The brakes have been slammed on plans to establish a common fund meant to protect bank depositors by the European Union.
Twenty eight EU countries had been negotiating the possible set up of a European deposit insurance scheme (EDIS) that could potentially cover deposits up to 100,000 euros (£77,061) across all participating countries. The idea had been proposed by the European Commission back in November last year with the idea that savers would receive better protection thanks to reduced costs for the banks making the financial system across the continent that little bit more stable.
However, now Reuters is reporting that the scheme will be reassessed. The newswire gained access to a document circulated among delegates urging the European Commission to reassess the financial impact of the European deposit insurance scheme and to look at alternative options.
One alternative option outlined would be a “mandatory lending” plan among national deposit insurance schemes – this would replace a single fund. This option, which has the support of Germany, would see national funds helping banks in other European states whenever a liquidity crisis affects deposits.
However, doubts have also been cast about its effectiveness – with an EU official reported to have stated that the “help is unlikely to be unconditional”. In this case there would be no backstop for depositors in the event of a banking crisis.
The Dutch presidency has proposed reintroducing national veto powers to set up the European deposit insurance scheme or one of its alternatives.
