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Switzerland's financial centre. Since 2014, the ECB has been supposed to take over the supervision of the EU's biggest banks, but auditors argue it still relies too heavily on national authorities.
The audit would have been the first to look at the Single Supervisory Mechanism (SSM), which was set up in 2014 to give the ECB greater oversight over Europe’s financial system to ensure it remained in good health following the financial crisis.
But auditors said they were only able to complete their assessment “only partially” due to resistance from the bank.
“The ECB withheld many documents that we considered necessary [to assess the operational efficiency of the bank’s management of the scheme],” explained Neven Mates, member of the European Court of Auditors responsible for the report.
He said that the bank had argued the documents were not necessary for this purpose. The ECA disagrees, and is currently “considering its options” with regards to access to the documents.
Based on the information they did have access to, the auditors concluded the ECB is too heavily reliant on national authorities to deliver the ‘full and effective supervision’ required by EU law.
The main aim of the SSM was to pass much of the supervisory work done by member state authorities to the ECB, to ensure oversight and regulation is harmonised and consistent following the financial crisis.
This had shown how contagious problems in the financial sector can be, especially in a monetary union, and the SSM hoped to ensure weaknesses were dealt with swiftly and to rebuilt resilience and trust in the system.
Under the SSM, the ECB is now responsible for the direct supervision of some of the 120 most important banking groups in the euro area.
While this does involve cooperation with national authorities, auditors said they played much too large a role.
ECB staff led only 12% of the on-site inspections of the large banking groups they were responsible for supervising, while 92% of inspection teams were predominantly staffed by individuals from national authorities.
Off-site supervision was also found to be heavily reliant on national authorities, and the ECB had little say over the composition of off-site teams.
The ECB’s system to evaluate the national supervisors participating in what should have been ECB-led teams was lacking, and the bank had no proper database of skills to ensure teams’ effectiveness, auditors continued.
Finally, the ECB did not sufficiently separate its monetary and supervisory responsibilities despite this being required by regulation, the auditor’s report said.
“The ECB has taken the view that this allows the use of certain shared services,” the ECA said. “This saves on resources, but the risk of possible conflicts of interests in some areas needs to be addressed.”
Auditors called on the ECB to “substantially” step up their presence during on-site inspections, enhance its monitoring of national staff and to make improvements to governance and accountability, including by providing all documents required for audit purposes.
The ECB said it took note of the auditors’ report and that it cooperated fully with the ECA and provided “all information and documentation necessary to assess the operational efficiency and management of the ECB”.
“In the run up to assuming our supervisory responsibilities, we took steps to resource the new function and optimise the SSM operations within the framework given,” it continued. “We’ll continue to do so going forward.”
