In parallel, monetary policy operations could provide useful signals to the supervisory function, for instance, when a bank relies disproportionately on central bank funding.
The creation of the SSM is an opportunity for Europe to rethink the links between banking supervision and monetary policy in a way that can strengthen both functions and learn the lessons of past banking crises, such as avoiding “zombie banks” infused with central bank money or the evergreening of non-performing loans. The SSM does not need to be limited to the euro area.