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  • European Commission Publishes Roadmap for EU Bank Crisis Management and Deposit Insurance Framework

    The European Commission has published a roadmap for its proposed review of the EU's crisis management and deposit insurance framework. The framework consists of the EU Bank Recovery and Resolution Directive, the EU Single Resolution Mechanism Regulation and the EU Deposit Guarantee Scheme Directive. It was introduced in the aftermath of the financial crisis and has applied across the EU since 2015 (in the case of BRRD and DGSD) and 2016 (in the case of SRMR). A number of problems have been identified with the existing framework, including that:
    • it incentivizes the use of tools other than resolution (e.g. those provided under the DGS), meaning the resolution framework has been under-utilized since it was introduced in 2014;
    • there is a discrepancy in the availability and use of insolvency tools across Member States, which operate as a counterfactual to resolution, meaning that the application of the EU framework is inconsistent even among jurisdictions within the banking union;
    • there are limitations to legal certainty and predictability as to when and how the framework will be used, particularly where banks operate cross-border;
    • the centralization of management of resources for cross-border banking groups and a misalignment between those who bear the cost of bank failures and those responsible for preventing and handling the failures have limited the framework's potential to enhance market integration, particularly within the banking union; and
    • the scope of depositor protection and payout processes varies across Member States, which may undermine confidence in the framework.

    The review hopes to combat these problems by making the incentives to use resolution more balanced, improving the DGS's capacity to manage adverse situations, ensuring that crisis management and deposit insurance tools are able to handle the failure of all sorts of types of banks and addressing discrepancies in deposit insurance. The initiative will be relevant for all entities that fall within the scope of the BRRD, SRMR and/or DGSD. Feedback on the roadmap should be submitted by December 8, 2020.

    View the Commission's Roadmap for the EU Bank Crisis Management and Deposit Insurance Framework review.

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