Since its creation in 2014 as a unit of the European Central Bank, it has been the remit of the Single Supervisory Mechanism (SSM) to put the eurozone’s banking sector on a healthier footing. Today it oversees the bloc’s 120-odd biggest banks, including eight banks of global systemic importance, slightly more than the US Federal Reserve.
It has not been a smooth journey. The aftermath of the 2011 sovereign debt crisis brought a new banking and non-performing loan crisis to Italy in 2016. In addition, investors have continued to punish the poor profitability of some of the eurozone’s biggest banks, not least in Germany, where Deutsche Bank’s losses have subdued what was the biggest European league table challenger to the US investment banks.
The SSM is the most complete pillar of the ECB’s banking union, as the Single Resolution Board remains a work in progress and there is no political consensus for a common deposit guarantee scheme. Even so, the SSM’s badgering of banks with big NPL problems has sparked controversy, particularly in Italy. After an attempt in late 2016 to introduce guidelines for full NPL coverage within certain timeframes, a statement in July qualified this, suggesting a more bank-specific approach.
