On November 8, 2017, the European Central Bank (“ECB“) published a report on the supervision of less significant institutions (“LSIs“) in the single supervisory mechanism (“SSM“).

In its role as lead supervisor in the SSM, the ECB directly supervises all credit institutions in the Eurozone that are classified as significant, while national competent authorities (“NCAs“) directly supervise other credit institutions, referred to by the ECB as LSIs.

In the report, the ECB sets out an overview of:

• A description of the organization of banking supervision in the SSM, focusing on the supervision of LSIs.
• A description of the LSI sector and the implications for supervision of current challenges for LSIs.
• The main supervisory activities conducted of LSIs by NCAs. The ECB summarizes the NCAs’ work relating to off-site and on-site supervisory activities, thematic reviews and the application of supervisory powers under Article 104 of the CRD IV Directive (2013/36/EU).
• The ECB’s work to promote the convergence of LSI supervision across the SSM. The ECB states that it and the NCAs have made substantial progress in promoting a common supervisory approach, methodologies and toolkit for LSIs. The ECB notes that further work is needed to address challenges arising from differences in practice relating to accounting systems.