The European Council announced that it and the European Parliament have reached a political agreement on a reformed EU crisis management and deposit insurance (CMDI) framework for banks. The package is designed to make resolution more usable for small and medium-sized banks by allowing access, under safeguards, to industry-funded financing tools in addition to a failing bank’s own loss-absorption resources. Under the agreement, deposit guarantee schemes (DGS) and resolution funds, including the Single Resolution Fund (SRF) in the Banking Union, can be used to “bridge the gap” where a bank has insufficient own funds and eligible liabilities (MREL), with MREL remaining the primary line of defence. The framework also clarifies and broadens how resolution authorities should conduct the public interest assessment, including requiring consideration of real-economy disruption at both national and regional levels, while keeping liquidation as the default approach in most cases, particularly for small and medium-sized banks. A harmonised “least cost test” would govern when DGS resources may be used and would cap any use of DGS funds at the amount of covered deposits held by the bank. The agreed text retains the current depositor preference, with DGS-protected deposits ranking first and a second tier for household and SME deposits not covered by the DGS. The co-legislators will now finalise the legal text at technical level before formal adoption by both institutions. The reform amends the Bank Recovery and Resolution Directive, the Single Resolution Mechanism Regulation and the Deposit Guarantee Schemes Directive.
European Council 2025-06-25
European Council strikes political deal with European Parliament to reform EU bank crisis management and deposit insurance framework
The European Council and European Parliament have agreed on a reformed EU crisis management and deposit insurance framework for banks, enhancing resolution usability for small and medium-sized banks. It allows access to industry-funded financing tools alongside a bank's own loss-absorption resources, with deposit guarantee schemes and resolution funds bridging gaps when a bank lacks sufficient own funds and eligible liabilities. The reform amends key directives and regulations, retaining depositor preference and introducing a harmonised "least cost test" for using deposit guarantee scheme resources.