Deposit guarantee schemes and bank crisis management: legal challenges arising from the European legal framework

During the early years of application, the common bank Crisis Management and Deposit Insurance (CMDI) framework showed several areas of inefficiency for which three main causes can be identified: firstly, the existence of a common European framework alongside various heterogeneous national frameworks; secondly, the rigidity and the lack of proportionality of the CMDI itself; thirdly, the practical approach of the Single Resolution Board. In substance, the supranational resolution framework was applied in a very limited way, and the crises hitting the less significant banks — and the significant ones not subject to resolution — have mainly been ma- naged at the national level. Recent experience has shown that Deposit Guarantee Schemes can play a fundamental role in preven- ting and managing the banking crisis in a role that is, however, strongly limited by the current regime. This paper analyses those limits and makes some suggestions as to how to address and over- come them.