Banks, Deposits, EU – Baltic States, Financial Services, Insurance, Legislation

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 15:32

Completing banking union: deposit insurance schemes

Eugene Eteris, BC, Copenhagen, 12.11.2015.Print version
Banking union’s completion is regarded as indispensable part in achieving a full and deep Economic and Monetary Union (EMU). However, additional steps are needed, in particular, about implementing European Deposit Insurance Schemes in the member states. Commission presents opinion on reducing risks in the financial system in general and in the banking union, in particular.

Financial stability and the confidence of citizens are indispensable preconditions for economic growth. A proposal for EDIS, as suggested by the Five Presidents' Report, would consist of a reinsurance of national Deposit Guarantee Schemes (DGS) as a first step, moving towards a full European system of deposit guarantees in the longer term. While national DGS are already in place and provide for the protection of € 100.000 per person/per account per bank, they are not backed by a common European scheme.

 

EDIS would help to reinforce depositor confidence in banks across the Banking Union. Pressure on banks would be reduced and the loop between banks and Member States would be further weakened by helping to ensure that all national DGS would have sufficient funds available to weather periods of high stress.

 

The Commission emphasises the need for all EU states to implement fully the agreed rules of the Banking Union. On 24 November 2015, together with the EDIS proposal, the Commission will also present concrete ideas about how risks can be further reduced in the financial system in general and in the Banking Union, in particular.


Steps to further strengthen EMU

The recent Five Presidents' Report set out a number of steps to further strengthen EMU. One of them is to move towards guaranteeing deposits at the EU level with a European Deposit Insurance Scheme (EDIS).

 

EDIS would mark an important step forward in terms of reinforcing financial stability by reducing the link between banks and sovereigns, and it would enhance confidence by protecting citizens' deposits at the European level, independent of their bank's location in the union. It would be based on a system of reinsurance, as a first step.

 

The Commission's proposal on 24 November 2015 will be accompanied by a Communication which will set out other concrete measures to further reduce risks in the financial system.

 

Commenting on the future steps, Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, underlined that financial stability was a precondition for economic growth and convergence. Thus, completion of the banking union is regarded as one of the pillars of a resilient and dynamic Economic and Monetary Union.

 

The discussion in the Commission demonstrates the EU’s commitment towards EU Deposit Insurance Scheme; in parallel, the Commission will work on further reducing risks in the banking sector.

 

Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union, added that an “unfinished business” on the banking union (alongside supervision and resolution) restricts an effective system for deposit guarantees. By gradually developing the EDIS at the European level, the Commission will reinforce the confidence that depositors have in their banks, and further weaken the link between banks and their sovereigns.  


For more information, see:

= Banking Union;

= Completing Economic and Monetary Union;

= Five Presidents' Report;

= Economic and Monetary Union;

= Commission press release IP-15-6051 “European Commission holds orientation debate on how to complete the Banking Union”, Brussels, 11 November 2015, in:

http://europa.eu/rapid/press-release_IP-15-6051_en.htm?locale=en







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