The Single Supervisory Mechanism – Panacea or Quack Banking Regulation?

48 Pages Posted: 18 Aug 2013 Last revised: 11 Nov 2016

See all articles by Tobias H. Troeger

Tobias H. Troeger

Leibniz Institute for Financial Research SAFE; Goethe University Frankfurt - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: August 16, 2013


This paper analyzes the new architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the SSM as a regime that intends to bolster financial stability in the steady state.

By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus under-incentivizes their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. To this end, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical.

The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States.

Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB’s ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision

Keywords: prudential supervision, banking union, regulatory capture, political economy of bureaucracy, Single Supervisory Mechanism (SSM), European Central Bank (ECB), European Banking Authority (EBA)

JEL Classification: G21, G28, H77, K22, K23, L22

Suggested Citation

Tröger, Tobias Hans, The Single Supervisory Mechanism – Panacea or Quack Banking Regulation? (August 16, 2013). European Business Organization Law Review, Forthcoming, SAFE Working Paper No. 27, Available at SSRN: or

Tobias Hans Tröger (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)


Goethe University Frankfurt - Faculty of Law ( email )

Theodor-W.-Adorno-Platz 3 (Westend Campus)
Frankfurt, 60323
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)


European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels


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