As of 4th November the European Central Bank (ECB) has assumed responsibility for the supervision of Euro Zone banks.

This new mechanism known as the Single Supervisory Mechanism (SSM) is the product of a year-long preparatory phase of analysis and in-depth examination of the biggest banks in the Euro area, which banks – approximately 120 banking groups – represent 82% (by assets) of the Euro area banking sector.

The ECB will directly supervise credit institutions, financial holding companies and mixed financial holding companies. The principal purpose of this mechanism is to provide for consistent supervision by the ECB thereby contributing to the safety and soundness of these credit institutions, which in turn ensures stability of the European financial system.

For all other 3,500 banks with a lesser significance, the ECB shall allow the national competent authorities to maintain responsibility for the supervision of these institutions. Nevertheless, the ECB will work closely with the national authorities and can decide at any time to exercise direct supervision in order to ensure consistent monitoring and application of high supervisory standards.

A new website, www.bankingsupervision.europa.eu was also launched. This website is dedicated to the ECB’s task of Banking Supervision.

A Maltese Perspective

The ECB identified three banks in Malta as being of high significance. This significance is calculated on technical grounds that each bank has assets above 20% of the GDP. The banks are Bank of Valletta plc, HSBC Bank Malta plc, and Deutsche Bank (Malta) Ltd. This assessment was based on the banks’ figures – year ending in 2013, their total value of assets, their influence on Malta’s economy and on the EU as a whole, and on cross-border activity.

Less significant institutions like  AgriBank Plc, APS Bank Ltd, Banif Bank (Malta) Ltd, FimBank plc, Izola Bank plc, IIG Bank (Malta), Lombard Bank Malta plc, Commbank Europe Ltd, ECCM Bank plc, FCM Bank Ltd, Ferratum Bank (Malta) Ltd, Mediterranean Bank plc, Nemea Bank Ltd, Novum Bank Ltd and Pilatus Bank Ltd, will continue to be supervised by the Malta Financial Services Authority (MFSA) and other national competent authorities, with competence from the ECB to exercise direct supervision at any time.