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What are less significant institutions?

13 December 2022

All supervised entities are, by default, classified as less significant institutions (LSIs). They only become significant – and therefore fall under the ECB’s direct supervision – if they fulfil at least one of the criteria set out in the Single Supervisory Mechanism (SSM) Framework Regulation. These criteria include the bank’s size, its importance to the economy of its home country or the EU as a whole and the significance of its cross-border activities. As of October 2022,111 banks were classified as significant institutions (SIs) and more than 2,000 as LSIs.

Many LSIs provide their services within smaller communities or regions. Most savings and cooperative banks fall into this group, for example. Furthermore, LSIs may offer more specialised services and products than those offered by SIs, such as car financing, mortgage banking, lending to specific sectors and providing securities services.

LSIs are supervised by their national supervisors, under the oversight of the ECB, whereas SIs are supervised directly by the ECB. Their supervision and oversight follows the principle of proportionality. This ensures that the supervisor’s expectations and requirements correspond to the size, systemic importance and risk profile of the banks being supervised, and that supervisory resources are efficiently allocated. Nevertheless, minimum standards must be respected by all banks and therefore cannot be waived for proportionality reasons.

To facilitate this proportionate treatment, banks are classified according to their characteristics. That means that the differentiation between SIs and LSIs is a key starting point for applying proportionality. A further distinction between LSIs is possible following the introduction of small and non-complex institutions (SNCIs) as a result of the revised Capital Requirements Regulation (CRR II). Bank-specific attributes such as risk profile, business model, cross-border activities and size are additional differentiation factors used to determine the appropriate level of supervisory engagement (in terms of the frequency, scope and depth of supervisory reviews) and supervisory reporting.


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The SSM Framework Regulation sets out institutional relations and procedures within European banking supervision.

SSM Framework Regulation


The ECB maintains a list of all significant banks under its direct supervision and less significant banks under its indirect supervision.

List of supervised banks


Find answers to some of the most frequently asked questions on LSI supervision and oversight, which should help familiarise you with the topic.

LSI supervision and oversight