Anniversary of the Single Supervisory Mechanism in banking supervision
This page collates the FIN-FSA’s key releases and texts on banking supervision in 2024.
Ten years of the SSM – from scattered beginnings into the banking union’s fist
The Single Supervisory Mechanism (SSM) of the European Central Bank celebrated its ten-year journey in autumn 2024. Since its beginning in 2014, the SSM has sought to enhance banking supervision and safeguard financial stability in the European Union. The SSM has grown into a prominent role as a supervisor in Europe.
In its first years, the SSM focused on devising uniform supervision practices and standards to ensure consistent banking supervision across all member states. This was crucial, because banking crises at the beginning of the 21st century demonstrated the vulnerability of the European banking system. Uniform practices and more stringent supervision have reduced risks and improved banks’ capital adequacy.
The SSM plays a key role and supervises hundreds of banks in different parts of Europe. It has succeeded in strengthening supervision and increasing the transparency and reliability of banks. In the future, the SSM will play an ever more important role, as it continues to enhance banking supervision and ensure that banks comply with regulatory requirements.
Nordic and Baltic crisis simulation exercise 2024
In the autumn, authorities responsible for financial stability in the Nordic and Baltic countries tested their preparedness for a potential crisis situation in an exercise concerning the management of a simulated financial crisis involving three fictitious banks active in the Nordic-Baltic region. The exercise involved the participation of nearly 450 people, representing authorities from Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden as well as relevant European Union authorities: European Commission, ECB, Single Resolution Board (SRB) and European Banking Authority (EBA). A staff member of the International Monetary Fund was invited and took part as an observer.
The purpose of the exercise was to test communication, information sharing and collaboration between the authorities during crisis management in an environment with a high level of uncertainty and under time pressure. The exercise was based on a crisis scenario where the fictitious banks went through the following three phases that could be foreseen in a bank crisis management process:
- from normal business to recovery including liquidity provision
- from recovery to resolution with resolution authorities assuming control of the bank and
- after resolution, a return of the restructured bank to the market.
During the exercise, the authorities applied the tools and powers at their disposal according to the EU regulatory framework for banking supervision and crisis management.
Following the successful conclusion of the exercise, the authorities will document and share lessons learned and integrate them into their existing crisis management routines, in order to develop their crisis preparedness and further enhance the crisis management framework in the Nordic-Baltic region.
A preparation team under the Nordic Baltic Stability Group (NBSG) was established in 2023 to prepare the exercise. The Nordic and Baltic authorities have agreed to conduct financial crisis simulation exercises in the context of the NBSG on a regular basis.
Differences in Finnish banks’ impairment staging of loans
In 2024, the FIN-FSA conducted a thematic analysis of impairment classifications by Finnish banks, and the results revealed differences among banks. Differences in impairment staging undermine the comparability of banks and the predictability of changes in credit risks.
The importance of appropriate classifications as well as adequate and timely recognition of impairments is particularly highlighted in the current environment of elevated risks. Excessively low and delayed loan loss provisioning may, if the risks materialise, lead to higher impairments and a weakening of banks’ capital adequacy.
Artificial intelligence was used in writing the article. However, the article was finalised and reviewed by FIN-FSA’s specialists.