Date: 23rd October 2017
In November 2015, the European Commission (EC) proposed a regulation for a common system within the Single Market to guarantee savings in case of a bank defaults. This system, the European Deposit Insurance Scheme (EDIS), is meant to complement the common banking supervision mechanism and the centralised bank resolution authority and constitutes the third pillar of the Banking Union (BU).
However, disagreement reigns so far. The main concerns issue from Member States’ Governments as EDIS supposes an equal distribution of risks (risk-sharing) and an equal distribution of losses (loss-pooling).
Initial EDIS Proposal explained
Pursuant to Directive 2014/49/EU, national Deposit Guarantee Schemes (DGS) are instituted. The DGS, which are made of banks’ contributions, are meant to reimburse ‘a limited amount to compensate depositors whose bank has failed’, in case of a default.
In case national DGSs run out of liquidity, the EDIS would come into force, providing:
phase I: a fixed amount of liquidity cover and a fixed amount of loss cover for national DGS;
phase II: a higher amount of liquidity and loss cover, even where the national DGS funds have not been exhausted;
phase III: EDIS replaces DGS and provides full cover for banks in default.