The European Commission is considering tabling a new proposal on the European Deposit Insurance Scheme (EDIS) in a bid to break the long-running deadlock and complete the banking union, a Commission official has said.
The EU executive and national government’s have failed to agree on a
common scheme to protect savers with up to €100,000 deposits since the
proposal was first made in 2015.
EU officials concede that substantial differences be national
capitals must be addressed before the issue can be discussed by
ministers again.
EDIS is the third pillar of the banking union, together with the
single supervision mechanism and a common system to resolve ailing
banks.
Euro area leaders are expected to call once again for the completion
of the banking union this week at a eurozone summit on 11 December.
A senior EU official said on Tuesday (10 July) that an agreement on a
European Deposit Insurance Scheme (EDIS) to protect savers across the
bloc would be “very hard” given Berlin’s opposition.
Germany remains the main obstacle because it is wary of the risks present in the banks of some EU countries.
The significant reduction of ‘bad loans’ (or non-performing loans) to
around 3% of the total volume was not enough to convince Berlin to drop
its opposition to the EDIS.
A new proposal is “on the radar” because “we cannot allow this
indecision to persist”, a Commission official said, though the official
did not clarify when the new proposal would be made.
The bloc’s financial services commissioner, Mairead McGuinness, gave her “personal
and political commitment” to try to unblock the EDIS during her
confirmation hearing at the European Parliament in October.
She called on sceptics to seize “the window of opportunity” offered
by a more stable banking system to move forward, given that “doing
nothing is going backwards, and if we don’t act, we will repeat the
past”, a reference to the 2007-2008 banking crisis.
The Commissioner-designate for financial services, Ireland’s Mairead
McGuinness, promised on Friday (2 October) a “full investigation” into
the Wirecard fraud that has thoroughly shaken up Germany, to see why
supervision failed.
The COVID-19 pandemic has forced businesses to close across Europe
and risks increasing the volume of overdue loans in the banking system.
Previous attempts by the Commission to break the impasse on EDIS have
failed. In October 2017, the EU executive mooted a gradual introduction
of EDIS in two phases: a limited reinsurance system, followed by a
co-insurance mechanism conditional on progress made in reducing risks.
Hybrid model
In July 2018, the Austrian EU presidency proposed its own ‘hybrid
model’ under which a central fund and national deposit guarantee schemes
would coexist. The central fund would provide liquidity support to
national schemes when they run out of money. If the central fund were
depleted when an intervention is needed, the Single Resolution Board, on
behalf of the central fund, would be able to borrow from national
guarantee schemes through a mandatory lending mechanism.
However, the proposal has failed to unblock the discussion at
technical level, as member states disagreed over its design, according
to a document drafted by the German presidency, seen by EURACTIV.
“Some member states pointed out that the hybrid model could only be
an interim stage on the way to establish a fully-fledged EDIS (with 100%
loss coverage). Other member states argued that the hybrid model should
not entail any mutualisation at all or loss sharing should be subject
to clear conditions or political decisions,” the document reads.
According to the Commission’s thinking, the ‘hybrid model’ should be
seen only as a step toward a full European deposit insurance scheme to
cover savers.
Last November, Germany signalled that it was ready to accept EDIS, as
long as other issues were addressed in parallel. As part of the
package, finance minister Olaf Scholz said the EU should reconsider its
regulatory treatment of sovereign exposures.
European decision makers welcomed on Wednesday (6 November) German
finance minister Olaf Scholz’s attempt to unlock the European Deposit
Insurance Scheme (EDIS) proposal, but warned of the long process still
ahead to reach an agreement.
“The presidency acknowledged that member states’ views on the
regulatory treatment of sovereign exposures remained divided,” the
German presidency document said.
“The presidency also noted the need to assess the impact of the
proposals on smaller markets and banks, including for non-euro area
member states, and agreed that further analysis would be needed to
inform future discussions.”
EURACTIV
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