The European Commission adopted a proposal to adjust and further strengthen the existing EU bank crisis management and deposit insurance (CMDI) framework.
A rulebook for all financial actors in the EU
In response to the 2008 financial crisis, the European Commission pursued a number of initiatives to create a safer financial sector for the single market. These initiatives form a single rulebook for all financial actors in the 27 EU countries. They include
- stronger prudential requirements for banks
- improved protection for depositors
- rules for managing failing banks
This single rulebook is the foundation for the banking union.
Deeper integration of the euro area banking system
As the financial crisis evolved into the euro area debt crisis it became clear that deeper integration of the banking system was needed for the euro area countries, which are particularly interdependent. That’s why, on the basis of the European Commission roadmap for the creation of the banking union, the EU institutions agreed to establish a Single supervisory mechanism (SSM) and a Single resolution mechanism (SRM) for banks. The banking union applies to countries in the euro area. Non-euro area countries can also join. After the accession of Bulgaria and Croatia, the banking union is now made of 21 countries.
Completing the banking union
The first two pillars of the banking union – the SSM and the SRM – are now in place and fully operational. However, the work on the banking union is not finished since its third pillar, the European deposit insurance scheme (EDIS), as proposed by the Commission in 2015, is still pending. EDIS would provide stronger and more uniform insurance cover for all retail depositors in the banking union. The legislative process has been put on hold for more than seven years by the European Parliament and Council.
In October 2017 the European Commission also published a Communication from the Commission: Completing the banking union.
On 18 April 2023 the European Commission adopted a proposal to adjust and further strengthen the existing EU bank crisis management and deposit insurance (CMDI) framework, with a focus on medium-sized and smaller banks. The reform constitutes an important step forward in strengthening the second pillar of the banking union and it paves the way towards further progress on completing the banking union.
The Commission also published its second Single supervision mechanism report, which concluded that, overall, the SSM is functioning well and has become a mature established supervisory authority delivering on the objectives set out when it was created.
More about the banking union
Single supervisory mechanism (SSM)
The SSM gives the European Central Bank certain supervisory tasks over the EU financial system.
Single resolution mechanism (SRM)
he single resolution mechanism (SRM) is a central institution for bank resolution in the EU.
European deposit insurance scheme (EDIS)
A proposed scheme to protect retail deposits in the banking union.
Sovereign bond-backed securities (SBBS)
The EU is working to remove unjustified regulatory impediments to the development of SBBS.