Towards banking union

In June 2012, the Heads of State or Government of the European Union (EU) decided to create a single body to supervise banking in order to improve the quality of supervision in the euro area, favour market integration and break the negative link which had formed between confidence in banks and doubts as to the sustainability of government debt.

The initiative to create the Single Supervisory Mechanism (SSM) was formalised on 15 October 2013 when the Council of the European Union approved Regulation (EU) 1024/2013. This Regulation defines the SSM as an integrated European system for the supervision of financial institutions that combines the leadership of the European Central Bank (ECB), in a supervisory role, with the involvement of the national competent authorities (NCAs) of the euro area countries — including the Banco de España — and of other EU Member States that wish to join it, establishing close cooperation with the ECB.

The SSM came into force on 4 November 2014, when the ECB assumed the supervisory tasks assigned to it in the SSM Regulation.

The establishment of the SSM was the first step towards the creation of a “banking union”. The successful conclusion of this process also requires another two fundamental pillars:

  • The Single Resolution Mechanism, which came into force in January 2015.
  • A harmonised deposit guarantee system. In November 2015, the European Commission presented a proposal for the establishment of a deposit guarantee scheme in the euro area.

The three pillars of the banking union mentioned above were also reinforced by the introduction of a single rulebook, based on the new capital requirements established by Regulation (EU) 575/2013 and Directive 2013/36/EU, which came into force in January 2014.