ECB's new watchdog takes over EU banks supervision

The European Central Bank has assumed responsibility for the supervision of euro area banks. From now on its new watchdog will directly supervise 120 "significant banking groups", which represent 82 percent (by assets) of the euro area banking sector.

It's hoped that the so-called Single Supervisory Mechanism (SSM), the Frankfurt-based body, will help "improve and strengthen" financial stability. The aim of the European Central Bank (ECB) supervisor is to boost safety of credit institutions and the stability of the European financial system as a whole.

"We now have a unique opportunity to develop a culture of supervision that is truly European, building on the best practices of supervisors from across the euro area," the chairperson of the supervisory board of the ECB, Danièle Nouy, said. She revealed that the ECB has hired over 900 banking experts for its new supervisory unit.

The European Parliament’s Green economic and finance spokesperson, Sven Giegold, described it as "a milestone for more financial stability in Europe", which could "finally draw a line under the often lax national banking supervision, which played a significant contributory role in the financial crisis and led to €5 trillion of European taxpayers' money being put on the line to rescue failing banks."

An audit of the EU's 130 largest banks in October revealed that 25 lenders across the EU bloc had failed their stress tests designed to find out whether banks would have enough capital to confront future financial crunches. The worst results were concentrated in Italy, Greece and Cyprus, the ECB said. The banks showed a combined capital shortfall of 25 billion euros (about $31 billion).

While the ECB will supervise 120 significant banking groups, for all other 3,500 banks it will also set and monitor the supervisory standards and work closely with the national competent authorities in the supervision of these banks.