Many EU member states want a common deposit insurance as soon as possible. But the plans do not go far enough. improvements are necessary.
It is now time to complete the European banking union, EU Trade Commissioner Valdis Dombrovskis tries to set the course. They have been working on it for ten years and have also improved many things in terms of financial market supervision or equity. But what is needed now is a significant strengthening of crisis management.
“The European Union’s banking sector is in good shape, but we can do even better. The recent crises in the global banking system show that there is no way we can remain inactive,” said Dombrovskis. It is important to develop clear rules for crisis management at the banks at European level now. “It’s about protecting financial stability, protecting taxpayers’ money and investor confidence.”
No support from Germany
The EU Commission is stepping up the pace. Negotiations are scheduled to begin next week in the Council of the 27 member states. The Swedish Finance Minister Elisabeth Svantesson, whose country has held the EU Council Presidency since January, suspects that this could take weeks or months because the proposal on the table is so complex and extensive.
While many countries would rather have a common deposit insurance scheme today than tomorrow, others such as Austria are rather skeptical. And Federal Finance Minister Christian Lindner has not yet agreed to the EU Commission’s proposal.
“Suggestions need improvement”
“Two points in particular concern us,” said Lindner. The first point concerns the involvement of shareholders and creditors in the event of a bank’s difficulties. “Until now, it was always intended that before common European instruments were used, the shareholders and creditors would be involved in the stabilization.” Individual liability contributes to stability, which should now be deviated from.
The German Finance Minister fears that this could also be to the detriment of German savers. He’s not the only one who believes that there could still be significant risks lurking in the balance sheets of southern European banks: “On the other hand, we have functioning deposit insurance systems in Germany and it was always clear to us that the functioning instruments had to be retained.” That is no longer the case in the Commission’s proposal. “And that’s why, from our point of view, further development and improvement of the proposals is necessary.”
Banks fear for security system
And until then, no compromise is perhaps better than a bad compromise. The German financial institutions hope that the Federal Minister of Finance will not agree to any joint liability for deposit insurance. Savings banks or Volksbanks and Raiffeisenbanks in particular, which have hitherto been jointly liable if one of them encounters turbulence, fear that their security system will otherwise be undermined and that they will be asked to pay even more in the event of a crisis