The Rising Power of the ECB: The Case of the Single Supervisory Mechanism

Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisis, charged with doing ‘too little, too late’ in order to alleviate market pressure. Its inaction / delayed reaction may have worsened the impact of the crisis. Within the context the European Central Bank emerged as an indispensable institution in euro area governance. ECB President Mario Draghi is even credited with saving the euro thanks to his speech in July 2012 in which he vowed to do “whatever it takes.” This article considers the evolving role of the ECB in euro area governance, specifically financial supervision. Whereas at the start of the crisis, the ECB’s increasingly important role in crisis management was termed as largely incremental (cf Salines et al. 2012; Schwarzer 2012), the ECB has increased its capacity and its competences significantly since onset of the global financial crisis. From a technical standpoint, this decision could be viewed as a natural outgrowth of central bank responsibilities (over half of the euro area national central banks were already responsible for financial supervision in their respective countries). From a political perspective, however, this change had important consequences regarding the centralization of authority in an already-powerful institution. Moreover it concerns the supervision of a major industry in Europe that has long enjoyed national regulatory forbearance and close relationships with national governments. Finally, the designation of the ECB as SSM is inextricably connected with the decision to forge ahead with Banking Union, the most important change in EU governance since the introduction of the euro