Better protection for your money

What was the biggest problem during the financial crisis? Confidence. Citizens have no trust in banks anymore. Therefore, the European Commission wants to protect bank deposits.

How did we get here?

Take an educated guess? Right, the crisis. As a consequence of all the turbulences at the financial markets the European Commission called for a Banking Union in 2012 in order to restore confidence. The Banking Union is based on three pillars

After measures were taken to get the first two pillars going the Commission is now working on the third pillar with this proposal (-> Video: What is the Banking Union?).


Why is this important for me?

Because the EU is trying to protect the money that is in your bank account(s) or will be there in the future. In case the bank goes bankrupt you shall not lose it (up to 100.00 Euro). In some Member States such a system already exists, in others it doesn't. Now the new scheme is supposed to fortify the eurozone as a whole  - regardless of your location - against future financial shocks.


What's the content?

Commission Vice-President Valdis Dombrovskis, responsible for the Euro, and Financial Stability Commissioner Jonathan Hill presented their proposal for a European Deposit Insurance Scheme (EDIS). The proposed system follows a gradual approach (graph):

This only applies to Member States whose currency is the Euro. The system shall not allow whoever did not fill up their own deposit guarantee scheme to live at the espense of others. It is supposed to be designed in a way that only those who have fulfilled their obligations will be able to benefit from it. The fund is filled by banks themselves contributing about €6.8 billion a year until the fund is filled. Based on data from 2011 the fund would reach around €43 billion. Also, riskier banks should contribute more than less risky banks.


What's happening with this legislation in the future?

The proposal is currently discussed in the Parliament's Committee for Economic and Monetary Affairs, which already presented a draft position and will soon vote on a position. However, the tricky part will be to find an agreement among European finance ministers in the Council: Germany is firmly opposing the proposal because it considers itself a very financially stable country and fears to be paying for the failure of banks in other EU countries. So Germany is resisting moving forward with the initiative until risks in the banking sector are reduced and proposing to change the legal basis for the new rules, which would give Germany a veto.


Related Bills:

Financial Transaction Tax: Making banks pay for the crisis

Too big to fail: Structural Reform of EU Banking Sector

Access to a Basic Bank Account for Everyone

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