Not every small bank in trouble needs to go into resolution

“When we talk about rescuing banks in trouble, it’s clear that there is a lack of coherence in the application of the current EU rules. Too many disparities exist and it is high time to address this issue. However, we need a targeted reform and should not throw the baby out with the bathwater. We should maintain the fundamental idea that bank resolution is only for those institutions that pose a tangible risk for financial stability”, explained Markus Ferber MEP, the EPP Group Spokesman on Economic and Monetary Affairs, as the European Commission is about to present a review of the Crisis Management and Deposit Insurance (CMDI) rulebook today.

"Not every small bank that gets into trouble needs to go into resolution. Otherwise, we overburden small banks without gaining anything in terms of depositor protection or financial stability. A ‘one-size-fits-all’ solution is too problematic", Ferber continued.

The main objective of today's law proposal is to speed up the handling of failing banks to ensure they are not bailed out by taxpayers but ‘bailed in’ using their own resources.

“Some Member States have institutional protection systems with a proven track record in place. Let’s not undermine national systems that work well and are effective at reducing contagion risk. What we need is a system that leaves a bit of flexibility for national idiosyncrasies as long as the general resolution objectives are fulfilled”, Ferber stressed.

“The Commission would be well advised to draw the right lessons from the recent turmoil in the US and Swiss banking systems. During the Credit Suisse takeover, markets got very nervous very quickly because of the uncertainty of who gets bailed in first”, Ferber explained.