Across the EU, member states’ economies remain weak and citizens are still dealing with the fallout from the financial crisis. Needless to say, many people have lost confidence in the banking system.
In response, EU Commissioner Jonathan Hill has proposed a European Deposit Insurance Scheme (EDIS) for bank deposits, along with introducing new measures that will mitigate remaining risks in the banking sector and strengthen the banking union in the process.
The European Deposit Insurance Scheme is compulsory for all Eurozone members
“The crisis revealed the weaknesses in the overall architecture of the single currency,” said Hill in a statement. “Since then, we have put in place a single supervisor and a single resolution authority.
“Now we need to take steps towards a single deposit guarantee scheme. As we do so, step-by-step, we need to make sure that risk reduction goes hand in hand with risk sharing. That is what we are determined to deliver.”
The scheme will open in 2017. Over time, the EU Commission wishes to slowly increase the share of risk that that the scheme bears, with the intention of it eventually insuring national Deposit Guarantee Schemes in 2024, which will coincide with the phasing in of the Single Resolution Fund and DGS Directive. Both are essential components in formulating and finalising the EU Banking Union.
“Completing the Banking Union is essential for a resilient and prosperous Economic and Monetary Union,” said Vice President Valdis Dombrovskis, who is responsible for the Euro and Social Dialogue. “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.
“In parallel we need to take further measures to reduce risks in the banking system. We must weaken the link between banks and sovereigns, and put into practice the agreed rules whereby taxpayers should not be first in line to pay for failing banks.”
The European Deposit Insurance Scheme is compulsory for all Eurozone members and will remain open to all other member states.