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Andrea Enria
Chair of the Supervisory Board of the ECB

The CMDI package: a vital building block to improve our crisis management framework

Opening remarks by Andrea Enria, Chair of the Supervisory Board of the ECB, at the SRB-ECB CMDI Seminar

Brussels, 16 October 2023


It is my pleasure to deliver the opening remarks at today’s seminar on crisis management and deposit insurance (CMDI). I would very much like to thank the Single Resolution Board (SRB) for hosting this event, organised jointly with the ECB.

The discussions on CMDI are at an important juncture. Indeed, the end of the legislative term is approaching fast, and we have only a small window of opportunity during this term to make meaningful progress on a key aspect of the banking union. I hope today’s discussions will bring full clarity around the features of the proposal, dispel any misconceptions and move the debate forward.

Improving the crisis management framework matters greatly to European supervisors, European banks and the economy at large

Let me start by stressing that we have already achieved a lot in terms of crisis management inside the banking union. The Single Supervisory Mechanism (SSM) and the SRB, in very close cooperation, have done extensive work on recovery and resolution planning. Banks have made considerable progress on establishing buffers of “bail-in-able” liabilities, the system’s first line of defence in ensuring that taxpayers’ money is safeguarded when banks fail. The Single Resolution Fund (SRF) will this year reach 1% of covered deposits (around €77 billion); together with national deposit guarantee schemes this provides the banking union with an overall amount of privately-funded crisis management resources which do not materially differ from those available in the United States, a peer jurisdiction I and many others often look at when it comes to identifying a virtuous track record of crisis management practices.[1] With the ratification of the backstop to the SRF, additional €60 billion will contribute to enhancing ex-ante confidence in the framework. Most importantly, the banking union has given itself a resolution framework that has been tested to successfully work in practice. I am referring to the two different cases of Banco Popular and Sberbank. We have therefore already come a very long way.

At the same time, the experience of the last ten years clearly shows that there are certain shortcomings that need to be addressed. The European Commission’s CMDI package does exactly that and, for this reason, is strongly supported by both the ECB and the SRB.

I will argue today that the CMDI i) increases the options available to supervision and resolution authorities when it comes to managing a bank crisis; ii) provides workable solutions for mid-sized banks; iii) allows for easier access to existing crisis management funds while strengthening the cost minimisation principle under more harmonised criteria. My Supervisory Board colleague Anneli Tuominen will discuss this in more detail with you later today.

A well-functioning and efficient bank crisis management framework is first and foremost necessary to ensure depositors’ protection and financial stability in the banking union, at minimum costs for the taxpayer. By minimising value destruction, it is a mechanism that helps the banking sector and therefore the real economy to remain resilient in wake of shocks. To the extent that it provides solutions that are sufficiently predictable and compatible with level playing field conditions across countries and banks, an efficient crisis management framework also contributes to further integrating the EU banking market, offering the European economy a larger potential for private risk sharing outcomes.

We need to keep in mind that it is possible to improve the crisis management framework to achieve those objectives in the current institutional setting, given the currently available crisis management resources and without any pre-commitment on the further steps towards integrating deposit insurance at the European level. The CMDI proposal put on the table by the Commission serves that purpose and should be assessed exclusively on that basis.

Need for more options in crisis management

First, the proposal on the table would provide all relevant stakeholders with a robust toolkit, with a variety of tools, and some discretion to choose the right one for each individual case. The Commission’s text rightly opts for keeping all the tools available today as part of the framework, clarifying the conditions for their use and enhancing their effectiveness. Some tools – such as precautionary recapitalisation – will continue to be used only in very rare circumstances, subject to strict conditionality. Others – such as deposit guarantee scheme (DGS) alternative and preventive measures – remain national in their application but the rules governing their functioning are harmonised within the proposal – and with good reason.

Second, the Commission’s proposal gives authorities the necessary flexibility to choose the most appropriate and proportionate approach for each case. We should avoid prescribing a one-size-fits-all approach, as it is impossible to account for all the peculiarities of real-life bank failures. In short, to deftly deal with crises, we should avoid putting the crisis managers in a legal straitjacket. Instead we need to provide a full toolkit and ensure optionality. This is the best way to reduce the costs of actual application.

Need for workable solutions for mid-sized banks

The banking union landscape is characterised by considerable diversity. We are home to several different types of banks, from large institutions which are active on international capital markets, to cooperative networks which operate under the umbrella of institutional protection schemes, and medium-sized banks not covered by such schemes. Handling the latter type of banks under the resolution regime is subject to well-known challenges. In particular, their difficulty in raising sufficient loss-absorbing capacity can result in a shortfall in resolution funding and prevents these banks from accessing the SRF, due to its 8% bail-in requirement. Dealing with these banks under piecemeal liquidation can also be suboptimal, as this generates significant value destruction, puts DGSs in their paybox function significantly under strain, opens up to highly non-harmonised national liquidation solutions and may require the use of taxpayers’ money. All this, unfortunately, has been observed in past experience.

