The CMDI is the EU's framework for Bank Crisis Management and Deposit Insurance. It's a set of rules designed to address bank failures, protect depositors, and ensure financial stability. A recent review, initiated in April 2023 by the European Commission, aims to strengthen the framework, especially for smaller and medium-sized banks, while also reducing reliance on taxpayer funds.
AFME and its members have continuously engaged with the European Commission, EU co-legislators and other relevant stakeholders to emphasise the need for the review of the CMDI framework to recognise that banks operating in the EU, especially Global Systemically Important Banks (G-SIBs) and large systemic banks, have made significant progress in recovery and resolution planning, raising Minimum Requirement for own funds and Eligible Liabilities (MREL) and enhancing resolvability. We continue to advocate that it is essential that any reforms to the resolution framework do not prejudice the progress already achieved, that the co-legislators be vigilant in avoiding unintended consequences of further reforms or any additional or increased contributions to Deposit Guarantee Schemes (DGS) or the Single Resolution Fund (SRF), especially for those banks compliant with the Bank Recovery and Resolution Directive (BRRD) requirements.
AFME believes that a successful review of the CMDI package should result in:
- Maintaining consistency in the tools and application of the framework at EU level in order to ensure that all banks, regardless of their size or country of origin, can fail in an orderly manner, have a plan in place to provide for this and have the resources to support it (i.e., a sufficient level of MREL).
- Enhancing the credibility, predictability and consistency of the CMDI framework, including appropriately filtering the access of new banks to resolution, especially those banks earmarked for liquidation. Reducing the potential for banks to seek a last-minute switch to resolution, further enhancing financial stability, without adversely impacting the progress made to date on resolution.
- Minimising risk to taxpayers and moral hazard by ensuring a consistent, harmonised and careful approach across EU Member States to the use of common or mutualised funds to absorb losses, supporting market discipline and avoiding competitive distortions.
- Supporting strong cross-border cooperation and minimising fragmentation both within the EU and with third countries.
- Maintaining the existing governance of the Single Resolution Board and the competences and powers of its Executive Board.
- Not increasing contributions to mutualised funds.
