What is the goal of European Bank supervision?

The banking crisis of 2007 and 2008 laid bare vast inadequacies in the structure and practical supervision of domestic financial institutions and the financial system. It also revealed shortcomings in risk management at a large number of financial institutions. Many of these operated across borders, and the national supervisory mechanisms were not designed to handle the strong interlinkages between European financial markets.

As a result, the governments of many countries were forced to intervene to prevent the financial system from collapsing. In the Netherlands, the Dutch government intervened in systemically important banks such as ABN AMRO, ING and SNS (renamed de Volksbank in 2017). This had huge repercussions for the national budget and, by implication, taxpayers.

To avoid a future need for government intervention in the banking sector, the member states in the euro-area agreed to establish the European banking union. As a result, responsibility for prudential supervising - that is supervision of financial institutions to ensure their soundness and the stability of the financial system – of the 120 largest banks in the EU the largest banks is now no longer a task for national supervisory authorities in a manner of their choosing. Instead, supervision is at an EU level and, within the framework of the single supervisory mechanism, performed by the European Central Bank. The fact that all the major banks in the member states are now supervised in the same way reduces the chances of bank failure. And if Eurozone banks do run into financial difficulties, the aim of the European resolution mechanism will be to resolve the problems without passing on the costs to national governments and taxpayers.

Following the banking and credit crisis of 2007-2011, bank supervision was also strengthened in other areas, for instance to prevent money laundering. Money laundering is a serious social problem because every laundered euro is a proceed of crime. It is estimated that between €15 and €20 million is laundered in the Netherlands every year.
Integrity supervision to prevent money laundering is based on European regulations and directives and is currently conducted by national supervisors. This will change in 2027, when the European Anti-Money Laundering Authority (AMLA) wil lassume part of the supervision.