ISSN 2330-717X

European Commission Eyes New Proposal To Unblock Deposit Insurance Scheme


By Jorge Valero 


(EurActiv) — The European Commission is considering tabling a new proposal on the European Deposit Insurance Scheme (EDIS) in a bid to break the long-running deadlock and complete the banking union, a Commission official has said.

The EU executive and national government’s have failed to agree on a common scheme to protect savers with up to €100,000 deposits since the proposal was first made in 2015. 

EU officials concede that substantial differences be national capitals must be addressed before the issue can be discussed by ministers again. 

EDIS is the third pillar of the banking union, together with the single supervision mechanism and a common system to resolve ailing banks.

Euro area leaders are expected to call once again for the completion of the banking union this week at a eurozone summit on 11 December.


Germany remains the main obstacle because it is wary of the risks present in the banks of some EU countries.

The significant reduction of ‘bad loans’ (or non-performing loans) to around 3% of the total volume was not enough to convince Berlin to drop its opposition to the EDIS.

A new proposal is “on the radar” because “we cannot allow this indecision to persist”, a Commission official said, though the official did not clarify when the new proposal would be made.

The bloc’s financial services commissioner, Mairead McGuinness, gave her “personal and political commitment” to try to unblock the EDIS during her confirmation hearing at the European Parliament in October.

She called on sceptics to seize “the window of opportunity” offered by a more stable banking system to move forward, given that “doing nothing is going backwards, and if we don’t act, we will repeat the past”, a reference to the 2007-2008 banking crisis.

The COVID-19 pandemic has forced businesses to close across Europe and risks increasing the volume of overdue loans in the banking system.

Previous attempts by the Commission to break the impasse on EDIS have failed. In October 2017, the EU executive mooted a gradual introduction of EDIS in two phases: a limited reinsurance system, followed by a co-insurance mechanism conditional on progress made in reducing risks. 

Hybrid model

In July 2018, the Austrian EU presidency proposed its own ‘hybrid model’ under which a central fund and national deposit guarantee schemes would coexist. The central fund would provide liquidity support to national schemes when they run out of money. If the central fund were depleted when an intervention is needed, the Single Resolution Board, on behalf of the central fund, would be able to borrow from national guarantee schemes through a mandatory lending mechanism.

However, the proposal has failed to unblock the discussion at technical level, as member states disagreed over its design, according to a document drafted by the German presidency, seen by EURACTIV.

“Some member states pointed out that the hybrid model could only be an interim stage on the way to establish a fully-fledged EDIS (with 100% loss coverage). Other member states argued that the hybrid model should not entail any mutualisation at all or loss sharing should be subject to clear conditions or political decisions,” the document reads. 

According to the Commission’s thinking, the ‘hybrid model’ should be seen only as a step toward a full European deposit insurance scheme to cover savers.

Last November, Germany signalled that it was ready to accept EDIS, as long as other issues were addressed in parallel. As part of the package, finance minister Olaf Scholz said the EU should reconsider its regulatory treatment of sovereign exposures. 

“The presidency acknowledged that member states’ views on the regulatory treatment of sovereign exposures remained divided,” the German presidency document said.

“The presidency also noted the need to assess the impact of the proposals on smaller markets and banks, including for non-euro area member states, and agreed that further analysis would be needed to inform future discussions.”


EurActiv publishes free, independent policy news and facilitates open policy debates in 12 languages.

Leave a Reply

Your email address will not be published.