Bank crisis management and deposit insurance in Europe
Bank crisis management and deposit insurance in Europe
Context
Having an effective and integrated framework for managing crises is essential for preserving trust in the financial system, fighting against further fragmentation, and safeguarding financial stability.
The EU framework has been seriously reinforced over the last decade, in particular for large banks, but there remains room for improvement and harmonization to reach a crisis management framework effective for all types of banks, including small and medium-sized ones. The variety of approaches followed by national authorities notably in the management of failing mid-sized banks in recent years has generated obvious mistrust between Member States, which is one of the obstacles to completing the Banking Union and to achieve an agreement on a European Deposit Insurance Scheme (EDIS).
In early March 2023, the US regional banking sector experienced severe stress. Two banks failed: Signature Bank and Silicon Valley Bank. They did not comply with enhanced prudential global standards and associated supervisory rigor (stress testing, liquidity and interest rate risk management for example). This reminds us that medium sized banks can be systemic. Crisis events also shows the importance of resolution strategies that rapidly reassure depositors and minimize disruption.
On 16 June 2022, the Eurogroup agreed on the following broad elements “to underpin a strengthened EU bank crisis management and deposit insurance (CMDI) framework:
- A clarified and harmonized public interest assessment.
- Broadened application of resolution tools in crisis management at European and national levels, including for smaller and medium-sized banks, where the funding needed for effective use of resolution tools is available, notably through MREL and industry-funded safety nets.
- Further harmonization of the use of national deposit guarantee funds in crisis management, while ensuring appropriate flexibility for facilitating market exit of failing banks in a manner that preserves the value of the bank’s assets. A harmonized least-cost test, administered by national authorities, to govern the use of DGS funds outside payout to covered depositors, to ensure consistent, credible and predictable outcomes.
- Harmonization of targeted features of national bank insolvency laws to ensure consistency with the principles of the European CMDI framework.
While maintaining a level playing field, the improved CMDI framework will take due account of the specificities in the national banking sectors, including by preserving a functioning framework for institutional protection schemes to implement preventive measures”.
The Eurogroup invited the European Commission to bring forward legislative proposals for a reformed CMDI framework and took note of the intention of the European Commission to finalize the review of the State aid framework for banks to ensure consistency between the State aid framework and the renewed CMDI framework.
On 18 April 2023 the European Commission published its proposal concerning the review of the BRRD, SRMR, DGSD and Daisy Chain Directive, which is currently debated by the European Institutions (Council, Parliament, Commission).
Panel discussion summaries
Enhancing the EU bank crisis management framework - Stockholm High Level Seminar - April 2023
lmproving the EU bank crisis management framework - Prague Financial Forum - September 2022
Improving the EU bank crisis management framework - Ljubljana Financial Forum - September 2021
Improving the EU bank crisis management framework - Lisbon Virtual Seminar - April 2021
Medium-sized bank resolution - Helsinki Financial Forum - September 2019
Resolution of banking groups at the EU Level - Vienna Financial Forum - September 2018
Eurofi Views Magazine chapters
Improving the EU bank crisis management framework - September 2023 new
Dominique Laboureix - Single Resolution Board (SRB) | Edouard Fernandez-Bollo - European Central Bank (ECB) | Stefano Cappiello - Ministry of Economy and Finance, Italy | Jacek Jastrzębski - Polish Financial Supervision Authority | Daniel Quinten - The National Association of German Cooperative Banks (BVR) | Axel Marmottant - Crédit Agricole | Christian Castro Torres - CaixaBank
Enhancing the EU bank crisis management framework - April 2023
Dominique Laboureix - Single Resolution Board (SRB) | Stefano Cappiello - Ministry of Economy and Finance, Italy | Simonas Krėpšta - Bank of Lithuania | Karolin Schriever - Deutscher Sparkassen- und Giroverband (DSGV)
Improving the EU bank crisis management framework - September 2022
Edouard Fernandez-Bollo - European Central Bank | Dominique Laboureix - Autorité de Contrôle Prudentiel et de Résolution | Giuseppe Siani - Banca d’Italia | Juan Poswick - BNP Paribas | Karl-Peter Schackmann-Fallis - Deutscher Sparkassen- und Giroverband
EU bank crisis management framework - February 2022
Edouard Fernandez-Bollo - European Central Bank | Elke König - Single Resolution Board | Helmut Ettl - Austrian Financial Market Authority | John Berrigan - European Commission | Jérôme Grivet - Crédit Agricole S.A. | Francesco Ceccato - Barclays Europe | Santiago Fernández de Lis - Banco Bilbao Vizcaya Argentaria | Johannes Rehulka - Raiffeisenbank International
EU bank crisis management framework - September 2021
Elke König - Single Resolution Board | Helmut Ettl - Austrian Financial Market Authority | Edouard Fernandez- Bollo - European Central Bank | Juan Poswick - BNP Paribas | Johannes Rehulka - Raiffeisen Bank International AG | Karl-Peter Schackmann-Fallis - Deutscher Sparkassen- und Giroverband
EU Bank crisis management framework - April 2021
Elke König - Single Resolution Board | Maria Velentza - European Commission | Helmut Ettl - Austrian Financial Market Authority | Martin Merlin - European Commission | Karl-Peter Schackmann-Fallis - Deutscher Sparkassen- und Giroverband | Jacques Beyssade - Groupe BPCE | Diederik van Wassenaer - ING Group
EDIS: is a political agreement nearer? - April 2020
Pablo Hernández de Cos - Banco de España | Jonás Fernández - European Parliament | Georg Huber - Deutscher Sparkassen- und Giroverband