Single Supervision and the Governance of Banking Markets

ECGI - Law Working Paper No. 294/2015

43 Pages Posted: 22 Jun 2015

See all articles by Guido Ferrarini

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI)

Date Written: June 8, 2015

Abstract

In this paper, I try to assess the likely impact of the Single Supervisory Mechanism (SSM) on Eurozone banking markets. I start by analysing the predictions made by economists and policy makers with regard to the deeper integration of financial markets which may derive from the Banking Union. I then try to identify the regulatory weaknesses that may throw uncertainty on the benefits commonly expected from the Banking Union. Firstly, I highlight the limits of EU supervisory centralisation as shaped by the reforms enacted after the 2008 financial crisis. Secondly, I analyse the limits of the SSM, which is to some extent still grounded on supervisory cooperation despite the fact that the ECB has powers of direction and substitution with respect to national supervisors. I argue, in particular, that the SSM represents a system of semi-strong centralization, which may still give rise to agency problems particularly in the relationships with supervisors of non-euro area countries that are still governed by the EU system of enhanced cooperation. Thirdly, I examine the decoupling of supervision from regulation deriving from the fact that the ECB lacks sufficient regulatory powers when acting as a supervisor of the Eurozone banking systems. The separation of regulation – which is harmonized (often with excessive detail) at EU level – and supervision – which is centralized in the euro area – may create problems to the extent that the single supervisor cannot create a prudential rulebook for the Eurozone, but is subject to EU prudential regulation and national law provisions often unduly limiting its supervisory discretion.

Keywords: Banking Union, Single Supervisory Mechanism, SSM, supervisory centralisation, regulatory harmonisation, banking regulation, prudential supervision

JEL Classification: E58, G21, G28, K20, K22

Suggested Citation

Ferrarini, Guido, Single Supervision and the Governance of Banking Markets (June 8, 2015). ECGI - Law Working Paper No. 294/2015 . Available at SSRN: https://ssrn.com/abstract=2604074 or http://dx.doi.org/10.2139/ssrn.2604074

Guido Ferrarini (Contact Author)

University of Genoa - Law Department and Centre for Law and Finance ( email )

Via Balbi, 22
16126 Genova, 16100
Italy
+39 010 209 9894 (Phone)
+39 010 209 9890 (Fax)

HOME PAGE: http://www.clfge.org

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Register to save articles to
your library

Register

Paper statistics

Downloads
298
Abstract Views
972
rank
99,782
PlumX Metrics