On Friday 11 June, the Member States’ ambassadors to the European Union (Coreper) will discuss the report of the Portuguese Presidency of the EU Council on the progress made in the first half of 2021 on the creation of a European deposit insurance scheme (EDIS), the third pillar of the banking union in the euro area.
In particular, this report covers discussions on the creation of a hybrid model that entails the access by national Deposit Guarantee Schemes (NDGSs) to additional financial support in the event of bank failure from a mandatory lending mechanism between NDGSs coupled with a central Deposit Insurance Fund (DIF).
Initially, this hybrid model would only involve the provision of aid to cover the liquidity needs of a failing bank through the compulsory inter-scheme lending mechanisms already provided for on an optional basis in EU law. The idea of placing the funds available for compulsory lending in national sub-funds alongside the central fund would be supported by many Member States.
Eventually, the hybrid model would gradually evolve into a model that could also intervene to cover possible losses of failing banks.
The positions of the Member States continue to be “divergent”, notes the Presidency in its report, a copy of which was obtained by EUROPE. Member States that favour increased financial risk-sharing advocate an expanded EDIS, while other countries are opposed to EDIS loss coverage, as this phase is dependent on a political agreement conditional on the reduction of financial risks.
The report also discusses issues such as the participation of non-bank financial entities in EDIS, ‘institutional protection schemes’ and differences in national rules governing NDGSs.
On the basis of the work carried out at technical level under the Portuguese Presidency, the Eurogroup is invited to finalise, on Thursday 17 June, a work plan leading to the eventual creation of the EDIS (see EUROPE 12621/3). It will then submit its proposal to the leaders of the euro area countries, who will meet at a summit on Friday 25 June.
See the progress report: https://bit.ly/3g2yWyz (Original version in French by Mathieu Bion)