The EU Commission has unveiled new proposals for the single European Deposit Insurance Scheme (EDIS) that it is aiming to set up. For example, unlike in the Commission’s previous draft scheme the multi-stage transition to a single European insurance scheme is now no longer to take place automatically, but only after an assessment of possible NPLs in the banks‘ balance sheets. Generally speaking, more importance is attached to the reduction of legacy assets and other risks. In addition, the single European insurance scheme will provide limited subsidiary assistance where necessary only as liquidity support on a loan basis for national deposit guarantee schemes that are overstretched by losses.
With these changes the Commission aims to get the stalled deposit insurance negotiations going again in order to allow further progress to be made towards a European Banking Union. The Commission’s revised proposals are intended to respond to critics, but they fail to deal with the main problem: against the background of the serious risk imbalances in the national banking markets in Europe, EDIS harbors the danger that a mutualization of risk could lead to a transfer union in the absence of risk-commensurate contributions from the banks. An obligatory EU-wide deposit guarantee scheme is incapable of bridging the considerable risk differences between the national markets, which still remain largely fragmented, and is, therefore, still to be rejected.