The Single Supervisory Mechanism (SSM) is a new system which gives
the European Central Bank (ECB) the power to intervene in any bank within the
eurozone. Its aim is to reduce financial risk and prevent cross-border
contagion. A new permanent rescue fund – the European Stability Mechanism –
allows failing banks to be recapitalised directly without adding to a country's
sovereign debt. The biggest contributors are Germany (27%), France (20%) and
Italy (18%).
The
SSM receives a mixed reaction. On the one hand, there are those who welcome the
increased regulation, something which was largely absent for years and played a
major role in the crisis of 2008. On the other hand, fears are raised over the
centralised supervision of so many banks, viewed by many as another step
towards a federal European superstate.
This
banking union is of particular concern to the UK, which until now has dominated
financial services with over half of all investment banking in Europe. With its
own separate currency – pound sterling – it lies outside the group of eurozone
members and their circle of influence, but within the European Union (EU). It
therefore stands to be marginalised when decisions are taken on regulation in
the EU as a whole. This triggers a major debate in the UK over the country's
role in policymaking, leading to further calls for a referendum on its EU
membership.
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