EC Proposes Bank Deposits Insurance Scheme for Euro AreaEU | November 24, 2015, Tuesday // 17:04| views
The European Commission proposed on Tuesday a euro-area wide insurance scheme for bank deposits.
The EU executive body also set out further measures to reduce remaining risks in the banking sector in parallel.
“A European Deposit Insurance Scheme (EDIS) will strengthen the Banking Union, buttress bank depositor protection, reinforce financial stability and further reduce the link between banks and their sovereigns,” the Commission said in a press release.
European Commission Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, commented that completing the Banking Union is essential for a resilient and prosperous Economic and Monetary Union.
“The Commission's proposal for a European Deposit Insurance Scheme builds on national deposit insurance schemes and would be accessible only on the condition that commonly agreed rules have been fully implemented,” Dombrovskis said, according to the press release.
The scheme would develop in three stages. It would consist of a re-insurance of national Deposit Guarantee Schemes, moving after three years to a co-insurance scheme, in which the contribution of EDIS will progressively increase over time.
As a final stage, a full European Deposit Insurance Scheme is envisaged in 2024. The scheme includes a series of strong safeguards against 'moral hazard' and inappropriate use, in order to give incentives to national schemes to manage their potential risks in a prudent way.
A national scheme will only be able to access EDIS if it fully complies with relevant Union law.
Alongside introducing EDIS and in parallel to the work on the legislative proposal, the Commission will pursue measures to reduce risks and ensure a level playing field in the Banking Union, according to the press release.
These measures include reducing national options and discretions in the application of prudential rules; harmonising national deposit guarantee schemes; enforcing existing rules so that the use of public funding to maintain a solvent and resilient banking sector is minimised; and, achieving greater convergence in insolvency law.
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