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Mr Nouy said: "The idea of the SSM was born at a moment when the sovereign debt crisis threatened the cohesion of the euro area. Since the political decision to set up the SSM during the June 2012 European Council meeting, we have come a long way in building a strong and independent supranational supervisor.
For the first time in the history of the EU, there will be a supervisor with a truly European mandate, and a collective responsibility. The SSM will take an encompassing view of banks’ activities throughout the SSM Member States (and beyond) and remove national bias in supervision. Moreover, the ECB will be accountable to both the European Parliament and the EU Council, two institutions that represent citizens of the European Union and the Member States. By reducing financial fragmentation, the SSM will also facilitate the smooth transition of monetary policy throughout Monetary Union. Money markets will work more efficiently across national borders.
The SSM is rapidly becoming a reality and is set to assume responsibility for bank supervision within the euro area from 4 November 2014. The ECB published and finalised the SSM Framework Regulation on 25 April. The Framework Regulation lays down the main rules for the proper functioning of the SSM. ECB has largely developed the supervisory model of the SSM. The current SSM core project – the comprehensive assessment – consisting of the asset quality review (AQR) and the stress test, is progressing on multiple fronts. The actual execution of the AQR is on track – more than 6,000 supervisors and auditors are now working on the AQR. If banks face a capital shortfall arising from the AQR or the baseline stress test scenario, they will be asked to restore their capital position within six months; for shortfalls arising from the adverse stress test scenario, they will have up to nine months. The SSM is working on harmonised reporting templates based on Common Reporting (COREP) and Financial Reporting (FINREP) data that will ultimately reduce the reporting burden on pan-European banks, by eliminating different reporting standards across European countries, and will help to foster a level playing field.
From a supranational supervisor’s perspective, the region is certainly interesting. There is much cross-border bank activity among Denmark, Finland, Norway and Sweden, in the form of both subsidiaries and branches. Partly thanks to their experiences of the crises in the early 1990s, the four Nordic countries now have strong national supervisors. Nordic banks are already considered to have good solvency as well as good risk management. But what benefits will the banking union bring for them? Among other things, the additional transparency created by this exercise will further enhance the confidence of investors and depositors. The strong link between transparency and confidence has important positive implications for funding costs."