Reform of the CMDI framework – driving off with the breaks on

  • The lack of a European Deposit Insurance Scheme (EDIS) – often referred to as the ‘third pillar’ of Banking Union – has been criticized since the inception of the EU Banking Union. The Crisis Management and Deposit Insurance (CMDI) framework needs to rely heavily on banks’ internal loss absorbing capacity and provides little flexibility in terms of industry resolution funding. This design has, among others, led to the rare application of the CMDI, particularly in the case of small and medium sized retail banks. This reluctance of resolution authorities weakens any positive impact the CMDI may have on market discipline and ultimately financial stability. After several national governments pushed back against the establishment of an EDIS, the Commission recently took a different approach and tried to reform the CMDI comprehensively, without seeking to erect a ‘third pillar’. The overarching rationale of the CMDI Proposal is to make resolution funding more flexible. To this end, the proposal seeks to facilitate contributions from (national) deposit guarantee schemes (DGS). At the same time, the CMDI Proposal tries to broaden the scope of resolution to include smaller and medium sized banks. This paper provides an assessment of the CMDI Proposal. It argues that the CMDI Proposal is a step in the right direction but cannot overcome fundamental deficiencies in the design of the Banking Union.

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Author:Ioannis G. AsimakopoulosGND, Tobias TrögerORCiDGND
URN:urn:nbn:de:hebis:30:3-715687
URL:https://ssrn.com/abstract=4821398
DOI:https://doi.org/10.2139/ssrn.4821398
Series (Serial Number):LawFin Working Paper (53)
SAFE working paper (418)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2024
Year of first Publication:2024
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2024/09/06
Tag:Banking Union; CMDI; EDIS; MREL; bail-in; bank resolution; transfer strategies
Edition:May 2024
Page Number:32
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:G Financial Economics / G0 General / G01 Financial Crises (Updated!)
G Financial Economics / G1 General Financial Markets / G18 Government Policy and Regulation
G Financial Economics / G2 Financial Institutions and Services / G28 Government Policy and Regulation
K Law and Economics / K2 Regulation and Business Law / K22 Corporation and Securities Law
K Law and Economics / K2 Regulation and Business Law / K23 Regulated Industries and Administrative Law
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht