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Watching over 21,000 Billion Euros: Does the ECB Single Supervisory Mechanism Affect Bank Competition in the Euro Area? (Burkhard Raunig, Michael Sigmund)

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Abstract

Under the Single Supervisory Mechanism (SSM), introduced in 2014, systemically important euro area banks with combined assets of about 21,000 billion euros are directly supervised by the ECB.We examine from a static and a dynamic perspective how this fundamental shift to unified supervision under the SSM affects the competitive position of SSM banks. We find that the SSM reduced competition for SSM banks in countries affected by the sovereign debt crisis. Otherwise, the impact of the SSM was limited or competition increased. Furthermore, our results suggest that anti-competitive side effects of the SSM are unlikely to be permanent.

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  • Burkhard Raunig & Michael Sigmund, 2023. "Watching over 21,000 Billion Euros: Does the ECB Single Supervisory Mechanism Affect Bank Competition in the Euro Area? (Burkhard Raunig, Michael Sigmund)," Working Papers 250, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:250
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    More about this item

    Keywords

    ECB Single Supervisory Mechanism; Banking supervision; Competition; Lerner index; Persistence of profits;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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