The introduction of the SSM is a fundamental change as to how banking supervision is conducted. The SSM comprises of the ECB and the national competent authorities (NCAs) of participating Member States. From 4th of November 2014, SSM is responsible for the prudential supervision of all credit institutions in the participating Member States, which includes Ireland.
The Structure of Banking Supervision comprises of:
Ongoing Supervision For Significant Institutions supervision will be aligned with the SSM Joint Supervisory Team structure which will be led by the ECB. The JST will comprise staff from both the ECB and NCAs. The JSTs will be responsible for prudential supervision. For Less Significant Institutions, supervisory responsibility will remain with the Central Bank. Supervision will be conducted in accordance with European law and EBA standards but also in line with the harmonised standards and processes that the SSM has developed.
On Site Supervision will include in-depth investigations of risks, risk controls and governance within credit institutions.
Analysis functions: includes a number of areas which support the supervisory process, such as Risk Analysis and Internal Models, Crisis Management and Authorisations.
The SSM approach to supervision is risk-based. It takes into account both the degree of damage which the failure of an institution could cause to financial stability and the likelihood of such a failure occurring. Where the SSM judges that there are increased risks to a credit institution or group of credit institutions, those credit institutions will be supervised more intensively until the relevant risks decrease to an adequate level. The SSM approach to supervision is based on qualitative and quantitative approaches and involves judgement and forward-looking critical assessment.
In carrying out its prudential tasks, as defined in the SSM Regulation, the ECB applies all relevant EU laws and, while the NCAs apply national law. The ECB is subject to technical standards developed by the European Banking Authority (EBA) and adopted by the European Commission, and also to the EBA’s European Supervisory Handbook.