20th IGA annual conference: "The new deposit insurance – blessing or curse?"
Should the protection of savings deposits in the Eurozone be covered by a standard European deposit insurance in future, as planned by the European Commission? This question was the focus of the 20th annual conference of the International Institute of Alpine Cooperative Research on 11 November 2016 at the Hotel Terme Merano.
Representatives from Germany, Switzerland, Italy and Austria presented, first of all, the current savers protection schemes in their respective countries. Mr Claus Königs (Bavarian Cooperative Association), Mr Andreas Gmünder (University of Lucerne), Mr Robert Nicolussi (Raiffeisen Association South Tyrol) and IGA Chairman Mr Arnulf Perkounigg (former Director of the Raiffeisen Association Tyrol) were among the speakers.
Afterwards, the highly controversial European plan was debated: the European Commission wishes to incrementally lift the current national systems of deposit insurance to a European level by 2024. In favour of the plan, Mr Andreas Schneider, representative of the Commission, said that this third pillar of the banking union is conducive to a more stable system, if only due to the sheer size of a common protection fund.
Furthermore, the European Deposit Insurance System (EDIS) sets consistent standards for all citizens of the Eurozone. As is already the case now, deposits up to a value of 100,000 euros will be insured and payment, if necessary, will take place within seven days as standard. In order to guarantee the new Europe-wide insurance, the national deposit protection funds – which are currently only just being endowed and will eventually amount to 0.8 percent of the insured deposits – will be transferred to Brussels in three stages, firstly as reinsurance, then as coinsurance and finally as full insurance.
Schneider promised to proceed in a risk-oriented manner when calculating the contributions. The Commission representative admitted, however, that it is still to be confirmed how exactly this will happen. In any case, the fact that existing joint liability schemes lower the risk for banks must be taken into consideration. The Commission expert also made no secret of the fact that a consensus among the member states regarding EDIS has not yet been reached. While northern countries – Schneider mentioned Germany, France, the Netherlands and also Austria – are hesitant towards the proposal, Spain, Italy, Greece and Cyprus are in favour of the implementation taking place as quickly as possible.
Ms Theresia Theurl, Professor of Economics at the University of Münster, saw few benefits in the plan, which she made clear during her presentation. She described EDIS as a "regulatory robbery of banks", and painted a bleak picture of a transfer union. Ms Theurl argued that the necessary conditions for a communitarisation of insurance systems are just not present as of yet. There are still bad debts in the balance sheets of many banks, and there are also varying risks in the individual countries, which cannot be covered through a single premium.
Furthermore, proven national systems are not being considered enough in the Commission's proposal. And, for real crises, even the European fund with its planned 45 billion euros would be too small. As an alternative, she called for a mandatory European reinsurance, whereby the existing national deposit insurance systems would be the first to be held accountable in the event of a crisis.
This is, incidentally, similar to what the Dutch MEP Ms Esther de Lange would propose as a compromise. Recently, she threw a light version of EDIS into the debate. Her suggestion is to pay only a part of the monetary funds into the European "pot". And even this step should be tied to a number of conditions – for example, the creation of sufficient risk buffers in the banking system.
The concluding panel discussion with the speakers, led by Mr Paul Gasser, Director of the Raiffeisen Association South Tyrol, was also characterised by scepticism. The general thrust was that more subsidiarity, with due regard to regional banks with their low-risk business model, is required. This model still constitutes the best protection of client funds, said Mr Andreas Gmünder, researcher at the University of Lucerne. Claus Königs, stakeholder at the Bavarian Cooperative Association, stressed: "The voluntary institutional guarantee systems of cooperative banks act in a preventive manner and ensure that the compensation case does not occur in the first place."
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