ECB and SRB support the EU bank crisis framework

The European Central Bank (ECB) and the Single Resolution Board (SRB) took part in the consultation process that led to the European Commission’s proposals and published related documents, such as the ECB contribution and the SRB contribution. Both institutions stand ready to provide technical input to further enhance the Commission’s proposals and ensure that the overall framework is consistent and workable.

The proposals contain many developments. For example, they clarify the scope of the application of a resolution in relation to national liquidation procedures. They also enhance the toolkit for managing bank failures in a way that protects critical functions and citizens effectively.

The ECB notes that the European Commission has recommended that the European Parliament and the EU Council consult the ECB on the proposed legislative changes. Following requests for consultation, the ECB would deliver its opinion in due course.

Strengthening EU's bank crisis management and deposit insurance framework

The EU's banking sector, which includes a strong crisis management framework, has become much more resilient in recent years. Financial institutions in the EU are well-capitalised, highly liquid, and closely supervised.

The new proposal will enable authorities to organise the orderly market exit for a failing bank of any size and business model, with a broad range of tools. In particular, it will facilitate the use of industry-funded safety nets to shield depositors in banking crises, such as by transferring them from an ailing bank to a healthy one. Such use of safety nets must only be a complement to the banks' internal loss absorption capacity, which remains the first line of defence.

The proposal facilitates the use of deposit guarantee schemes in crisis situations to shield depositors from bearing losses, where this is necessary to avoid contagion to other banks and negative effects on the community and the economy. By relying on industry-funded safety nets, the proposal also better protects taxpayers who do not have to step in to preserve financial stability. Deposit guarantee schemes can only be used for this purpose after banks have exhausted their internal loss absorption capacity, and only for banks that were already earmarked for resolution in the first place.