EC launched a targeted consultation on the review of crisis management and deposit insurance framework in EU. The consultation focuses on three EU legislative texts: Bank Recovery and Resolution Directive (BRRD), Single Resolution Mechanism Regulation (SRMR), and Deposit Guarantee Schemes Directive (DGSD). The main purpose of the review is to assess how the crisis management and deposit insurance framework works and to find ways to make the framework more proportionate, efficient, and consistent in handling the resolution or liquidation of any bank in EU, including by securing appropriate funding within and outside the Banking Union. The review also aims to improve synergies between crisis management and depositor protection, including by taking steps to complete the Banking Union.
The targeted consultation seeks technical feedback on stakeholder experience with the current framework and the need for changes in the future framework. The questions raised in the consultation relate to the following aspects:
- Resolution, liquidation, and other available measures to handle banking crises
- Deposit Guarantee Scheme (DGS) funds to be used to prevent failure of a bank
- Adequacy of available tools in resolution and insolvency
- Resolution strategy and funding sources in resolution
- Ability to issue minimum requirement for own funds and eligible liabilities (MREL) and impact on the feasibility of the resolution strategy
- Treatment of retail clients under the bail-in tool
- Level of harmonization of creditor hierarchy in the EU and impact on “no creditor worse off” principle
- Making depositor protection more robust, including via the creation of a common deposit insurance scheme in the banking union
The possible revision of the resolution framework as well as a possible further harmonization of insolvency law are foreseen in the respective review clauses of the three legislative texts (BRRD/SRMR/DGSD). By reviewing the framework, EC aims to increase its efficiency, proportionality, and overall coherence to manage bank crises in EU as well as to enhance the level of depositor protection, including through the creation of a common depositor protection mechanism in the banking union. Crisis management and deposit insurance, including a common funding scheme for the Banking Union, are strongly interlinked and interdependent and present the potential for synergies, if developed jointly.
In parallel to this more technical targeted consultation, a general public consultation will be launched in mid-February 2021. The public consultation shall comprise a selected list of questions on the bank crisis management and deposit insurance framework. These same questions also feature in the targeted consultation, seeking more specialized and technical views. Therefore, it is advised to reply to only one of the two versions (either the targeted consultation or the general public consultation) to avoid unnecessary duplication.
Comment Due Date: April 20, 2021
Keywords: Europe, EU, Banking, BRRD, SRMR, DGSG, Deposit Insurance, Resolution Framework, Banking Union, Proportionality, MREL, Crisis Management Framework, EC
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