On 26 January 2021, the EU Commission launched the announced consultation on the revision of the crisis management and deposit insurance framework. In November 2020, the EU Commission had already stated that it would present proposals for the revision of the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR) and the Deposit Guarantee Schemes Directive (DGSD).
The German Banking Industry Committee (GBIC) welcomes the EU Commission’s objective of further strengthening crisis management for banks. Long before the financial crisis, GBIC stressed the importance of financial market stability for the European Union time and again. The deposit guarantee and institution protection schemes which have proven their worth for decades play a fundamental role in this context.
In view of the EU Commission’s objective of ensuring financial stability, improvements in crisis management should be discussed prudently, in particular in the current economic situation, which is marked by the coronavirus pandemic. “The trust of depositors must not be compromised by challenging the entire legal framework that is currently in place. Instead, the political decisions taken in the past few years should be respected, also in the interest of banks and market players, and the required continuity of the legal frameworks that give due regard to the principle of subsidiarity should be ensured”, said Karl-Peter Schackmann-Fallis, member of the Executive Board of the German Savings Banks Association (DSGV), which plays the lead role in GBIC this year.
GBIC therefore expressly welcomes the fact that – unlike its proposal in 2015 for a regulation on the establishment of a European Deposit Insurance Scheme (EDIS) – the EU Commission has decided this time to seek the views of the public and interested public and private institutions before presenting a legislative proposal. However, the consultation can only be the first step. Before presenting a legislative proposal, a comprehensive impact study needs to be carried out, based on various options.
It is also important for any revision of the crisis management and deposit insurance framework to continue addressing the considerable uncertainties around whether the measures defined for deposit guarantee schemes are compatible with European state aid law. It is not yet clear from the current consultation how the revision of state aid law is to be included.
GBIC believes that it makes no sense for the EU Commission to link the discussion on strengthening crisis management with its unchanged proposal of 2015 for establishing a European Deposit Insurance Scheme. By clinging to this proposal for a regulation, which provides for full collectivisation and loss-sharing of the financial resources of national deposit guarantee schemes, the European Commission is jeopardising the progress made on essential detailed improvements to crisis management.
In addition, GBIC warns against excessively readjusting the current legal framework and replacing it with a system inspired by the Federal Deposit Insurance Corporation (FDIC), the US regulatory, resolution and deposit insurance authority. There are no constitutional foundations for a European FDIC. In addition, such an institution would be at odds with the heterogeneous banking market structures that have evolved over history, with their diverse business models and national particularities. This is explained in detail in a position paper published by GBIC today.