'A strong first year, challenges ahead for SSM', Deputy Governor Cyril Roux

• The SSM is a unique construct that has delivered much in its first year but more challenges ahead.

• The ECB is well staffed by experienced supervisors coming from national authorities attracted by the European project and much better financial terms.

• Capital requirements need to be disclosed to investors.

• Enforcement needs to be exercised within SSM.

The Central Bank’s Deputy Governor for Financial Regulation, Cyril Roux, said that the Single Supervisory Mechanism (SSM) had delivered much in its first year of operation despite the unique and unprecedented management challenges and legal complexities brought by supra national supervision.

While the SSM has developed a common methodology to determine capital requirements, more work is to be done in that area and more transparency is needed towards the banks and their investors.

Speaking at the Banking and Payments Federation’s Banking Union conference, Mr Roux said that the Central Bank recognised that banks face continued headwind on profitability, the on-going drag of non-performing loans, new and emerging risks such as cyber threats and the implementation and full application of regulatory reform from Basel III and the second pillar of banking union, the single resolution mechanism.

“Business model viability and sustainable profitability assessments will drive much of the supervisory engagement in the coming period as well as operational risk issues like IT and cyber risk.”

He also said that national competent authorities continue to carry out large amounts of the work, contribute to decision-making and influence and provide approaches to supervision.

The Deputy Governor recognised the Central Bank staff have been attracted to the working conditions at the ECB, and acknowledged that this presents a challenge for in terms of retention of staff at a national level.

He also said that the ECB needs to find its feet in enforcement as it enters its second year of operation as a prudential supervisor.

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