Filenews 28 June 2025 - by Theano Thiopoulou
The European Union is pushing for an agreement on rules for the management of failing banks without a haircut on deposits and the creation of a new regulatory framework that will strengthen depositor protection across the European Union.
It should be recalled that Cyprus is the only state in Europe whose depositors of the two systemic banks of the period 2013 were cut (Laiki, Bank of Cyprus) and twelve years later they have still not been compensated.
According to the Joint Communication of the Council and the European Parliament, the agreement reached provides for facilitating the access of failing banks to national Deposit Guarantee Funds, with the aim of supporting loss absorption – without affecting customer deposits.
This reform is an important milestone in advancing the Banking Union. It will better ensure financial stability and prevent taxpayers' money from being used to bail out failing banks.
The reform aims to strengthen the capacity of resolution authorities to manage the failure of small and medium-sized banks by broadening the scope of resolution to include those banks when it is in the public interest. This will allow more banks to undergo a smooth exit, such as a sale to another bank, instead of going into liquidation, thus minimizing financial disruption in the event of bank failure.
The reform will also strengthen depositor protection across the European Union. The agreement also recognises the specificities of national banking sectors, while ensuring that a level playing field is maintained. The new institutional framework, known as CMDI (Crisis Management and Deposit Insurance), is seen as a crucial step towards banking integration in Europe, as it aims to bridge the gap between national regulatory systems and enhance the stability of the single banking market.
The statement states that "the co-legislators reached an agreement on the key aspects of the reform. The Commission will continue to provide support to the European Parliament and the Council as they work together at technical level to finalise the details of the agreement. Once the technical aspects are finalised, the co-legislators will meet again to adopt the final text."
Commissioner for Financial Services and the Savings and Investment Union, Maria Luis Albuquerque, said: "This agreement reinforces the key promise of the Banking Union: that bank failures can be dealt with effectively, fairly and without burdening taxpayers. It is also the perfect example of what the Union can offer European citizens.
With the agreement reached on Thursday, which maintains the objectives of the Commission's proposal, we are strengthening the protection of citizens, businesses, local public administrations and society at large from the effects of bank failures. This will strengthen financial stability, improve depositor confidence and improve the EU's competitiveness overall.
This reform is also an important milestone in advancing the Banking Union and further integrating the EU's banking markets, which are key pillars of the Savings and Investment Union."
