Is CMDI what the Banking Union needs?

After the end of the euro area sovereign debt crisis and the sovereign-bank feedback loop receded, EU Member States’ appetite for progress in the Banking Union significantly decreased. Against the background of lessons learnt from several resolution and liquidation cases during the first few years of the Banking Union, the European Commission tabled a proposal in April 2023 to reform the Crisis Management and Deposit Insurance (CMDI) framework. While this proposal has its merits, it falls short of the real pending issues for completing the Banking Union, namely the third pillar (EDIS or the European Deposit Insurance Scheme), a mechanism for liquidity provision in resolution, and the ‘missing pillar’ regarding the provision of Emergency Liquidity Assistance (ELA). In this CEPS Policy Brief, we make three key recommendations on how to improve the CMDI proposal, namely: 1. Full harmonisation, or at least the harmonisation of the most relevant aspects of liquidation procedures; 2. Updating and aligning the Banking Communication with the BRRD/SRMR; and 3. Further facilitating access to industry funds. Finally, we strongly discourage ‘a piecemeal approach’ during the ongoing negotiations over the CMDI reform.