In a keynote speech, Pedro Machado, member of the European Central Bank’s Supervisory Board, argued that the European Commission’s planned 2027 banking package must pair measures supporting cross-border integration with credible arrangements for managing bank failures. Proposals to ease subsidiary-level capital and liquidity constraints, improve intragroup resource transfers and coordinate prudential and resolution requirements will remain difficult to use unless national authorities trust that losses, liquidity needs and depositor protection will be handled consistently across borders. Regulatory simplification can proceed separately, but Machado said the integration measures should not be separated from reforms to the safety net. Machado identified four areas requiring further work: implementing and completing the reformed crisis management and deposit insurance framework, establishing a European liquidity mechanism for banks in resolution, creating a common deposit insurance framework and reducing divergence among national insolvency regimes. These gaps encourage authorities to retain capital and liquidity locally, with the ECB estimating that current constraints lock up €230 billion of high-quality liquid assets in cross-border subsidiaries. Supervisory decisions on cross-border waivers should therefore be assessed alongside resolution strategies, including the location of internal loss-absorbing capacity and the enforceability and ranking of intragroup support claims during failure.

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