Brussels, 12/11/2015 (Agence Europe) - On Tuesday 24 November, the European Commission will present a legislative proposal to create a European Deposit Insurance Scheme (EDIS) for bank deposits, the third plank of banking union in the eurozone.
“In our proposal, we have to find the right balance between reducing risk and sharing risk (…). We want to move forward gradually, starting with a system based on reinsurance, and one that is built on existing national deposit guarantee schemes”, the Commissioner for the Euro, Valdis Dombrovskis, said on Wednesday 11 November, following a guideline debate of the European Commission on this issue.
According to the Commissioner, the future European system will help to ensure that all bank deposits - currently guaranteed to a level of €100,000 by the national schemes - are safe, irrespective of where they are in the eurozone. It could be called upon only if the national schemes were insufficient in the event of bank failure. For the banking sector, its creation will not mean costs exceeding those already budgeted for in the creation of the national bank deposit guarantee schemes.
A document of the European Political Strategy Centre (EPSC), which was published the same day, lists four options for the EDIS in the eurozone. Of these four possibilities, two options best describe the interim system recommended by the Commission: - a 20th scheme to complement the 19 national ones; - a reinsurance mechanism for the national schemes. According to the document, the difference between these two options lies in how the ex ante contributions of the banking sector are collected, directly for the former and indirectly for the second. Both options would require a European entity to collect these contributions, preferably the Single Resolution Board, which will be responsible for managing the Single Resolution Fund (SRF), the financial arm of banking union (see EUROPE 11428). The EDIS will eventually also benefit from a backstop, which may take the form of a credit line of the SRB board at the European Stability Mechanism, the permanent bailout fund of the eurozone.
Giving Germany pledges. The future European system will be open only to the banks of states which scrupulously apply the directives harmonising the national deposit guarantee schemes (2014/49) and bank restructuring/resolution (directive 2014/59, 'BRRD'). “We will make sure that EDIS will not be an excuse for the member states to avoid building up national deposit guarantee schemes required by the rules”, Dombrovskis stressed.
Germany, which opposes any further pooling of financial risks, is calling for guarantees prior to the completion of the banking union in the eurozone. This will be achieved by implementing all of the relevant European legislation. Currently, just 11 countries have fully transposed the 'deposit guarantee' directive (see EUROPE 11426 and 11061). Under this directive, the member states are obliged to set in place, by 2024, national guarantee funds with amounts covering 0.8% of all deposits covered. Loans between these national funds is even a option. Six countries have, furthermore, already been brought before the Court of Justice of the EU for delays in transposing the 'BRRD' directive (see EUROPE 11416). In addition to creating national resolution funds, this directive brings bail-in rules into the EU, creating a hierarchy of shareholders, creditors and major savers which could potentially be called upon to chip in in the event of bank failure.
Dombrovskis, who is “fully aware” of the position of Germany and the German industry, said that the Commission would, “in parallel”, present measures to “reduce the financial risks”. He declined to specify whether these proposals would concern the introduction of any capital requirements for banks holding sovereign bonds. (Original version in French by Mathieu Bion)