Berlin. For seven years, the complex question of the future development of the banking union has been the subject of debate. And suddenly things are moving: the common European deposit insurance system (EDIS) is back on the agenda of the European Parliament. The European Parliament’s ECON committee is due to vote on the proposed regulation as early as Thursday. A valid reason for this rush? There are not any. However, this aligns with the previous process.
Once again, someone is trying to take the second step before the first. In 2015, the European Commission presented a proposal even before the revised directive on deposit guarantee schemes could be implemented in member countries. This initial haste has given rise to extremely controversial discussions to this day. For example, it is completely unclear which elements should actually include the future development of the banking union and how they should be organized. These include the regulatory treatment of government bonds, regulatory siloing in host countries, and differences in national insolvency laws. A European deposit insurance system, which is only one discussed element of the banking union, must fit into all this. Crucial questions that have not yet been resolved.
It is completely unclear what elements the further development of the banking union should actually include and how they should be organized.
The rapporteur at the time, Esther de Lange, failed to reach an agreement in the European Parliament. Some feared that an immature EDIS could do more harm than good. Divergent positions also became apparent in June 2022, when the Eurogroup failed to reach common agreement on the correct design of the banking union despite serious efforts by Paschal Donohoe. Since then, the objective has been to revise the crisis management system for banks (CMDI). It was agreed that only on this basis it would be possible to decide whether and in what form a European deposit protection system would really be necessary.
The vote on the CMDI in the European Parliament is scheduled for April 24; the Council’s position is still completely open. Instead of waiting for this process to be completed, the new EDIS rapporteur in the EP, Othmar Karas, took over the EDIS torch since the end of February and launched rapid and reckless action.
There is a considerable risk of repeating the mistake made by the European Commission in 2015 on the basis of hastily negotiated compromises. In particular, the proposal completely ignores the structural changes resulting from the review of banks’ crisis management. While the CMDI aims at the resolution of banks, the EDIS mainly serves to compensate depositors. This simply does not go together, and there is a considerable risk that the European Parliament will adopt contradictory positions on CMDI and EDIS. This mismatch would create serious uncertainty which would not only have a negative effect on financial stability, but also on the overall competitiveness of the banking sector and the European Union. This cannot be in the interest of those in favor of SEDIS.
We therefore call on European parliamentarians to postpone the vote on EDIS.
Contrary to many technical discussions, deposit protection is an issue that is viewed very closely by the European population, and not only in Germany. A premature “compromise”, such as that currently sought by ECON, could have far-reaching and unpredictable consequences, especially at present, particularly just before the next European elections. Each Member of the European Parliament should therefore consider very carefully whether they have actually taken into account the implications of the ECON proposal. After all, a wrong decision on this important issue would have consequences not only for the future European Parliament, but also for the European Union as a whole.
We therefore strongly recommend that you do not take the second step before the first at the risk of tripping. We therefore call on European parliamentarians to postpone the vote on EDIS.
We are all united by the same goal. But let’s take the time to find a viable solution that takes into account all interests equally. And let’s not forget: Ultimately, half-baked ideas only play into the hands of populists.
Politico
