THE IMPACT OF THE SINGLE SUPERVISORY MECHANISM ON EUROPEAN BANKS: MICRO EVIDENCE FROM A DECADE OF DATA

This paper provides a comprehensive overview of the impact of the Single Supervisory Mechanism (SSM) on the European banking market at the micro level. I contribute to the literature by exploiting a large unbalanced panel of 3400 banks from all 20 euro-area countries over 2011–2023, combined for the first time with a novel matching method proposed by Imai et al. (2023). This approach allows me to identify the causal effect of the adoption of the SSM, i.e. the effect of being directly supervised by the European Central Bank instead of the National Competent Authorities, on six bank balance sheet variables, four of which have not been previously examined in the SSM-related literature. My findings show long-run effects that align with the explicit objectives of the European supervisor. Thus, ten years after its introduction, these results provide evidence of the effectiveness of the SSM, both directly through its supervisory activities and indirectly through increased transparency and credibility of the supervised institutions.