The discussion about EU-wide protection of bank customers from bankruptcies, as most recently in the Greensill case, is intensifying. German Volksbanks and savings banks are calling for exceptions.
She is in the spotlight again, not only because of the Greensill Bank compensation case, which cost the security systems of the private banking association 3.1 billion euros: The deposit insurance remains a dispute in Europe, but the Commission and the European Central Bank (ECB) are pulling together. They want to create a common European security system, in particular to stabilize southern European banks with high loads of bad loans.
But so far the German government has withstood these attempts and has always referred to risk reduction in bank balance sheets as a prerequisite. On Friday, the finance and economics ministers of the Eurogroup met to discuss the progress made towards completing the banking union. The associations of the Volks- and Raiffeisenbanken as well as the savings banks fear a new attempt from Brussels to introduce a common European deposit insurance.
EU guarantees only 100,000 euros per customer
In a joint declaration, the security institutions of the savings banks and Volksbanken, supported by sister institutions from Austria, Italy, Poland and Spain, called for exceptions. They want their institute guarantee systems to be given a special position in a communitized European deposit guarantee system. The associations of the savings banks and Volksbanken protect each member institution: If one is in a slump, it is caught within the association. This protects all deposits of every customer. On the other hand, a European deposit insurance scheme should initially protect the legally guaranteed deposits of up to 100,000 euros per customer and bank.
However, the banking supervisors of the European Central Bank (ECB) were dissatisfied with the savings banks’ security systems in the case of the Norddeutsche Landesbank (NordLB) because some regional savings bank associations were very reluctant to support the ailing Landesbank. The ECB has now set the savings banks a deadline of 2023 to reform their security systems with regard to clearer decision-making processes and faster action.
Attack from Brussels?
But Volksbanks and savings banks fear a new attack from Brussels. Because in January the EU Commission started the consultations to review the EU legal framework for crisis management and deposit insurance for banks. By the end of the year she wants to publish a legislative proposal that also includes a European deposit guarantee system. In a conversation with the “Börsen-Zeitung”, Gerhard Hofmann, a regulatory expert on the board of the Federal Association of People’s and Raiffeisen Banks (BVR), warned of a new European super authority that could then emerge. What was meant was the SRB bank resolution fund, which is headed by Elke König, President of the Bafin Financial Supervisory Authority from 2012 to 2015. It was only in February that she criticized the little progress made in creating a European deposit insurance scheme.
Hofmann believes that the Commission envisions a powerful authority responsible for banking supervision, resolution and deposit insurance. “For over 80 years, our institute protection has made a significant contribution to financial stability in Germany, which is precisely why it enjoys a high level of trust among citizens. This protection must not be called into question by a collective deposit guarantee system in Europe, ”warned Hofmann in the joint declaration of the institute guarantee systems.