The Commission’s proposal offers a sensible, clear and pragmatic answer to this problem. In a nutshell, the idea is to expand the resolution tools to also cover the medium-sized banks. This would allow the use of best-practice sale of business tools. Sometimes referred to as “transfer strategies”, these have a proven track record of preserving value for depositors – unlike piecemeal liquidation – and generate broader financial stability benefits in the process.[2]

It will be important to find the right balance when casting the net of resolution wider. The ECB supports a proportionate expansion of the scope of resolution, as this will improve the effective and harmonised management of failures of medium-sized banks. Indeed, as the United States found out in the spring of this year, medium-sized banks may appear non-systemic in life, but may then prove to be systemic in death. At the same time, it is important to ensure sufficient proportionality and discretion and not overburden smaller banks, which may not actually be systemically relevant, even in death.

I understand that this topic has raised some concerns about a blanket expansion of resolution to all banks. This is not – and cannot be – the intention. Some further fine-tuning of the proposed changes to the public interest assessment may therefore be considered in order to address these concerns. At the same time, it is also important to keep in mind the safeguards that are already in the Commission’s proposal. After all, national resolution authorities would remain in charge of the public interest assessment for smaller banks that are outside the scope of the SRB’s direct responsibilities. And importantly, the responsibilities and tasks would continue to be shared between the European and national levels, as is the case today.

Need to ease access to funding

Last, the proposal on the table seeks to make the resolution tools fully operational by ensuring they are backed by funding resources that can be actually accessed and used. Indeed, there is no point in providing authorities with an ambitious toolkit and large amounts of resources if access to the latter is subject to excessive constraints in practice.

As I mentioned, we should remember that the EU has roughly as much industry-funded firepower as the United States. However, we are much more constrained in the way we can deploy those funds, meaning we get much less “bang for our buck” than the US authorities. By allowing national DGS funds to be used to unlock SRF funding, CMDI would go a long way towards addressing this inefficient state of affairs.

The three main elements in the package form a cohesive whole and cannot be separated: expanding the scope of resolution – as just discussed; the so-called “DGS bridge”, i.e. allowing the contribution from the DGS to count towards the 8% threshold for accessing the SRF; and introducing a single-tier depositor preference.

Taken together, these three elements would go a long way towards equipping authorities with credible options for the resolution of medium-sized banks, by providing access to industry-funded safety nets in order to support best-practice transfer strategies in resolution, such as the tried-and-tested purchased and assumption strategy successfully adopted by the US Federal Deposit Insurance Corporation.

We should thus resist the temptation to pick and choose certain parts of the proposal while discarding others, as this would undermine the consistency of the overall package. Put simply, while the minimum requirement for own funds and eligible liabilities (MREL) remains the first line of defence, we cannot credibly expand the scope of resolution without also facilitating access to funding for those banks that are predominantly deposit-financed. And to close the funding gap, the DGS bridge and the single-tier depositor preference are key.

I have spoken mostly about funding in resolution, but it is also necessary to ensure funding in other, non-resolution scenarios. Here too, the Commission’s package – and in particular the single-tier depositor preference – will help to ensure that the funding equation adds up. My colleague Anneli will elaborate further on this in her presentation.

The discussions on CMDI have stirred controversy as to how to treat uninsured depositors. What is clear to both the SSM and the SRB is that there should be no blanket extension of the DGS coverage to all uninsured depositors – and this is indeed not foreseen under the CMDI package. Conversely, in some occasions bailing in uncovered depositors can fuel financial instability. The Commission has rightly chosen a middle ground, allowing resolution authorities to exclude uncovered depositors from bail-in when warranted by financial stability considerations.


Ultimately, the CMDI proposal provides the ECB with more tools in the run-up to resolution, and the SRB and national resolution authorities with more options during the crucial hours of the resolution weekend. It also improves the framework for dealing with crises affecting medium-sized banks. The timely adoption of the proposals will be good for depositors and taxpayers, as well as financial stability. We would like to see the co-legislators make swift progress in this regard.

I hope today’s discussions will help build a consensus over the important positive changes the CMDI package has in store for our crisis management framework and clear up some misunderstandings about certain features of the proposal.

Looking beyond CMDI, some fundamental aspects of the broader crisis management architecture are not tackled by the proposal, namely the adoption of the third pillar of the banking union – a European deposit insurance scheme – and the creation of a European framework for liquidity in resolution. We hope that these aspects will be addressed in the next legislative term.

  1. Eule, J., Kastelein, W. and Sala, E. (2022), Protecting depositors and saving money, Occasional Paper Series, No 308, ECB, Frankfurt am Main, October (revised in June 2023)..

  2. Eule, J., Kastelein, W. and Sala, E. (2022), Protecting depositors and saving money, Occasional Paper Series, No 308, ECB, Frankfurt am Main, October (revised in June 2023).


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