The nature and scope of the European Central Banks’s (‘ECB’) oversight mandate over the supervision of smaller and medium-sized banks by national supervisors has been one of the most debated aspects of the newly created European Banking Union. In particular, the issue whether the ECB should influence already established national supervisory practises and standards was not immediately straightforward. This paper applies the Principal-Agent (‘PA’) approach to explore the extent of the ECB supranational agency governing the supervisory oversight policies in the Single Supervisory Mechanism (‘SSM’). Notably, one of the important features of the SSM institutional design is the contractual incompleteness of supranational delegation. The ECB has been granted discretion to fill in the agency contract concluded with the Member States. A brief analysis of the practical operationalization of the ECB oversight role suggests that the ECB could exploit this contract condition to pursue own policy goals (agency hold-up problem) and situate itself in “bureaucratic drift” vis-à-vis the Member-State principals. However, under slightly relaxed Principal-Agent assumptions which allow policy learning to take place between the principal and agent, it is also possible that the ECB managed to influence the Member States’ stance, and, in doing so, exercised effective bureaucratic entrepreneurship.
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