- Expansion of the resolution process remains extremely limited.
- Guarantee schemes maintain priority in the creditor hierarchy.
- It is time to move forward with EU market integration.
Today, the Economic and Financial Affairs Council agreed on calibrations to the EU proposal for the review of the crisis management and deposit insurance (CMDI) framework. “The draft is a step in the right direction and a significant improvement on the proposals made by the European Commission,” Heiner Herkenhoff, CEO of the Association of German Banks, commented.
Guarantee schemes maintain their priority ranking within creditor hierarchies and use of deposit guarantee funds is to be strictly limited during resolution, both positive results: these changes are critical for ensuring the financial security of guarantee schemes and, in consequence, depositor confidence.
In addition, the proposal contains only a moderate expansion of the scope of applicability for the resolution process for small and medium-sized banks. The comprehensive expansion the Commission had called for would have placed a significant financial and administrative burden on small and medium-sized banks in particular, without offering any real added value.
“Of course, we would have liked to see additional harmonisation of national deposit protection schemes,” Herkenhoff said. As it is, he went on to say, alternative and preventative deposit insurance options are only available on the national level, and Germany, as an example, has so far not made any use of such options. Herkenhoff emphasised that “national legislators should have a stronger obligation to approve the use of these options, which would give guarantee schemes greater flexibility in the event of a crisis.”
Overall, however, the position of the Council offers a solid foundation for the upcoming Trilogue, providing options for actual improvements to the framework for crisis management and deposit insurance. The Association of German banks would welcome rapid finalisation of this process, so that the Commission can turn its attention to other important banking union issues required for the creation of an integrated single financial market.
