EESC calls for stronger deposit protection, harmonisation and proportionality to strengthen EU banking system

In the wake of recent banking crises in the US and the Credit Suisse case, the EESC has reviewed the Commission's proposal to reform the Bank Crisis Management and Deposit Insurance framework (CMDI). Among other measures, the Committee calls for protecting the interests of smaller and local banks, depositors and taxpayers, and coordinating the CMDI package with the future reform of the State aid Regulation.

It was the Spanish government who asked the EESC to look into the matter and provide policy recommendations to the co-legislators and the Spanish Presidency of the Council. The Commission's proposal to reform the CMDI aims to tackle remaining risks in the European banking sector, advancing further in the completion of the Banking Union and strengthening the EU single market in the interest of depositors and taxpayers.

The EESC acknowledges the importance of speed, flexibility and cooperation in responding to bank crises while protecting depositors and taxpayers, commented EESC rapporteur Giuseppe Guerini. The Commission's proposal is a step towards the completion of the Banking Union, which is crucial for achieving full consolidation of the EU financial system and reducing market fragmentation.

In its opinion, the EESC insists that harmonising deposit protection and evaluating resolution and insolvency alternatives are crucial for protecting the interests of depositors and preserving the diverse European banking ecosystem.

Enhancing crisis management

The EESC supports expanding the public interest assessment (PIA) to include regional banks, but suggests refining its formulation and harmonising its application across the EU. Pragmatic and flexible approaches should be adopted, considering the regulatory approach, available tools, practical implications, cooperation between stakeholders, execution speed and financial resources.

Evaluating resolution and insolvency

Resolution may not always be the most cost-effective solution, especially for small and medium-sized banks. Insolvency should remain the best option when resolution proves more expensive. The EESC emphasises the importance of striking a balance between an enhanced PIA and proportionality, especially for small, medium-sized, and local banks that do not pose a risk to financial stability.

Coordination with State aid legislation

The CMDI package should be properly coordinated with the expected revision of the 2013 Communication on State aid in the banking sector to avoid inconsistencies and legal uncertainty. The EESC calls for a proportional application of the PIA, respecting the interests of small, medium-sized and local banks, while achieving the Regulation's objectives.

Deposit protection and harmonisation

The EESC appreciates the extension of the deposit guarantee schemes' (DGS) protection to include public authorities, and aims for enhanced harmonisation of deposit protection tools across the EU. The level of coverage should consider depositors in vulnerable economic situations, such as those who are disabled or have long-term illnesses.

Liquidity backstop and integration of resolved banks

The regulatory framework should provide appropriate conditions for the timely transfer of troubled banks to other banks, ensuring due coordination between authorities and enabling cross-border transfers. Efficient procedures and accelerated approval mechanisms are essential for the integration and management of resolved banks, minimising disruptions and uncertainty.