On Wednesday evening, the Economic and Monetary Affairs committee voted on Crisis Management Deposit Insurance Review (CMDI). Changes to the directive (BRRD) were adopted with 28 votes to 22 and 3 abstentions and to the regulation (SRMR) with 30 votes to 14 and 9 abstentions. Changes to the directive on deposit protection (DGSD) were adopted with 37 votes to 13 and 3 abstentions. MEPs want to better safeguard taxpayers’ money, bring more banks into scope, empower authorities to handle effectively a potential failure and harmonise depositor protection.

Bank resolution in public interest

MEPs agreed that resolution framework should be applied to any bank, where it is assessed that there is public interest to do so, irrespective of its size. They also clarified, that a bank can play a critical function at a regional level. A resolution action should be treated as in the public interest where winding up of the institution under normal insolvency proceedings would not meet those resolution objectives (such as ensuring continuity of critical functions, avoiding a significant adverse effect on the financial system, protecting public funds and protecting depositors) more effectively.

Outside resolution, in order to protect public finances as well as the level playing field in the internal market, tax-payer funded extraordinary financial support could be granted only to remedy a serious disturbance in the economy of a Member State of an exceptional or systemic nature and to preserve financial stability.

Depositor hierarchy

MEPs also introduced a modification in the ranking of creditors, which should make the deposit guarantee schemes (DGS) funded by banks to compensate depositors as well as the single resolution fund (SRF) more accessible for the funding of resolution. That in turn should limit use of public support and pave the way to more effective solutions in case of a bank resolution. They proposed a two-tiered approach where deposits of retail clients as well as micro, small and medium-sized enterprises benefit from a higher priority ranking over eligible deposits of large enterprises and central and regional governments. That tiered approach is designed to provide enhanced protection for a wide range of depositors, reflecting their unique characteristics.

Protecting deposits

Finally, MEPs want to ensure a smooth transition to the completion of the banking union. In order to do so, they voted for harmonisation of the DGS’ functions. The number of discretions under national law should be limited and all DGSs should be able to finance resolution measures, preventive measures and other alternative measures to the payout of depositors.

MEPs stressed that any involvement of the DGSs must be cost-effective and transparent