On 5 October 2023, the European Banking Authority (EBA) published a key-note speech, given by Jose Manuel Campa, at the International Workshop on Financial System Architecture and Stability. In his speech, Mr Campa discussed the European crisis management framework and events in the banking sector earlier this year.
In his speech, Mr Campa makes the following key points:
- In his view, a lot of progress has been made to enhance the resolution framework in the last decade. The EU already has strong rules and tools to deal with bank crises in an effective way.
- The current framework will benefit and further improve in some aspects through the implementation of the recent Commission proposals contained in the crisis management and deposit insurance (CMDI) package.
- While remaining confident of the European crisis management framework, the recent crises serves as a reminder to not be complacent and the importance of continuing to critically review the framework on the basis of the experience gained through crisis planning and implementation.
- Recent events have highlighted the importance of being able to access appropriately funded public backstop facilities in resolution as essential to restore public trust and confidence.
- It was evident from the events earlier this year that, during their planning, resolution authorities should consider and develop different options to be ready to adopt the strategy most appropriate to the scenario and its evolution.
- A major observation to emerge from the events earlier this year has been the importance of a clear and timely external communication as an essential condition to restore trust and confidence in the effectiveness of the chosen strategy to restore viability of the institution.
- After various years of resolution planning development, real progress could be achieved in resolvability through appropriate testing and the EBA has already dedicated specific guidance to authorities and institutions on this aspect in its resolvability testing guidelines.
- To ensure further progress, the EBA is now conducting a stock take of the testing exercises so far conducted by authorities to identify best practices.
- Although not prompted by recent events, the European Commission’s legislative proposal of the CMDI package is crucial as it refines the framework addressing some implementation aspects that have also emerged.
- The proposals contained in the CMDI proposal should facilitate a move towards completing the Banking Union which still misses its third pillar i.e. an EU common deposit insurance scheme.