The Future of a Hybrid Mechanism : The Case of the Single Supervisory Mechanism
Brauss, Hanns Bernhard Reinhard (2014)
The Single Supervisory Mechanism, first component of the EU's Banking Union, represents an
important step in revising the supervision system in the EU's financial sector and European
integration. It aims to break the vicious circle that impacted the European economies heavily during
the sovereign debt crisis. Interestingly, the Mechanism was created as a hybrid of supranational and
national components and actors. Although supervisory powers were pooled at the ECB, the national
competent authorities are also included. This set-up leaves room for questions looking at the future
development of the Mechanism, either able to go beyond the will of the member states or effectively
remain under national control. Derived from this general interest the primary research question asks
“What is the relative power of the supranational and the national side within the Single Supervisory
Mechanism?” (RQ1). The analysis is carried out as a Congruence Analysis within the theoretical
framework of the two prominent European integration theories: Neo-Functionalism (NF) and Liberal
Intergovernmentalism (LI). Both offer opposed views on integration: NF focuses on how the
demand for integration is created and deems the supranational actors and underlying mechanisms
responsible. LI highlights the role of the member states, supplying integration. The thesis has two
objectives, on the one hand to explore the possibilities for the future development of the SSM, and
providing evidence for the applicability of the theories and their relative potential to explain the
evolving integration of the European financial sector, on the other. To enable conclusions to be
drawn on RQ1 the sub-research question is “Which European Integration theory is better suited to
explain the integration process in the European Union's financial supervision sector, and the
establishment of the Single Supervisory Mechanism?“ (sRQ). The analysis of the negotiation
process and the final output shows that Liberal Intergovernmentalism seems to be better suited to
explain integration in the financial supervision sector. The influence of the supranational side was
rather limited, as the national side remains influential even after the creation of the SSM influencing
the scope and scale of the SSM's possible development. Still, to ensure a proper functioning and
effective Mechanism, the ECB was equipped with rather strong competences. The relationship
between the ECB, as the central actor of the SSM, and the NCAs will largely determine the future
development and the success of the Mechanism. The ECB has to be careful to decide when to
interfere at the national level of supervision.
Brauß_MA_Management and Governance (MB).pdf