EU plans for 100,000 euro bank deposit insurance causing controversy

EU’s Deposit Insurance System Under Threat: Raiffeisen Association Warns on Weakening Safeguards and Calls for Maintaining Current Limits

The Raiffeisen Association and Bank chairman Willi Cernko are raising the alarm over a possible weakening of the deposit protection system that has been in place for decades. This system ensures that failing banks are handled appropriately and that depositors are protected. They urge that the current deposit insurance amount of 100,000 euros per customer and bank be maintained to safeguard savers and maintain financial stability.

The Austrian Ministry of Finance acknowledges the need to strengthen the resilience of the banking sector at the EU level, but emphasizes that strict bail-in regulations must be upheld to ensure that creditors and owners bear the brunt of losses and costs. The Austrian deposit insurance system has proven successful in protecting secured savings deposits, a model that should continue to be followed.

However, recent developments in the EU Parliament threaten to undermine owner and creditor participation in insolvency cases by potentially expanding the use of deposit insurance funds. This could also remove preferential treatment for deposit protection, making it harder for banks to recover from losses. These changes are necessary to improve the resolution process for banks, especially smaller ones, and enhance EU resolution laws.

One proposal that is unlikely to materialize soon is a single EU deposit insurance pool where banks from different countries would contribute to cover bankruptcies across the EU. This idea faces political resistance due to concerns about cross-border financial obligations and sovereignty.

Overall, this debate highlights the complexities of balancing financial stability, creditor accountability, and depositor safeguards in an ever-changing regulatory landscape.

Leave a Reply

Analyst warns that Fed rate cut may negatively affect stock market outlook Previous post Artificial Intelligence Excitement Fuels Stock Market Rally, Not Anticipated Rate Cuts: Analyst warns of earnings risks
Laredo Health Department recommends getting vaccinated for respiratory illnesses Next post Protect Your Health: Stay Vigilant During Flu Season End, Get Vaccinated to Keep Yourself and Loved Ones Safe