The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union

January 7, 2022

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Format: Chicago

Atilla Arda, and Marc C Dobler. The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union, (USA: International Monetary Fund, 2022) accessed November 24, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper argues that in the European Union (EU) deposit insurance funds are too difficult to use in bank resolution and too easy to use outside resolution. The paper proposes reforms in three areas for the effective management of bank failures of small and medium-sized banks in the European Union: making resolution the norm for dealing with failing banks; establishing a common DIS for the European Union; and increasing funding and backstops for deposit insurance while removing constraints on their use for resolution measures. Without these changes, the European Union will continue to be challenged by banks that are too small for resolution and too large for liquidation.

Subject: Bank resolution, Bank resolution framework, Deposit insurance, Distressed institutions, Financial crises, Financial institutions, Financial safety nets

Keywords: Aid rule, Authorities in host jurisdiction, Bank resolution, Bank Resolution, Bank resolution framework, Banking Union, Crisis Management, Crisis Preparedness, Deposit insurance, Deposit insurance, Deposit Insurance, Distressed institutions, EU response, Euro Area, European Union, Financial Crisis, Financial safety nets, Financial Stability, Fiscal authorities, Global, Host authorities' concern, Liquidation regime, Single market

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/002
Stock No:

WPIEA2022002
ISBN:

9781616358075
ISSN:

1018-5941

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