4 November 2016

The German Banking Industry Committee welcome Esther de Lange’s report on the planned European Deposit Insurance Scheme (EDIS)

The report by Esther de Lange, MEP and member of the European People’s Party, on the European Deposit Insurance Scheme is basically a step in the right direction in the view of the German Banking Industry Committee (GBIC). GBIC welcomes the fact that Ms de Lange envisages no comprehensive mutualisation of deposit insurance funds and in the first phase only liquidity support. In the second phase, too, a participating deposit guarantee scheme would only be able to shift its losses partially – and not fully as under the Commission proposal – onto the other schemes. This mitigates, though does not eliminate, the problem inherent in the Commission proposal of mutualising bank risks, which to a large extent arise from national policies and specificities.

Some major concerns nevertheless remain: the rapporteur’s plan also envisages a central fund at European level fed by contributions from national deposit guarantee schemes. There is no legal basis in Union law for such a transfer of funds from national schemes. For this reason, the similarly functioning transfer of funds to the Single Resolution Fund is based on an intergovernmental agreement. It would seem inconsistent not to call for such an agreement here as well.

The preconditions proposed by Ms de Lange for the second phase, in which EDIS would also assume a portion of the losses, fall short of GBIC’s expectations, which go further. What is more, these conditions need not only to be agreed on, but also to be actually met ahead of phase 1. The mechanism of triggering the second phase after the entry into force of only generally described legal acts and on the basis of a Commission delegated act is inappropriate, in GBIC’s view. The German banks believe a new legislative procedure is needed for phase 2 on the basis of extensive consultations on various options and accompanied by an impact study.

A positive development is that the rapporteur has taken on board some of GBIC’s concerns. GBIC also welcomes the focus on the provision of liquidity, which is key to a functioning deposit insurance system. Mutual liquidity support among deposit guarantee schemes in Europe can be achieved without a central fund and unlimited joint liability risks, however.

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