Comparisons within peer groups have helped identify bank-specific issues early on, which are then addressed with each bank individually. The third benefit of European supervision is that it reduces fragmentation in the supervisory framework. In the past, broad discretion in applying EU rules led to significant national differences in key prudential aspects, such as the definition of funds, or capital and liquidity requirements.
The resulting divergences in the capital strength of banks undermined confidence in their soundness. European supervisors identified 175 options and discretions (O&Ds) available under EU law, 130 of which are available to national supervisors and are now applied in a uniform way across the euro area. More harmonised rules have helped re-build confidence in banks and reduce compliance costs for cross-border groups.