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Staff Working Paper Series #3 - The Commission proposal to reform the EU Bank Crisis Management Framework: A selected Analysis

Abstract: This SRB staff working paper aims to foster debate on the possible impact of the CMDI proposal, linked namely to the changes to the Public Interest Assessment and to the creditors’ hierarchy and their effect on industry funded resources both in resolution and in liquidation. The paper argues that the quantitative assessment indicates that the Commission’s proposal provides a balanced and feasible approach, which can bring a broader range of small and medium-sized banks, where warranted, under the resolution framework by providing for sufficient funding for the resolution action through a more effective use of industry-funded safety nets so as to shield depositors from losses, in particular when this would have detrimental effects for financial stability and depositors’ confidence. At the same time, the additional costs for industry-paid funds appear to be manageable both in resolution and in liquidation scenarios.