The College of Commissioners adopted last week the proposal for a regulation establishing a European Deposit Insurance Scheme (EDIS). This long expected measure is the final missing piece of the banking union, launched after the 2008 financial crisis, as well as its most controversial point. As of today, the EU has a bank supervisor (ECB), common rules for the recovery of failing banks (bank recovery directive) with a single authority over the process (Single Resolution Mechanism) and a single resolution fund to avoid taxpayer-funded bailouts (Single Resolution Fund). However, individual depositors´ savings in banks are guaranteed by national deposit guarantee schemes - even though the rules are harmonized on EU level (e.g. the guarantee fund must be worth 0.8% of total bank savings covered by the insurance). This level of integration is deemed insufficient by experts and the majority of EU leaders. A single scheme should be introduced.

According to the Commission´s proposal, a shared deposit insurance fund would be gradually introduced in the eurozone (and possibly other participating countries) to cover individual depositors´ savings in banks – up to €100,000 per person. Banks would send a gradually-increasing share of their insurance contribution to EDIS. In the first phase, EDIS would only step in if national schemes ran out of money – this would last until 2020. From 2020 to 2024, the role of EDIS would get more important – national guarantee schemes would be able to take money from EDIS regardless of their own capacities (in 2020, they would be allowed to take 20% of the money needed for repayments for failed banks´ clients; this share would increase by 20 p.p. every year). As of 2024, EDIS would fully cover all insured savings in the eurozone. The role of national deposit insurance schemes after this date, though, is not yet fully clear.

Germany remains the strongest opponent of the plan. Its banks are in general in good shape and it fears moral hazard of some Southern bankers – German banks could be forced to indirectly pay for a failure of a, say, Greek bank. The EC does its best to respond to this problem. Firstly, the EDIS plan is supervised by Vice-President Dombrovskis, a renowned fiscal hawk. Secondly, banks would only be able to sign up to EDIS if their home state adopted all the EU banking rules in full. And thirdly, the management of EDIS would be in the hands of the Single Resolution Board – chaired by a German at the moment. Also, individual banks´ contributions to EDIS would be based on their risk assessment. Banks with riskier assets would pay more than those with safer assets. The fund would cover all states whose banks are supervised by the Single Supervisory Mechanism – meaning all eurozone states and other states that want to get on board.

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