28 April 2016

Reuters: EU states' funds cover 1 percent of banks' insured deposits - Commission document

National insurance schemes for bank savers in the EU cover 1 percent of insured deposits, a European Commission document showed, with an average level above the required 0.8 percent but only if pooled in a single EU fund.

European Union states are negotiating the setting up of a European deposit insurance scheme (EDIS) that would cover individual deposits of up to 100,000 euros in all participating countries.

The scheme would complete the EU's flagship banking union project which was conceived to make the banking system safer after the financial crisis.

The deposit scheme is open to all EU members, but is only compulsory for those in the 19-member euro zone, with states such as Britain sitting out.

The plan, brought forward by the EU Commission last November, has been slowed down by German opposition, as Berlin fears that its wealthier deposit guarantee funds may be used to rescue savers in other countries.

The average available funding of national deposit insurance schemes currently covers 1 percent of insured deposits, the document said using confidential data provided by the 38 European national schemes. EU rules say that the minimum coverage level should be 0.8 percent of total insured deposits by 2024. The 1 percent figure shows that countries have already reached the minimum agreed targets, but only if taken all together.

The EU executive arm had said in previous documents that in one third of EU states deposit funds already covered more than 1 percent of insured deposits and in some countries more than 3 percent.

The Commission document lists the economic benefits of EDIS, concluding that a common insurance scheme "will improve deposit insurance cover for banks in all participating member states, without changing the overall level of funding."

In case of a broader banking crisis with multiple pay-outs necessary to protect deposits in more than one ailing lender, national schemes would fail to fully protect deposits in 2.5 percent of the cases, Commission calculations show, while if EDIS were in place only in 0.7 percent of the cases depositors may not be fully reimbursed.

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© Reuters