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In this paper, I try to assess the likely impact of the Single Supervisory Mechanism (SSM) on Eurozone banking markets. I start by analysing the predictions made by economists and policy makers with regard to the deeper integration of financial markets which may derive from the Banking Union. I then try to identify the regulatory weaknesses that may throw uncertainty on the benefits commonly expected from the Banking Union. Firstly, I highlight the limits of EU supervisory centralisation as shaped by the reforms enacted after the 2008 financial crisis. Secondly, I analyse the limits of the SSM, which is to some extent still grounded on supervisory cooperation despite the fact that the ECB has powers of direction and substitution with respect to national supervisors. I argue, in particular, that the SSM represents a system of semi-strong centralization, which may still give rise to agency problems particularly in the relationships with supervisors of non-euro area countries that are still governed by the EU system of enhanced cooperation. Thirdly, I examine the decoupling of supervision from regulation deriving from the fact that the ECB lacks sufficient regulatory powers when acting as a supervisor of the Eurozone banking systems. The separation of regulation ? which is harmonized (often with excessive detail) at EU level - and supervision ? which is centralized in the euro area ? may create problems to the extent that the single supervisor cannot create a prudential rulebook for the Eurozone, but is subject to EU prudential regulation and national law provisions often unduly limiting its supervisory discretion.

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