13 November 2017

Don’t endanger the success of the deposit protection reform

  • Private banks call for a euro finance minister
  • ECB’s negative rate on deposits should be halved
  • Small banks need relief from bureaucracy

Deposit protection is highly important to German savers and should not be compromised by incalculable risks. The focus on retail depositors has made the Deposit Protection Fund fit for the future. “We should not endanger the successful reform of the Deposit Protection Fund,” said Hans-Walter Peters, President of the Association of German Banks and Spokesman for the Managing Partners of private bank Berenberg. “We are open to admitting new members, but potential risks must first be ring-fenced. On top of that, the rules set out in the fund’s by-laws need to be observed.”

Peters called for a decisive change of course by the European Central Bank (ECB). The economy in Europe was doing well and deflation risks had been dispelled. “There is a growing danger that low interest rates will channel capital in the wrong direction and generate fresh disruption. We are in favour of halving the ECB’s negative deposit rate without delay in order to reduce the burden on banks,” the association’s president added.

With respect to Europe, Peters urged that the eurozone be placed on a stable and sustainable footing. This required further reforms. The European Stability Mechanism (ESM) should be expanded to become a European Monetary Fund. The task of the fund would be to monitor the national budgets of member states and make recommendations to the Eurogroup on the basis of its findings. A full-time euro finance minister should head the fund. Further responsibilities would be chairing the Eurogroup and representing the interests of the euro states on currency matters.

Peters called for relief from unnecessary bureaucracy for small and medium-sized banks in Germany. These were hit particularly hard by complex regulation and the associated bureaucratic burdens. Peters suggested a substantial reduction in the numerous reporting requirements, for example. He said the time and costs involved were out of all proportion to the gain in financial stability.


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