Moreover, although the ECB’s supervisory decisions are formally adopted by its Governing Council – which also defines monetary policy – these are prepared and pre-agreed by an independent Supervisory Board, meaning that the Governing Council acts only under the principle of non-objection. Hence, when defining the institutional model of the banking union, the European legislator has set great store by preventing conflicts of interest between micro-and macroprudential supervision and monetary policy, on one hand, and between supervision and bank resolution, on the other. The aim is to mitigate the risk of monetary policy, geared to maintaining price stability, being tainted by considerations relating to financial stability, and to separate as far as possible the policies aimed at preventing solvency crises, which are pursued by the Single Supervisory Mechanism, from those geared to managing such crises, which are the remit of the Single Resolution Mechanism. The appropriate functioning of this model, based on the principle of separation, nevertheless requires the intense cooperation and coordination of the different authorities involved. In the case of the interaction between monetary and prudential policies, the necessary cooperation arises from the complementarity, at least in the medium term, between macroeconomic stability and financial stability and, above all, from the potential impact of the instruments available in one area on the objective pursued in the other.
Banking union The development of the banking union has had an appreciable impact on the organisation of supervision in Europe. In particular, national supervisors have relinquished competencies to European authorities, although solely in the area of prudential oversight and resolution policy for deposit-taking institutions. Competencies relating to oversight of the solvency of other intermediaries – such as insurance companies or investment firms – and of compliance with rules of conduct by all financial institutions remain under the stewardship of the national authorities. These, as is moreover appropriately reflected in the report presented today, actively contribute to the supervisory and resolution functions exercised in respect of significant banking institutions at the European level, and they retain their jurisdiction over less significant institutions. Accordingly, the relinquishing of sovereignty entailed by the banking union has not generally altered the organisation of financial supervision at the national level, although it has required the establishment of new European agencies that have assumed the competencies transferred from national jurisdictions. Indeed, the organisation of the banking union adheres to a model involving a significantly stricter separation of functions than that prevailing in national jurisdictions. Thus, two independent authorities have been created: the Single Supervisory Mechanism, which turns on the ECB, and the Single Resolution Mechanism, which does so on the Board of the same name.