion or constituting at least 20 percent of their home country’s GDP, or which have requested or received direct public financial assistance from the EFSF (European Financial Stability Facility) or the ESM.
Jonathan Hill, EU Financial Services Commissioner, commented in a statement: “The Single Supervisor will now ensure the day-to-day surveillance of banks in the eurozone, helping to keep the European banking sector safe and remaining alert to new risks emerging. Greater confidence in European banks will encourage affordable lending to the wider economy, to households and SMEs.”
Europe’s leading banks have been facing a number of allegations of ill practises, the details of their wrong-doings have been subject to investigations by both the banks themselves and regulatory authorities. Swiss banking giant, UBS, paid $1.5 billion in monetary penalties to authorities in the US, UK and Switzerland for the involvement of former staff members in the case.