A less significant institution (LSI) is a bank whose routine prudential supervision is carried out by a national competent authority within the Single Supervisory Mechanism. The European Central Bank monitors these institutions indirectly rather than supervising them itself on a day-to-day basis. This distinguishes LSIs from significant institutions, for which the ECB assumes direct supervisory responsibility.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.