The debate over the establishment of the Single Supervisory Mechanism (SSM) has focused largely on the sharing of competencies between the European Central Bank (ECB) and national supervisory authorities in respect of micro-prudential banking supervision. A less commented feature of the SSM Regulation is that it also establishes the ECB as a macro-prudential authority. This article explains the consequences of this development for the macro-prudential policy framework in the EU. The article argues that the new powers conferred on the ECB potentially disrupt a delicate balance between national and supranational authority in macro-prudential policymaking. That balance – established by the so-called Capital Requirements Directive IV and Capital Requirements Regulation – involves the competent authorities of member states exercising ‘constrained discretion’ over the use of macro-prudential instruments at the national level. While the ECB’s new macro-prudential role may bring benefits in respect of the coherence of the Single Market in banking, its desirability from a financial stability perspective is less obvious. The ECB has a banking-only remit in macro-prudential policy and a governance structure geared towards monetary policy independence. Were it to supplant both the European Systemic Risk Board and national competent authorities to become the de facto macro-prudential authority for countries participating in the Banking Union, it could propagate an excessively narrow approach to the identification of systemic risks and a subordinate role for macro-prudential policy vis-à-vis micro-prudential supervision and monetary policy.
