EU Commission Considers Completion of the Banking Union

This debate is an indispensable part of achieving a full and deep Economic and Monetary Union (EMU), and in particular about bringing forward a proposal for a European Deposit Insurance Scheme (EDIS).

The recent Five Presidents’ Report set out a number of steps to further strengthen EMU. One of them is to move towards guaranteeing deposits at the European level with a European Deposit Insurance Scheme (EDIS). EDIS would mark an important step forward in terms of reinforcing financial stability by reducing the link between banks and sovereigns, and it would enhance confidence by protecting citizens’ deposits at the European level, independent of their bank’s location in the union. It would be based on a system of reinsurance, as a first step.

The Commission’s proposal, which will be made on 24 November, will be accompanied by a Communication which will set out other concrete measures to further reduce risks in the financial system.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, said: “Financial stability is a precondition for economic growth and convergence. We need to complete Banking Union as one of the pillars of a resilient and dynamic Economic and Monetary Union. Today’s discussion in the Commission demonstrates our commitment to propose first steps towards an EU Deposit Insurance Scheme already this year. In parallel, we will work on further reducing risks in the banking sector.”

Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union, said: “Everyone agrees that there is unfinished business on the Banking Union. Alongside supervision and resolution, we need an effective system for deposit guarantees. By gradually developing that at the European level, we can reinforce the confidence that depositors have in their banks, and further weaken the link between banks and their sovereigns.”

Financial stability and the confidence of citizens are indispensable preconditions for economic growth. A proposal for EDIS, as suggested by the Five Presidents’ Report, would consist of a reinsurance of national Deposit Guarantee Schemes (DGS) as a first step, moving towards a full European system of deposit guarantees in the longer term. While national DGS are already in place and provide for the protection of EUR 100.000 per person/per account per bank, they are not backed by a common European scheme.

EDIS would help to reinforce depositor confidence in banks across the Banking Union. Pressure on banks would be reduced and the loop between banks and Member States would be further weakened by helping to ensure that all national DGS would have sufficient funds available to weather periods of high stress.

The Commission emphasises the need for all Member States to implement fully the agreed rules of the Banking Union. On 24 November, together with the EDIS proposal, the Commission will also present concrete ideas about how risks can be further reduced in the financial system in general and in the Banking Union, in particular.