LSI overview

Less significant institutions (LSIs) are located in every country participating in the Single Supervisory Mechanism (SSM) . While the market share of LSIs in national banking systems varies considerably across these countries, LSI activities tend to be more geographically concentrated than those of significant institutions (SIs). Many LSIs provide services to smaller communities or regions, depending on their location. Furthermore, the product portfolios offered by LSIs are usually narrower and more specialised than those offered by SIs. The segments in which some LSIs specialise include car financing, mortgage banking, lending to specific sectors, and providing securities services.

Both below and in the ECB’s LSI Supervision Report you will find more detailed information on the LSIs in Europe. Specific information on Institutional Protection Schemes (IPSs) is also included, as a large number of LSIs are members of an IPS.

LSI sector overview

The LSI sector in Europe consists of around 2,000 banking entities at the highest level of consolidation. An additional 250 entities are acting as subsidiaries of other LSIs, while roughly 60 LSIs are operating as individual branches. This adds up to around 2,400 entities that are supervised by the national competent authorities (NCAs) of the 21 participating countries. The bulk of the LSI sector is still concentrated in Germany, Austria and Italy, where there are large decentralised systems of savings and/or cooperative banks.

LSI sector by business model across participating countries

(by number of entities)

As of December 2021

It is not just the market share of the LSI sector that varies considerably across the participating countries – the same holds true for LSIs’ predominant business models at national level. This includes the presence of LSIs in a variety of dynamic market segments, from consumer credit and real estate lending to private banking and asset management. LSI activities tend to be more geographically concentrated than those of SIs, with retail lending being the predominant business model.

LSI sector by countries

(number of entities and total assets)

As of December 2021

For more information on the LSI sector, please refer to the following ECB publications:

• LSI Supervision Report
• ECB Annual Report on supervisory activities
• LSI statistics (to come in Q2 2023)
• Supervision Newsletter

IPS overview

An institutional protection scheme (IPS) is defined in the Capital Requirements Regulation (CRR) as a contractual or statutory liability arrangement which i) protects its member institutions, and ii) ensures that they have the liquidity and solvency needed to avoid bankruptcy where necessary. The competent authorities may, in accordance with the conditions laid down in the CRR, waive selected prudential requirements – for example on liquidity according to Article 8(4) of the CRR or on considering intragroup exposures in the calculation of risk-weighted exposure amounts according to Article 113 (7) of the CRR – or allow certain derogations (e.g. application of lower outflow and higher inflow percentages for LCR calculation (Articles 422(8) and 425(4) of the CRR) for IPS member institutions.

IPSs are currently recognised for CRR purposes in four countries participating in the SSM: Austria, Germany, Italy and Spain. The relevance of IPSs is significant, given that their members account for about 50% of euro area banks and hold around 10% of the total assets of the banking system. In fact, SIs under ECB banking supervision and LSIs are often members of the same IPS. The two main sectors covered by IPSs in the four euro area countries in question are cooperative and savings banks.

In 2016 the ECB published guidelines on how to assess IPSs and coordinate the activities of the ECB and NCAs in this regard. The guidelines ensure that the ECB and NCAs assess new IPS applications in a harmonised way while consistently monitoring the IPSs to make sure that they adhere to the legal requirements.

• Guideline laying down the principles for the coordination of the assessment
• Guideline on the approach for the recognition of IPSs for prudential purposes by NCAs