The project for a European Deposit Insurance Scheme (EDIS), the implementation of which will make it possible to complete banking union in the euro zone, is certainly "under artificial respiration" at the political level, a European diplomat said on Friday 30 November, but technical work at the EU Council is continuing despite differences between Member States on the level of ambition of European work in reducing financial risks.
In the second half of 2018, the Austrian Presidency of the Council convened four meetings of national experts to discuss a "hybrid model" for EDIS that combines the principle of reinsurance derived from the European Commission's October 2017 proposals (see EUROPE 11881) and the principle of mandatory lending between National Deposit Guarantee Schemes (DGS), developed by the previous one.
"This hybrid model would provide assistance in the form of liquidity and not loss coverage" for a national deposit guarantee scheme in the event of bank failure, warns the Austrian Presidency in its progress report on the completion of the banking union, which will be forwarded to the Ecofin Council on Tuesday 4 December (see other news).
In the EU, bank savings are guaranteed up to 100,000 euros. In the event of bank failure, a national deposit guarantee system funded by industry intervenes to repay savers. According to the Austrian hybrid model, a national DGS lacking liquidity could use the Deposit Insurance Fund (DIF). If the European fund is depleted, the Single Resolution Board (SRB), which is responsible for managing it, could request additional liquidity through mandatory lending by the other national deposit guarantee schemes. As a last resort, the SRB Council could also be given the possibility to borrow on capital markets.
The national system that has requested European assistance should reimburse the intervening entities in the following order: the other DGSs mobilised, then the DIF Fund. To replenish its own funds, it would then be required to raise ex post contributions from the national banking system.
The opinion of the Member States is very divided. Without naming them, the Austrian Presidency refers to countries wishing to focus discussions on the provision of liquidity alone, while for others, these discussions are only of value if they constitute a transitional step towards the establishment of a fully shared EDIS system according to a pre-determined timetable. (Original version in French by Mathieu Bion)