European Central Bank – close cooperation with the national competent authorities of participating Member States whose currency is not the euro

KEY POINTS

The SSM was established as the system of banking supervision composed of the ECB and the NCAs of participating Member States, with the aim to ensure safe and sound banks, a stable and integrated financial system and the consistent supervision of all banks. All euro-area Member States participate automatically in European banking supervision.

Member States that do not use the euro can participate in the SSM by submitting a request for close cooperation between the ECB and their NCA. Once close cooperation has been established, these Member States can join both the SSM and the Single Resolution Mechanism, which ensures the orderly resolution of failing banks.

Steps for the establishment of close cooperation:

1. the non-euro-area Member State formally requests to enter into close cooperation under the SSM;
2. the non-euro-area Member State prepares and adopts national legislation that allows the ECB to exercise its supervisory tasks, and the ECB assesses that legislation;
3. the ECB carries out a comprehensive assessment (a financial health check) of the banks of the Member State concerned, similar to that conducted on euro-area banks in 2014 before the SSM was set up;
4. the ECB adopts a decision that indicates how supervisory tasks will be transferred to the ECB and when the close cooperation will start.

Overall, the establishment of close cooperation opens participation in the banking union to non-euro-area Member States, thus contributing to the safety and soundness of banks and fostering the process of financial integration across the single market.

Supervision under close cooperation:

Once close cooperation is established, the NCA of the Member State concerned is in a position comparable to all other NCAs of Member States participating in the SSM. This entails, among other things:

1. the identification of significant institutions that fall under the direct supervision of the ECB and of less significant banks that remain under the direct supervision of the NCA;
2. the creation of joint supervisory teams for the supervision of significant institutions;
3. the participation of a representative of the NCAs in the Supervisory Board of the ECB, with the same rights and obligations as all other members (including voting rights).

Under close cooperation, the NCAs are obliged to adopt any measure in relation to supervised entities at the request of the ECB. ECB legal acts (including decisions on banks) will not have direct effect in the Member State in close cooperation, as the latter does not form part of the euro area. Therefore, the ECB will not adopt decisions that are directly addressed to banks in the Member State concerned, but rather instructions addressed to its NCA. The NCAs must provide the ECB with all necessary information for its supervisory tasks. If an NCA fails to comply, the close cooperation agreement may be suspended or terminated by the ECB.

Suspension or termination of close cooperation:

• the ECB may suspend the close cooperation for up to six months, giving reasons for its decision;
• the termination of the close cooperation can be initiated by the ECB or by the Member State in close cooperation.

Once a Member State in close cooperation fulfils the necessary conditions for the adoption of the euro and that Member State adopts the euro, it becomes a member of the Eurosystem and the close cooperation comes to an end.