Deposit Guarantee Schemes and Bank Crisis Management : Legal Challenges Arising from the European Legal Framework

During the early years of application, the common bank Crisis Management and Deposit Insurance (CMDI) framework showed several areas of inefficiency for which three main causes can be identified: firstly, the existence of a common European framework alongside various heterogeneous national frameworks; secondly, the rigidity and the lack of proportionality of the CMDI itself; thirdly, the approach of the Single Resolution Board, which may be summarized in the current chairperson’s well-known phrase: «Resolution is for the few, not the many». In practice, the supranational resolution framework was applied in a very limited way, and the crises hitting the less significant banks – and the significant ones not subject to resolution – have mainly been managed at the national level. Recent experience has shown that Deposit Guarantee Schemes can play a fundamental role in preventing and managing the banking crisis in a role that is, however, strongly limited by the current regime. This paper analyses those limits and makes some suggestions as to how to address and overcome them. It also considers the proposal of a European bank insolvency procedure, underlining the need to first harmonize some key substantial and institutional aspects