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European banking supervision: the first eighteen months

The Bruegel report is an in-depth early assessment of how the Single Supervisory Mechanism works in practice since its official start in November 2014. The authors found European banking supervision to be broadly effective, tough, and fair, but they also identify mistakes, areas for improvement, and unfinished business that would eventually need to be addressed to fulfil the promise of banking union.

Bruegel blueprint series Vol 25
8 June 2016
Source: Bruegel

Dirk Schoenmaker, Erasmus University Rotterdam
Nicolas Véron, Bruegel

>  European banking supervision: the first eighteen months

Main findings:

The authors found the new European banking supervision system to be broadly effective and, in line with the claim often made by its leading officials, tough and fair. In their view these are remarkable achievements given the complexity of the transition from the previous regime. They also identify significant areas for future improvement. ECB banking supervision still lacks transparency, and there is evidence that the supervisors still have much to learn about the banks they oversee in order to better accomplish their mission, they write. Mistakes have been made along the way. According to them, European banking supervision has not yet achieved the objective of creating a level playing field for banking in the euro area and decisively breaking the vicious circle between banks and sovereigns.

  • European banking supervision is effective.
  • European banking supervision is tough, at least when it comes to significant (larger) banks.
  • European banking supervision appears to be broadly fair, at least for significant banks.
  • European banking supervision makes mistakes.
  • European banking supervision is insufficiently transparent.
  • European banking supervision has not yet broken the bank-sovereign vicious circle and created a genuine single banking market in the euro area.

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