Berlin. For seven years, the complex issue of the further development of the banking union has been a matter of debate. Now, suddenly, things are moving: The common European Deposit Insurance Scheme (EDIS) is back on the European Parliament’s agenda. The European Parliament’s ECON Committee is due to vote on the proposed regulation as early as Thursday. A valid reason for this rush? There is none. However, it aligns with the preceding process.
Once again, someone tries to take the second step before the first. In 2015, the European Commission presented a proposal before the revised Deposit Guarantee Scheme Directive could even be implemented in the member countries. This initial rush has led to extremely controversial discussions until today. For example, it is completely unclear which elements the further development of the banking union should actually include and how they should be organized. These include, in particular, the regulatory treatment of government bonds, regulatory ring-fencing in host countries and the differences between national insolvency laws. A European deposit insurance system, which is only one discussed element of the banking union, must fit into all of this. Crucial questions that have not yet been resolved.
It is completely unclear which elements the further development of the banking union should actually include and how they should be organized.
The rapporteur at that time, Esther de Lange, did not manage to reach an agreement in the European Parliament. There were concerns that an immature EDIS could do more harm than good. The differences in positions also became apparent in June 2022, when the Eurogroup was unable to reach common understanding on the correct design of the banking union despite serious efforts by Paschal Donohoe. Since then, the objective has been to revise the crisis management for banks (CMDI). It was agreed that only on this basis it could be decided whether and in which form a European deposit protection scheme would be necessary at all.
The vote on CMDI in the European Parliament is scheduled for April 24; the Council’s position is still completely open. Instead of waiting for this process to be completed, the new EDIS rapporteur in the EP, Othmar Karas, has taken up the EDIS ball since the end of February and initiated a rash quick shot.
There is a considerable risk of repeating the mistake made by the European Commission in 2015 based on hastily-negotiated compromises. In particular, the proposal completely ignores the structural changes resulting from the review of the crisis management of banks. While CMDI is aimed at the resolution of banks, EDIS primarily serves to compensate depositors. This simply does not fit together, and there is a considerable risk that the European Parliament will adopt clashing positions on CMDI and EDIS. This mismatch would create severe uncertainty which does not only have a negative effect on financial stability, but also on the overall competitiveness of the banking sector and the European Union. This cannot be in the interests of those who are in favor of EDIS.
We therefore call upon the European parliamentarians to postpone the vote on EDIS.
Unlike many technical discussions, the protection of deposits is an issue that is perceived very closely by the European population, not only in Germany. A premature ‘compromise’, such as the one currently being pursued by ECON, could have far-reaching and unforeseeable consequences, especially at the present time — especially just before the upcoming European elections. Every member of the European Parliament should therefore examine very carefully whether they have really considered the implications of the ECON proposal. After all, a wrong decision on this important issue would not only have consequences for the future European Parliament, but also for the European Union as a whole.
We therefore urgently recommend not taking the second step before the first and risk stumbling. We therefore call upon the European parliamentarians to postpone the vote on EDIS.
We are all united by the same goal. But let’s take the time to find a viable way which considers all interests equally. And let us not forget: In the end, half-baked ideas only play into the hands of populists.
