ESBG and its members stressed that the CMDI framework should go for an evolution, not a revolution, and that it must take into account the principle of subsidiarity and proportionality.
ESBG
submitted its response to the European Commission public consultation
on the review of the bank crisis management and deposit insurance (CMDI)
framework.
While the proposed regulations for the restructuring and resolution of banks have proven their worth, ESBG highlights the need of a holistic and not a “silo-thinking" approach. Cooperation and coordination between
authorities are essential to avoid the risk of duplication, double
reporting, unclear requirements and additional administrative burdens.
ESBG also sees potential for regulatory cost reduction and
simplification.
A clear distinction between resolution and liquidation should be made on Level 1 text
At
present, it does not seem clear which banks fall under which regime.
Both the resolution and deposit insurance regimes are currently building
up funds. It should become clear in which cases which funds may be
used. There should be a level-playing field and “gold plating" should be
prevented.
More level playing field is needed in the context of the application of the EU resolution framework
The
goal of a level playing field was only partially achieved. It should be
noted that not all member states seem to be willing to consistently
implement the rules for the resolution of banks agreed at European level
in practice. Instead, the impression arises that (unchanged) national
special solutions are being sought.
Harmonisation of insolvency proceedings at EU level should not damage well-functioning national insolvency proceedings
Should
insolvency proceedings for banks show weaknesses in individual
countries, this can hardly justify the damage to functioning insolvency
proceedings in other countries through uniform requirements. Differences
in consumer protection and rights to appeal of insolvency
administrators can have an impact on DGSs and payments to DGSs in
insolvency proceedings. It should be considered how to address these
differences for bank insolvency procedures.
Preventive measures are essential to the CMDI framework
Preventive
measures, in particular through institutional protection schemes, are
cost-efficient and successful private instruments (see detailed answer
to Question 9).
For IPS recognized as DGS and for measures according to Article 11(3) DGSD, no further clarification is needed
From
the perspective of an Institutional Protection Scheme (IPS)
successfully executing for decades preventive measures as defined in
Art. 11(3) DGSD, there is no need of any clarification of these
measures. If questions are raised about the assessment of the cost of
such kind of DGS intervention, this is neither caused by IPSs nor should
the current conditions be amended for IPSs.
A solution for liquidity in resolution would help to ensure that banks meant to be resolved are resolved smoothly
The
crisis management framework foresees a bail-in of shareholders and
creditors and has led to the build-up of loss absorption buffers. For a
crisis at individual bank level, this should minimize the recourse to
public financial and taxpayer's money. Nevertheless, a public backstop
to liquidity for banks in resolution and for banks coming out of
resolution .is still necessary also to ensure market confidence and to
bring a bank resolution to a successful conclusion.
The State Aid regime (2013 Banking Communication) and the resolution framework need to be aligned
It
must also be ensured that not only idiosyncratic crises can be
effectively handled. Considering that, in a systemic crisis, recourse to
state aid may still be necessary, it should be ensured that the EU
state aid rules (2013 Banking Communication) for the banking sector are
brought in line with the crisis management framework. The 2013 Banking
Communication and the crisis management framework are based on different
rationales and the experience shows inconsistencies in the
interpretation of financial stability and public interest by the EU
Commission and by the SRB. Misalignments between the state aid regime
and the BRRD/SRMR on public intervention have increased legal
uncertainty and can lead to inefficient and ineffective solutions.
A targeted harmonisation of national bank insolvency law could help
The
coexistence of the EU resolution framework with a plurality of national
regimes could generate dysfunctionalities and may give rise to
inefficient, costly and heterogeneous outcomes. A change in the legal
framework is therefore needed. This could lead to a targeted
harmonisation focused on bank insolvency law.
Simplified requirements are appropriate in the scope of the bank crisis management framework
It
should be noted that the resolution requirements apply already to all
institutions. However, simplified requirements are relevant for certain
institutions. Even if simplified requirements are applied, the power of
the SRB/NRAs to take resolution measures is not affected, see Art. 11
(5) SRMR. The gradation expressed in the simplified requirements is also
objectively justified and legally required in terms of the different
risks faced by institutions and their systemic relevance.
The
CMDI framework should go for an evolution, not a revolution. An EU
orderly liquidation tool for medium-sized banks does not seem
appropriate
No
need for a fundamental reorientation of the CMDI is seen. We also see
no need for new instruments such as the unspecified - Orderly
Liquidation Tool for small and medium-sized banks. Before the
introduction of new instruments, the existing framework should be
applied fully and coherently. New instruments may only be introduced if
the objectives pursued with them cannot be achieved by optimizing the
CMDI and the national insolvency rules, given the small number of
institutes that would fall under the tool.
Recovery planning needs to be improved and small banks should not be obliged to submit recovery plans
Besides,
in reviewing the CMDI framework, it should not be overlooked that the
“first line of defence" is recovery planning. It is a little bit
surprising that this issue is not the subject of the consultation.
However, there is also a need for improvement in this area. Small banks
should not be obliged to submit recovery plans. There is little added
value for both banks and supervisors. Instead, the supervisory authority
should be given the possibility to oblige small banks to carry out
recovery plans in individual cases.
Criteria linked to the Public Interest Assessment
(PIA) should be more transparent and predictable
This
would limit national crisis management cases that effectively involve
public intervention to circumvent the founding principle of the
resolution, (the bail in) maintaining alive zombie banks crippling the
potential for economic growth and jeopardizing financial stability.
The
solution to access to funding is not to increase the size of resolution
funds (including DGSs), but to allocate resources more efficiently
Recent
experiences seem to signal a need for appropriate funding in case of
liquidation. Most banks that have failed the PIA assessment received
public funds in their liquidation procedures. It is important to note
that contributions from institutions to DGSs and SRF are already very
substantial. Any attempt to improve access to funding in case of a
banking crisis should come from a more efficient allocations of
resources and not from increasing contributions from banks. This should
be a clear red line in the review process or the CMDI.
ESBG
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