Reform of the CMDI Framework – Driving Off With the Brakes On

Asimakopoulos Ioannis G. () and Tröger Tobias H. ()
Additional contact information
Asimakopoulos Ioannis G.: Affiliate Researcher, Leibniz Institute for Financial Research Sustainable Architecture for Finance in Europe (LIF SAFE), Frankfurt, Germany and Adjunct Lecturer in Financial Law, University of Luxembourg, LuxembourgLuxembourg
Tröger Tobias H.: Professor of Private Law, Commercial and Business Law, Jurisprudence, Center for Advanced Studies “Foundations of Law and Finance” (CAS LawFin) at Goethe University and Director of the Cluster “Law and Finance” at LIF SAFE, FrankfurtFrankfurt, Germany

European Company and Financial Law Review, 2024, vol. 21, issue 5-6, 531-562

Abstract: 531The 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 framework, particularly in the case of small and medium sized retail banks. This reluctance of resolution authorities weakens any positive impact the CMDI framework 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 framework 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.

Keywords: bank resolution; CMDI; EDIS; bail-in; transfer strategies; MREL; Banking Union (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 G28 K22 K23 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ecfr-2024-0018 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:eucflr:v:21:y:2024:i:5-6:p:531-562:n:1001

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ecfr/html

DOI: 10.1515/ecfr-2024-0018

Access Statistics for this article

European Company and Financial Law Review is currently edited by Heribert Hirte

More articles in European Company and Financial Law Review from De Gruyter
Bibliographic data for series maintained by Peter Golla ().