The European Union’s policy regarding the prudential supervision of institutions should be implemented in a coherent and effective manner so that the single rulebook for financial services is applied adequately to all institutions in all Member States concerned and the institutions are subject to supervision of the highest quality, unfettered by non-prudential considerations. In this context, the ECB is responsible for the effective and consistent functioning of the SSM and exercises oversight over the functioning of the system based on the responsibilities and procedures set out in the SSM Regulation for the ECB and NCAs regarding significant institutions (SIs) and less significant institutions (LSIs).

While NCAs are responsible for the direct supervision of LSIs, close collaboration between the ECB and NCAs is of utmost importance in order for the ECB to exercise its oversight task. In this regard, the ECB works together with NCAs, based on the allocation of responsibilities set forth in the SSM Regulation.

The ECB is entrusted with an oversight responsibility to ensure that the supervisory activities carried out by NCAs are in line with high supervisory standards, also with a view to fostering consistency of supervisory outcomes within the SSM. The general responsibility for the oversight of the system therefore covers the oversight of supervisory practices and standards applied by NCAs (see Section 5.1) as well as the oversight of LSIs (see Section 5.2).