CMDI Resolution Funding and State Aid Control

Abstract The State aid regime has dominated crisis management in the EU financial sector ever since the Global Financial Crisis. Even with the BRRD/SRM resolution framework taking effect, most European banks in distress continue to receive public financial support subject only to the State aid regime. However, it is one of the declared aims of the CMDI reform proposals to (further) reduce the bank-sovereign nexus by making it easier for banks of all sizes to access industry-financed resolution and deposit insurance funds instead of obtaining financial support directly from State budgets. This paper explores how the CMDI framework and the State aid regime currently interact and how this would change pursuant to the CMDI reform proposals. It argues that these reform efforts will be unlikely to make much of a difference and that, following their implementation, failing institutions will continue to be channeled away from the BRRD/SRM resolution framework towards a State aid-based assessment and treatment.