Machado flags crisis liquidity and deposit insurance gaps
ECB Supervisory Board member Pedro Machado identified four structural gaps in the European crisis framework on September 22, 2026. Speaking in Florence, he called for resolution liquidity mechanisms, common deposit insurance, insolvency alignment and tools for non-financial failures.
Four structural gaps in the continuum
Machado rejected viewing the Single Supervisory Mechanism and the Single Resolution Mechanism as detached pillars, describing supervision and resolution as a single continuum.
Drawing on the 2017 Banco Popular resolution and the 2022 Sberbank Europe case, he noted that supervisory failing-or-likely-to-fail determinations trigger the resolution machinery.
While the Crisis Management and Deposit Insurance reform published in April 2026 strengthened early intervention powers, four vulnerabilities remain: the absence of a mechanism providing liquidity in resolution under extreme stress, divergent national insolvency regimes, the lack of a European deposit insurance scheme, and crisis tools unsuited for non-financial shocks like cyberattacks.
Legal boundaries and joint procedures
Machado emphasized that resolution remains subject to strict legal boundaries established by EU court rulings, including the ABLV Bank judgment confirming failing-or-likely-to-fail assessments as preparatory acts.
Cooperation also continues after resolution schemes conclude, as supervisors must approve qualifying holdings and re-integrate restructured banks.
To streamline demands on lenders within existing mandates, the ECB and the Single Resolution Board accelerated joint processing for own funds reductions and, since July, early redemptions of MREL instruments.
Pragmatism cannot replace the missing pillar
Machado delivers a lucid diagnosis, but administrative pragmatism cannot substitute for missing structural pillars.
Without common deposit insurance and resolution liquidity, cross-border banking fragmentation will persist during severe panics.
Inter-agency harmony is welcome, but legislative paralysis leaves the framework vulnerable.