Banking industry groups have asked for caution after the Committee on Economic and Monetary Affairs of the European parliament adopted yesterday a proposal to create the first stage of the European Deposit Insurance Scheme.
The scheme, one of the missing elements to complete the European banking union, aims to help break the vicious circle of bank and sovereign risk, decoupling deposit insurance from the solvency of any single country.
The concept of a Europe-wide deposit insurance scheme, first proposed by the European Commission in 2015, has since stalled because of concerns from some states about sharing risk. Meanwhile, the two other pillars of the banking union, common supervision and insolvency resolution, have been established.
Giovanni Sabatini, general manager of the Italian Banking Association, welcomed the progress towards completing the banking union but said that “such progress must be the result of an orderly, co-ordinated, and coherent regulatory process”.
“In this regard, we note that an agreement has not yet been reached on the crisis management package [CMDI], with which choices regarding the EDIS will necessarily need to be co-ordinated. We strongly hope that a gradual and orderly approach will be adopted, starting with concluding the legislative process concerning the CMDI before moving on to concluding the so-called third pillar of the banking union,” Sabatini told The Banker.
Meanwhile, a joint statement from the National Association of German Cooperative Banks and the German Savings Banks Association agreed, asking for the CMDI review to be completed first before meaningful discussions on EDIS can take place.
“There is an opportunity in the upcoming legislative term to appropriately prioritise the development of the banking union,” the statement read.
The two German associations rejected the proposed EDIS scheme because it “would separate liability from responsibility, leading institutions and financial service providers to consciously shift risks onto those operating with stable business models in the market”.
Earlier this week, the two associations had asked the European parliament’s committee to take the vote on the EDIS dossier off the agenda. Their previous statement noted that “the EDIS compromise contradicts the CMDI approach because the latter focuses on resolution, whereas the EDIS proposal assumes the standard scenario of insolvency”.
Gonzalo Gasós, senior director of prudential policy and supervision at the European Banking Federation, noted there is no mandate to present the proposal at the last plenary session of the parliament at the end of April.
“Therefore, the agreed text will serve as a starting point for the Econ Committee in its new configuration following the election process in the EU [in June]. It is a step taken by the parliament achieving sufficient majority support across parties.
“Having said that, the position of the other co-legislator, i.e. the council, remains unchanged. Discussions will therefore have to wait until the next legislative cycle,” he said.
