Ten years of the SSM: The past, present and future of banking supervision in the Banking Union

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Judith Arnal, Apostolos Thomadakis

European banking supervision will have been operational for ten years come November 2024. The Single Supervisory Mechanism (SSM) has evolved from a start-up to a mature, well-established, and respected supervisor. Harmonised and transparent supervisory practices have been implemented, whilst the European banking sector has proved to be resilient with strong capital and liquidity positions. Nevertheless, whilst acknowledging the progress that has been made, Europe should not rest on its laurels.

As the global financial landscape is continuously evolving, the European framework must naturally also evolve with it. Growing geopolitical tensions, the rise of FinTech and BigTech companies, the ongoing digital transformation, and climate change not only all impact banks but they also add more complexity to the work of supervisors. This is because of the possibility for unexpected and difficult to model events, the creation of new business models, products and services, as well as the emergence of cultural, behavioural and ethical considerations that should also be taken into account.

To address these challenges, supervisors should enhance their competencies, approaches and tools (quantitative and qualitative) to stay ahead of evolving market dynamics and to remain aligned with the rapid evolution of technology and the risks that climate change poses. Equally important, ensuring thorough and efficient supervision requires fostering and strengthening collaboration and information-sharing between all relevant authorities.

Judith Arnal is Senior Research Fellow at ECRI and CEPS. Apostolos Thomadakis is Researcher Fellow at CEPS and Head of Research at ECMI.