“The road to failure is paved with good intentions,” said Hilmar Zettler, Head of Banking Supervision and Deposit Protection at the Association of German Banks, about the EU Commission’s CMDI framework review. The association will today publish its position paper on proposals contained in the crisis management and deposit insurance (CMDI) framework review.
“We see the fundamental necessity for the framework for crisis management of banks to be modernised. However, the Commission’s plan to expand the resolution regime to include small and medium-sized banks is the wrong way of going about it. The envisaged changes threaten to lead to a significant increase in the cost of crisis management for small and medium-sized banks, which in the end will have to be paid by the banks' customers.
In fact, it is already possible to ensure a bank’s orderly and cost-efficent exit from the market through national insolvency proceedings. This has not only been shown in recent payout events, such as that of Greensill Bank, but German and European deposit protection schemes have also proven their effectiveness in cross-border cases – such as Sberbank. Savers have a high degree of trust in such schemes, and with good reason. Europe should build on this trust and not damage it.
Against this background, we understand the concerns of the institutional protection schemes to ensure their schemes function properly, and continue to do so in the future. However, small and medium-sized banks are not just savings banks or cooperative banks. A large part the of private banks also falls into this category. Whatever course the further discussion on the CMDI package takes, there must be no competitive disadvantage for private banks in Germany.”
