European Central Bank Banking Supervision identifies four remaining gaps in EU bank crisis management

In a speech at the European University Institute Bank Resolution Academy, Pedro Machado, Member of the European Central Bank’s Supervisory Board, argued that supervision and resolution should operate as a single continuum from ongoing oversight through recovery, early intervention and resolution. He highlighted four remaining gaps in the framework: liquidity provision in resolution, differences among national insolvency and crisis management regimes, the absence of a common deposit insurance scheme and tools designed to address failures caused by operational, cyber, sanctions-related or geopolitical events. Machado said the reformed Crisis Management and Deposit Insurance framework strengthens early intervention by anchoring the ECB’s powers directly in the Single Resolution Mechanism Regulation and clarifying escalation, cooperation and information sharing with the Single Resolution Board. However, the banking union still lacks a resolution liquidity mechanism backed by common fiscal support, while divergent national regimes can produce inconsistent creditor outcomes. The existing toolkit may also need to evolve because it was largely designed for balance sheet stress rather than operational collapse. Within their existing mandates, the ECB and the Single Resolution Board are bringing supervisory and resolution planning closer together, streamlining approvals and shortening processing times. This includes faster joint handling of applications to reduce own funds instruments and, since July, applications for early redemption of instruments used to meet the minimum requirement for own funds and eligible liabilities.