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The Single Supervisory Mechanism will have many advantages. It will allow all euro-area banks to be supervised at consistently high standards; it will make it easier to deal with cross-border problems; and it will mitigate the influence of national interests on banking supervision. On the whole, it will create a single European supervisory culture which will also cover those banks that are not directly supervised by the ECB. It will make the entire banking sector safer, and that will be good for all banks.
However, all supervisors and regulators do is create a framework. The market functions within this framework, and each individual bank has to hold its own in a competitive environment. There are therefore several challenges: the persistent phase of low interest rates, which is putting pressure on profits; the trend towards digitalisation, which could fundamentally alter the structure of banking business; and more intense competition from new players in the market.
In view of the low interest rates, on 19 May BaFin and Bundesbank launched a second survey on German credit institutions' earnings and resilience in a low-interest-rate environment. This survey is important because it will give an exact picture of the impact of various interest rate scenarios and short-term shocks. The survey will run until 28 June.
To sum up: not only the big banks, but also smaller institutions, will have to face the challenges presented by the market and the challenges presented by the Single Supervisory Mechanism for banks in Europe. The words of William Shakespeare are apt here: "The fault (...) is not in our stars, But in ourselves (...)."