The European Central Bank (ECB) succeeded in setting up and staffing the Single Supervisory Mechanism (SSM) within a narrow timeframe, according to a new report from the European Court of Auditors. Through the SSM the ECB is now responsible for direct supervision of some 120 of the most important banking groups in the euro area. However, it is too heavily reliant on national competent authorities to ensure ‘full and effective supervision’, as required by EU law.
The Single Supervisory Mechanism was set up in 2014 to take over much of the work previously done by national banking authorities. It operates under the authority of the ECB but also closely involves the Member States.
This was the ECA’s first audit of the ECB’s operational efficiency with respect to the SSM, and the audit findings are mixed, say the auditors. They found that in setting up the SSM the ECB has not analysed supervisory staffing needs in the necessary detail, and that current staffing levels are insufficient.
Although the SSM Regulation put the ECB in charge of directly supervising large banking groups, ECB staff led only 12% of on-site inspections of these banks, and overall the inspection teams were predominantly staffed (92%) by the national competent authorities. Similarly, off-site supervision is heavily dependent on staff appointed by the Member State authorities, with the ECB having little effective say over the composition and skills of joint off-site supervisory teams.
The auditors also found that the ECB lacks a complete staff evaluation system for staff of national supervisors participating in joint supervisory teams and a proper database of skills to ensure the effectiveness of both on-site and off-site supervision teams. They point out that, while the SSM Regulation requires monetary and supervisory tasks to be carried out in full separation, the ECB has taken the view that this allows the use of certain shared services. This saves on resources, say the auditors, but the risk of possible conflicts of interests in some areas needs to be addressed.
The auditors have expressed concern about their lack of access to many documents during this audit. Speaking of the audit process, Neven Mates, the ECA Member responsible for the report, had this to say: “We were able to fulfil our task only partially, since the information provided to us by the ECB was insufficient to completely assess the operational efficiency of its management in respect of the supervisory function. The ECB withheld many documents that we considered necessary for this purpose, arguing that they did not concern the operational efficiency of its management. The Court is currently considering its options with regard to the access to documents it considers necessary to audit the operational efficiency of the ECB’s management.”