Development impacting banking supervision

National authorities will remain involved in the supervision of
those banks, as it is expected that they will assist the ECB in the performance of its new
supervisory tasks. Ongoing supervision of these banks will be conducted by Joint
Supervisory Teams (JSTs) coordinated by the ECB (also with staff from national competent
authorities), whilst teams of supervisors independent from the JSTs (drawn from both from
national authorities and the ECB) will be formed to conduct on-site inspections.

For smaller banks, national competent authorities will retain responsibility with oversight provided by the
ECB. These impending changes will have a significant impact on the roles, responsibilities
and tasks of both BaFin and Bundesbank as well as on current supervisory practices. Both
institutions are currently assessing the impact of the SSM in terms of resources, processes
and governance during the transition period 39 as well as the ongoing support that will be
provided to the SSM.

While these changes pose uncertainties and challenges, the German authorities are
encouraged to continue their efforts to enhance supervisory frameworks and processes, as
these will play a pivotal role in the microprudential supervision of German banks and
insurance companies. In particular, the transition to the SSM does not lessen the need by the
German authorities and/or the ECB to implement measures, described below, to further
enhance: (i) prompt and comprehensive risk identification; and (ii) timely and effective
supervisory intervention.