The SSM Fee for Supervision

The SSM Fee for Supervision

The ECB charges banks a supervisory fee each – how is it calculated?

Partner, Co-Head of KPMG’s ECB Office

KPMG in Germany

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The European Central Bank (ECB) oversees all "significant" and "less significant" credit institutions in Eurozone countries through direct and indirect supervision. This means that it directly supervises the significant banks and indirectly supervises the less significant banks. The criteria used to determine whether a bank is significant or not are the bank’s size, economic importance, cross-border activities and direct public financial assistance. The list of directly and indirectly supervised banks is published by ECB and is updated on a regular basis.

According to article 30 of the SSM regulation, the ECB is allowed to levy an annual supervisory fee for all significant and less significant banks.

The supervisory fee covers the ECB’s expenses related to supervisory tasks in the relevant fee period. The supervisory fee is calculated by using a bottom-down approach: 

  1. The ECB calculates the annual costs.
  2. The annual cost is split into categories of direct supervision (to be levied on the significant banks directly supervised) and indirect supervision (to be levied on the less significant banks indirectly supervised).
  3. The ECB publishes the decision on the total amount of the annual supervisory fee in the second quarter of each year.

The supervisory fee is the amount all supervised banks are obliged to pay – significant banks as well as less significant banks. It includes all banks established in the Eurozone countries as well as branches established in a participating country by a parent bank established in a Non-Eurozone country. The SSM fee must be paid annually to the ECB.

The supervisory fee is linked to the supervisory status of a bank, so significant banks have to pay more fee than less significant bank, and the calculation depends on the importance and the size of a bank.

The fee for each bank consists of a minimum fee component and a variable fee component. The minimum fee component for significant banks and less significant banks is a fixed percentage (10 percent) of the total annual costs for significant banks. For small significant banks (total assets < 10bn) the fixed percentage is halved. The variable fee components depends on the importance and risk profile of each bank.

The annual supervisory fee for every single bank is determined by allocating the total annual costs of each category to the individual bank based on its “fee factors”.

The fee factors refer to the bank’s size and risk profile, including risk-weighted assets.

Regulation (EU) No 1163/2014 (PDF 446 KB) of ECB of 22 October 2014 (ECB/2014/41) describes in detail how the fees for each bank are calculated.

The banks have to submit annual fee factors as of 31 December of the preceding year to their relevant national supervisor by 1 July of the following year.

In case a bank changes its status from less significant to significant or vice versa the supervisory fee is recalculated.

To assist the ECB to calculate the supervisory fee factor, banks must complete a template asking for total assets and total risk exposure. In February 2015, ECB published instructions (PDF 37 KB) for the completion of that template. 

The template also includes a paragraph titled “Auditors verification” that sets out several tasks asking the auditor to express its opinion of if the information used gives a true and fair view in accordance with the relevant financial reporting framework. 

The first deadline for the submission of the template was 1 July 2015. 

In 2014/2015 the total amount of supervisory fee was €326 million. The 123 significant banks had to pay 89 percent of the cost; the approx. 3,500 less significant banks had to pay 11 percent.

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