Reflections on euro area banking supervision: context, transparency and culture from an institutional law perspective

The chapter analyses some of the main legal and institutional issues regarding the extent and scope of the ECB’s competence to supervise credit institutions and banking groups, especially on a cross-border basis, and whether or not its powers and capabilities are adequate to achieve prudential regulatory objectives. The chapter argues that the EU Treaties and the Capital Requirements Directive IV provide limited competence and tasks for the ECB to act as a bank supervisor, especially regarding oversight of non-bank financial institutions that could cause systemic risks. The chapter assesses the main provisions of the Single Supervisory Mechanism Regulation and the SSM Framework Regulation that allocate home-host state responsibilities for oversight of credit institutions with cross-border operations. The chapter discusses how the supervisory structure depends heavily for its effectiveness on information exchange and cooperation between the NCAs and the ECB, but in many places there are gaps and institutional obstacles that limit the ECB’s effectiveness as a cross-border supervisor. The chapter concludes that although there are important issues to be resolved regarding the ECB’s capacity to fulfil its macroprudential tasks and its interaction with host country authorities the SSM provides an important pillar for the creation of the European Banking Union.