I wish I could have joined you in Frankfurt for this event marking the tenth anniversary of the foundation of the Single Supervisory Mechanism, but I am glad that I can join you virtually.
We have much to be proud of today as we reflect on this milestone.
The creation of the SSM was a historic moment of institutional transformation for the euro area. It was the right response to strengthen our banking and financial system in the aftermath of the global financial crisis and the European sovereign debt crisis.
We are now reaping the benefits of these institutional innovations. Our banks are more stable and more resilient. We are much more capable of dealing with stress events.
Supervisors at Eurogroup
The SSM is now thankfully embedded in much of our existence.
For example, just a few days ago – this past Monday, in fact – I was delighted to welcome Claudia to our Eurogroup meeting in Brussels for the second of our twice-annual reporting on Banking Union, together with Dominique from the SRB.
It was an excellent and a very timely opportunity, given the anniversary this week, to reflect on how far we have travelled in the first ten years of the SSM.
Supervision – the first pillar of Banking Union
While it was a very difficult time, including for many people in this room (and I for one have the grey hairs to prove it!), it is worth remembering the context for the establishment of ECB Banking Supervision.
In 2012 President of the European Council President Herman Van Rompuy presented the so called ‘Four President’s report’ setting the vision for the future of Economic and Monetary Union.
Central to this report was the strengthening of the architecture of EMU.
It proposed the elevation of responsibility for supervision to the European level, and for common mechanisms to resolve banks and guarantee customer deposits.
As many of you will remember, part of the rationale for the SSM was to address the so-called ‘financial trilemma’ which was the impossibility of achieving, at the same time, financial stability, financial integration and national financial policies in an integrated market.
A second critical objective was to break the negative feedback loop between banks and sovereigns.
As the first pillar of Banking Union, the SSM broke new ground and has stood the test of time.
Through the SSM, the ECB supervises over 100 institutions across the continent, that are significant because of:
- their size
- their importance to an individual economy or the overall European economy
- the scale of their cross-border activities, or
- their receipt of direct public financial assistance
Under the supervision of the SSM, the resilience of European banks has improved considerably over the decade:
- The CET1 ratio of Significant Institutions has increased by over 3% since the SSM’s establishment
- Non-Performing Loans have also declined dramatically from 7.5% in 2015 to 1.9% in 2024
These achievements, while simple to state, were the product, I know, of thousands of hours of work by you.
I agree wholeheartedly with the Commission’s assessment from last year that the SSM has become a mature, established supervisory authority that delivers on its objectives1.
To deliver and be recognised as such in under a decade is a testament to you in the ECB and all who have worked so hard at national level in our National Competent Authorities to build the SSM.
Changing environment
In 2014, the concept of the Banking Union was a powerful response to the financial crisis.
Since then, we have faced a global pandemic, another major challenge that required us to innovate and co-operate in so many ways.
Europe continues to face new challenges every day.
In the context of geopolitical uncertainty, monetary policy shifts and long-term structural issues such as climate change, digitalisation and demography, we must proactively address these issues.
And to do that, we must have a strong and stable financial sector.
Looking to the future, I want to make two points. First, in relation to the broader Banking Union project, and second, in relation to the next phase of work for the SSM.
Completing Banking Union
As Finance Ministers agreed in 2022, work on the Banking Union has focused most on strengthening the common framework for bank crisis management and national deposit guarantee schemes (CMDI framework). I am pleased that inter-institutional negotiations are scheduled to begin this month.
The CMDI review includes a comprehensive set of measures designed to improve the resolution process for small and medium-sized banks.
It represents an immediate step towards the further completion of the Banking Union.
But we should also not lose sight of the bigger picture and wider importance of delivering on the original vision of creating a stable architecture for EMU.
We all know there is much work to do.
For the SSM in particular, it is great to see it be so forward looking, responding to the changing environment through its priorities around geopolitical shocks, climate and environmental risk-management and the digital transformation.
I will leave others, better equipped, to discuss the SREP, the evolution of risk assessment and supervisory toolkits, analytics, and systems.
Conclusion
I would like to conclude by saying
- Be proud
- Be confident
- Be vigilant
Be proud of the work you have achieved for Europe. Proud of the institution and system of supervision you have built. And proud of the joint supervisory teams, the development of a supervisory philosophy, approach and methodology.
But in addition to being proud, be confident.
Confident in how you are responding to the great transitions of our age, confident in your engagement with firms, and confident in your assessments and judgements.
Finally, be vigilant, because none of us know what is around the corner.
1 Report from the Commission to the European Parliament and the Council on the Single Supervisory Mechanism established pursuant to Regulation (EU) No 1024/2013, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52023DC0212