SUERF Policy Brief Post-turmoil bank failure management: the

In the US, the failure of two regional banks, Silicon Valley Bank and Signature Bank, required the use of a systemic exception as authorities felt that the preservation of financial stability justified waiving the restrictions on the support that the Federal Deposit Insurance Corporation (FDIC) is allowed to provide, in order to protect all the deposits of those banks. [...] As the case of Credit Suisse shows, the preparatory work conducted around the development of the entity's resolution plan proved very useful for managing the failure of the bank, even if the plan was not ultimately implemented. [...] Under those conditions, the legislative framework's ability to preserve the stability of the financial system upon the failure of a mid-sized bank would depend exclusively on the effectiveness of the existing resolution tools. [...] The ongoing negotiations In that context, it is somewhat worrying that in the current negotiations around the Commission's CMDI initiative in the European Parliament, and particularly the Council, some opposition has emerged against the key aspects of the proposal aimed at enlarging the available funds to support SoB transactions. [...] That would not only contradict the spirit of the European bank failure regime and the objectives of the new resolution framework at the global level but also challenge the very purpose of the banking union.