The ECB directly supervises the significant banks in the euro area. To do so, we work together with the national supervisory authorities within the Single Supervisory Mechanism.
The less-significant banks are supervised by the national supervisory authorities while the ECB ensures a consistent approach across Europe.
Working together under the Single Supervisory Mechanism, the ECB and the national supervisors aim to
- ensure the safety and soundness of the European banking system
- increase financial integration and stability in Europe
- ensure consistent supervision
Microprudential tools concentrate on challenging and testing the risks of individual banks. In this way, they contribute to a safe banking system in Europe.
The ECB has the power to:
- carry out supervisory reviews, including stress tests
- conduct on-site inspections and investigations
- grant or withdraw banking licences
- authorise banks’ acquisitions of qualifying holdings
- ensure compliance with EU prudential rules
- set higher capital requirements (“buffers”) in order to counter any financial risks
- impose corrective measures and sanctions
Macroprudential supervision refers to the overall approach taken to ensure the stability of Europe’s financial system by limiting the build-up of aggregate risk within the system.
The ECB can:
- apply higher requirements for banks, such as counter-cyclical buffers
- comment and object to measures by national authorities