Banking system supervision
The objective of the supervisory activities is identifying risks in all areas of the operations of banks and savings banks (credit risk, liquidity risk, operational risk, capital risk, interest rate risk, profitability risk, internal controls, corporate governance, reputation, anti-money laundering) in timely fashion, and ensuring the stability of credit institutions and the system through effective action.
Single Supervisory Mechanism and supervision of less significant institutions
The banking supervision system has undergone significant change since the last financial crisis. The Single Supervisory Mechanism (SSM) began functioning in 2014 as one of the pillars of the banking union, whose objective is safe, transparent and unified European banking.
The establishment of the SSM saw supervision of 120 European banks that meet the criteria for classification as significant institutions transferred to the ECB in 2014, although this supervision is conducted in operational terms by joint supervisory teams (JSTs). The JST for each significant institution consists of a coordinator from the ECB, and members from the national supervisory authority and the ECB. The national supervisory authorities (the Bank of Slovenia in Slovenia’s case) participate in all the supervisory activities, while the supervisory decisions with regard to these banks are made by the ECB.
- For more on the Single Supervisory Mechanism, see the Introduction and the Guide to banking supervision
The supervision of banks that do not meet the criteria for being classed as significant institutions, i.e. less significant institutions, is conducted by national supervisors, i.e. the Bank of Slovenia in Slovenia’s case, in accordance with the rules and methodology of the ECB and the SSM. National supervisors regularly submit supervisory data for less significant institutions to the ECB, and inform it of the findings of their supervision. The national supervisory authorities may consult the ECB on the imposition of measures, but the final decision is their responsibility, other than in exceptional cases. The new arrangements also allow the ECB to directly take over the supervision of less significant institutions at the proposal of the national supervisor, at its own initiative in the event of the potential occurrence of a systemic crisis, or if the national supervisor is failing to conduct adequate supervision.
1 According to the ECB criteria, significant institutions are banks (1) whose total assets amount to more than EUR 30 billion or more than 20% of GDP (except banks whose total assets are less than EUR 5 billion); (2) who are among the three largest banks in the country; (3) who have received funding from the European Stability Mechanism; (4) whose total assets amount to more than EUR 5 billion and who account for more than 20% of the assets/liabilities in a single Member State.
2Has special status as a bank specialising in promotion of exports and development.Supervision is conducted by the Bank of Slovenia.
The ECB and the national supervisory authorities carry out the following types of activity:
- they conduct supervisory reviews, on-site inspections and investigations
- they grant and withdraw the authorisation to provide banking services
- they assess the acquisition and disposal of qualifying holdings
- they ensure that EU prudential rules are upheld
- they set out capital requirements
The annual supervisory review and evaluation process (SREP) at the individual bank or savings bank is an integral part of the ordinary supervision. Within the framework of the SREP, the ECB and the Bank of Slovenia analyse the business model of each bank, and assess the suitability of its governance structure, the risks inherent in its operations and the effectiveness of its risk management. One of the important input parameters for the assessment of a bank is the results of the stress tests conducted annually by the Bank of Slovenia and the ECB.
- For more on the SREP, see What is the SREP?
IMAS Portal – Banking Supervision Portal
On 27 January 2021 the IMAS Portal, which allows banks supervised by the ECB to submit their applications for fit and proper assessment, track the status of these assessments and exchange related information with supervisors, was launched. The IMAS Portal does not change the way in which the ECB and national supervisory authorities cooperate: in all participating countries, the national supervisory authority remains the entry point for fit and proper applications and applicants must follow relevant national laws and administrative practice with regard to their submissions. This leads to differences between participating countries in the way applicants can use the Portal.
The procedure for submitting applications with regard to fit and proper assessments to the Bank of Slovenia has not changed with the introduction of the Portal, applications must still be received by the Bank of Slovenia in physical form in accordance with relevant laws and regulations. It is therefore not possible to submit a valid application only via the IMAS Portal, but it may be submitted to the Portal on a voluntary basis in addition to the physical submission of the application.
- For additional information, please see this Quick guide to accessing the IMAS Portal
European Banking Authority (EBA)
Alongside the Single Supervisory Mechanism, the key institution in the area of banking supervision and financial stability is the European Banking Authority (EBA), in which the Bank of Slovenia participates as a member of the euro area.
The EBA’s objectives are to put in place consistent, effective and efficient supervisory practices and to ensure the harmonised application of European legislation in all EU Member States. To this end the EBA issues guidelines and recommendations in various areas of banking addressed to competent supervisory authorities and banks. The Bank of Slovenia decides on the application of EBA guidelines and recommendations to banks in Slovenia, and publishes a regulation on their application in the Official Gazette of the Republic of Slovenia.
Established in 2010 by Regulation (EU) No 1093/2010 of the European Parliament and of the Council, the EBA is part of the European System of Financial Supervision (ESFA), which is also made up of two other supervisory authorities: the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). The system also comprises the European Systemic Risk Board (ESRB), and the Joint Committee of the European Supervisory Authorities and national supervisory authorities. The EBA is independent, but accountable to the European Parliament, the Council of the European Union and the European Commission.