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28 May 2021

BETTER FINANCE Response to the European Commission consultation on the review of the crisis management and deposit insurance framework

In response to the global financial crisis, the EU started working towards a safer financial sector for the EU single market, triggering changes to European financial legislation and to the financial supervisory architecture. The single rulebook for all financial actors in the EU was enhanced, comprising stronger prudential requirements for banks, improved protection for depositors and rules to manage failing banks. The first two pillars of the banking union – the single supervisory mechanism (SSM) as well as the single resolution mechanism (SRM) – were also created. The third pillar of the banking union, a common deposit insurance, is still missing. The EU bank crisis management and deposit insurance framework lays out the rules for handling bank failures while protecting depositors. It consists of three EU legislative texts acting together with relevant national legislation: the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Deposit Guarantee Schemes Directive (DGSD).

The Commission launched a public consultation, covering BRRD, SRMR and DGSD, to gather evidence in the form of relevant stakeholders’ views and experience with the current crisis management and deposit insurance framework, as well as on its possible evolution in the forthcoming reviews. Please find BETTER FINANCE's responses to the consultation below.

Question 1

1) The framework per se represent a considerable progress to the pre-2010 and 2008 situations (when
depositors were not protected at all) but it has not been tested - fortunately - so far. As such, assessments
must rely on academic and statistical evaluations.
2) The framework provided an important first step in taking preventive action and limiting recourse to public
funding, but it is not fully harmonised as there are still instruments at national level that can be used in case
of a faliling or likely to fail bank. In absence of a fully functional, self-standing deposit insurance framework -
eliminating other avenues to be used at national level - the recourse to taxpayers' money cannot be truly
3) The level of protection for depositors is still low and, due to divergences in its implementation, the
necessary capital buffers have not been constitued everywhere the same. According to EBA data, only 13
out of 36 deposit guarantees at national level comply with their respective thresholds (available amount as a
% of the covered deposits). Moreover, there is still a significant part of deposits (from individuals and
businesses) that are not afforded protection. Out of the DGSs that have not reached their thresholds, many
of them are far away from reaching it (e.g. currently 0.2% out of 0.8%).
4) No opinion/don't know
5) No opinion/don't know
6) As explained for the first question, the framework does represent important progress, which implies
increased legal certainty and predictability. However, the numerous instruments parts of the CMDI at EU
level, combined with those available at national leval, and the complex web of supervisory and intervention
powers and authorities, for more

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