The aim of this paper is to investigate the economic impact of the single supervisory mechanism (SSM) as measured by the reaction of the major stock market indexes of the European Union (EU) countries. To capture the market reaction, we analyse the impact of news related to the development and implementation of the SSM on the broad stock indexes and their banking and non‐financial sector indexes. Moreover, we not only investigate stock returns, but also study the impact on systematic risk, overall risk and the degree of integration among markets. The results of an event study and stability tests show significant market reactions that decrease value and increase risk for some of the news, specifically the beginning and end of the process. The main effects are heterogeneous across different EU countries. The observed response is also more evident in the banking sector than in the non‐financial sector.