THE SINGLE SUPERVISORY MECHANISM (SSM)

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The European Banking Union: a comprehensive overview of its legal framework 5
According to recitals 11 and 12 of Regulation (EU) No 1024/2013 of the Council,
which is the main legal source of the Àrst pillar of the EBU (see below, under 3.2.1):
“A banking union should (...) be set up in the Union, underpinned by a comprehen-
sive and detailed single rulebook for Ànancial services for the internal market as a
whole and composed of a single supervisory mechanism and new frameworks for
deposit insurance and resolution. In view of the close links and interactions between
Member States whose currency is the euro, the banking union should apply at least
to all euro area Member States. With a view to maintaining and deepening the inter-
nal market, and to the extent that this is institutionally possible, the banking union
should also be open to the participation of other Member States.”
“As a Àrst step towards a banking union, a single supervisory mechanism should ensure
that the Union’s policy relating to the prudential supervision of credit institutions is
implemented in a coherent and effective manner, that the single rulebook for Ànan-
cial services is applied in the same manner to credit institutions in all Member States
concerned, and that those credit institutions are subject to supervision of the highest
quality, unfettered by other, non-prudential considerations. In particular, the Single
Supervisory Mechanism (SSM) should be consistent with the functioning of the internal
market for Ànancial services and with the free movement of capital. A single supervi-
sory mechanism is the basis for the next steps towards the banking union. This reÁects
the principle that the ESM will, following a regular decision, have the possibility to
recapitalise banks directly when an effective single supervisory mechanism is estab-
lished. The European Council noted in its conclusions of 13/14 December 2012 that[:]
‘In a context where banking supervision is effectively moved to a single supervi-
sory mechanism, a single resolution mechanism will be required, with the necessary
powers to ensure that any bank in participating Member States can be resolved with
the appropriate tools’ and that ‘the single resolution mechanism should be based
on contributions by the Ànancial sector itself and include appropriate and effective
backstop arrangements’.”
In terms of deÀnitions:
(1) The term ‘euro area Member States’ denotes Member States whose currency is
the euro (Treaty on the Functioning of the European Union (hereinafter the ‘TFEU’ ),
Article 136).18
(2) On the other hand, the term ‘single rulebook’ is commonly used, from a stricto
sensu perspective, to refer to the total harmonisation of rules pertaining to the mi-
cro- and macro-prudential regulation and the micro-prudential supervision of credit
institutions. The term was Àrst introduced in June 2009, when the European Council
called for the establishment of a “European single rulebook applicable to all Ànancial
institutions in the Single Market”, i.e. a single set of harmonised prudential rules.19
1819
18. OJ C 326, 26.10.2012, pp. 47-200.
19. European Council Conclusions, 18/19 June 2009, 11225/2/09 REV 2, paragraph 20, Àrst
sentence, available at: