Single banking supervision in Europe

On 4 November 2014 Europe’s Single Supervisory Mechanism (SSM) for banks started up, and the European Central Bank took over direct supervision of the most important banks in the euro area.

The banks operating in Estonia that are under the direct supervision of the European Central Bank are Swedbank, SEB and Luminor. The list of significant banks is reviewed and confirmed once a year.

The SSM is designed to make sure that there is single and strong supervision of bank capital throughout the euro area. In essence, it has two key functions:

  • ensuring security and confidence in the European banking system;
  • increasing financial integration and stability.

The European Central Bank is responsible for making sure that banks in the euro area meet the capital and liquidity requirements, for issuing and revoking licences, and for approving acquisitions of major holdings in banks.

Staff from the supervisory institutions of the euro-area member states are also involved in the work of supervision. The banking supervisor in Estonia, and partner for the European Central Bank in banking supervision, is the Financial Supervision Authority, which is responsible for supervising all the other banks in Estonia.

Eesti Pank’s role is to provide macroprudential supervision and ensure the stability of the financial system as a whole. This means giving opinions on the state and risks of the financial sector and designing measures that will ensure financial stability.

The Governor of Eesti Pank is on the Governing Council of the European Central Bank and so participates in taking decisions on the Single Supervisory Mechanism. The decisions are drafted by the Supervisory Board of the European Central Bank, and the Chair of the Board of the Financial Supervision Authority and the Deputy Governor of Eesti Pank sit on that board.

Read more about banking supervision on the SSM website and the website of the Financial Supervision Authority.