On Thursday 18 April, the European Parliament's Committee on Economic and Monetary Affairs (ECON) succeeded in adopting a position (26 votes in favour, 18 against, 3 abstentions) on the 2015 proposal to establish a European Deposit Insurance Scheme (EDIS), the third pillar of the euro area Banking Union, limiting – at this stage – the future European fund to providing liquidity to national schemes, intended to cover investor deposits in the event of the failure of a major European bank.
“This concerns a position of the ECON Committee. This is not a position of the European Parliament, nor is it a negotiating position with the EU Council. (...) But it is an important step towards successfully completing the successive stages of work”, said Othmar Karas (EPP, Austrian), the European Parliament’s rapporteur on this dossier. On behalf of the S&D group, Spain’s Jonás Fernández welcomed “a first step in the right direction”, which should eventually lead to the establishment of a fully-fledged European system for the joint assumption of losses affecting investors.
On Thursday, the parliamentary committee adopted all the compromise amendments put to the vote. It did not complete the first reading of this dossier, preferring to hand it over to the Parliament which will emerge from the June elections. Fearing being turned down, the rapporteur did not want an European Parliament negotiating mandate to be adopted.
At the heart of the EDIS will be a Deposit Insurance Fund’ (DIF) to be managed by the Single Resolution Board (SRB), the European authority responsible for resolving large failing banks within the euro area Banking Union.
In the event of a bank failure, the DIF will be asked to provide liquidity to a national Deposit Guarantee Scheme (DGS) that lacks the resources to intervene, with this liquidity used to finance preventive measures or alternatives to total bankruptcy. If there is a shortage of resources, the European fund could call on the national schemes, which would be obliged to contribute. After the first three years of the DIF’s build-up, this compulsory loan would be capped at 30% of the sums required for an intervention.
The DIF will be financed by direct contributions from banks, based on the level of risk in their business model, as is already the case for contributions to the ‘Single Resolution Fund’ (SRF), the financial arm of the ‘resolution’ strand of the Banking Union. According to MEPs, a mechanism should be put in place to enable the DIF to reach half of its target size within the first three years of its creation.
MEPs are of the opinion that a national deposit guarantee scheme that has drawn on the DIF will have to repay the cash it has received within six years. Interest will be charged to encourage a national scheme to repay borrowed cash quickly, whereas cash loans from a DGS to the European fund will not be subject to interest.
“This is not simply a reinsurance scheme” for national deposit guarantee schemes, said Mr Fernández. In his view, the fact that banks will be making direct contributions to the DIF will allow it to evolve into a “mutual loss-absorption fund” for bank deposits, which are legally protected in the EU up to a maximum of €100,000.
The Spanish Socialist also welcomed the fact that the parliamentary committee had included all banking models in the EDIS, while taking into account the specificities of certain national banking sectors, notably in the calculation of their contributions to the DIF. “The well-tested and approved decentralised banking sector with institutional protection schemes is recognised by this proposal and integrated into a common framework”, added Mr Karas.
Breaking the political deadlock on EDIS is not going down well with the German MEPs. Within the EPP group, Markus Ferber and Karolin Braunsberger-Reinhold voted against the text presented. Among the Social Democrats, Joachim Schuster did the same, while all the elected members of the participating S&D group voted in favour. In the Greens/EFA group, Rasmus Andresen abstained.
“The result is very disappointing and will lead to a fragmentation of Europe. We’ll have to pay the price over the long term!”, said Mr Ferber. In his view, the system recommended by the ECON committee would be to France’s advantage, as it does not have a solidarity contribution.
To see the various compromise amendments to the draft ‘Karas’ report: https://aeur.eu/f/buq; https://aeur.eu/f/bur; https://aeur.eu/f/bus; https://aeur.eu/f/but; https://aeur.eu/f/buu; https://aeur.eu/f/buv (Original version in French by Mathieu Bion)