The Single Resolution Board (SRB) believes that the ‘CMDI’ proposal to strengthen crisis management in the event of a banking crisis, currently under negotiation in the European Parliament (see EUROPE 13266/17) and the Council of the EU (see EUROPE 13183/2), will expand the scope of resolution to an additional “30 banks (mostly less significant institutions)”, even though the final decision will rest with the competent national authorities, in a note sent as part of the Eurogroup discussions on banking union held on Wednesday 8 November.
The ‘CMDI’ proposal suggests mobilising national Deposit Guarantee Schemes (DGS) to enable a failing medium-sized bank to reach the minimum level of bail-in required by EU law before it can access the ‘Single Resolution Fund’ (SRF), the financial arm of the ‘resolution’ strand of the eurozone banking union.
According to the SRB, these provisions will have only “a limited impact” on the financing of the DGS and the SRF Funds, given their available resources and the costs of a piecemeal bank liquidation in several countries.
Furthermore, according to the European authority responsible for resolving large failing banks, the change in the hierarchy of creditors affected in the event of a bank resolution will lead to “manageable” losses for DGS in the event of the liquidation of a failing entity.
The European legislator’s objective is to finalise the CMDI proposal before the end of the current legislative cycle.
By the end of 2023, the Single Resolution Fund will have reached its maximum capacity of €80 billion.
To see the note from the SRB, go to https://aeur.eu/f/9h7
To see the note on the Single Supervisory Mechanism (SSM) within the ECB, go to https://aeur.eu/f/9h8 (Mathieu Bion)