D.he national protection systems for the accounts of bank customers are for the chief supervisor of the European Central Bank (ECB), Andrea Enria, the greatest obstacle to a common banking market in the euro area. At a financial conference in Frankfurt on Wednesday, the Italian said he was no longer counting on a joint European deposit insurance (Edis) in his three-year term in office.
However, Enria believes that full deposit insurance in the euro zone is important. Because as long as there are national systems, cross-border banking groups in the euro area cannot operate as they would in a single home market. In addition, a European deposit insurance would prevent national governments from sealing off their domestic banking markets. This prevents the cross-border movement of capital and liquidity in the monetary union. Currently, the local subsidiaries of large banks have to meet national liquidity requirements. According to information from Enria, around 200 billion euros in liquid funds cannot therefore be transferred within such banking groups. This makes effective liquidity management more difficult.
The head of the ECB banking supervision has long been calling for a consolidation of the banks in the euro area in order to reduce the existing overcapacity and to form large institutions that can compete with the large American banks.
Rejection in Germany
But his demand for a European deposit insurance is met with rejection in Germany. Savings banks and Volksbanks in particular fear a weakening of the national security systems if these are also used in future for the risks of banks in Southern Europe. There, banks are struggling with high levels of default-endangered loans from ancient times. Should the corona pandemic lead to a severe recession, Enria expects a significant increase in bad loans to up to 1.4 trillion euros. It is currently around 500 billion euros.
The large private banks, especially Deutsche Bank, are currently campaigning for lower contributions to the European resolution fund (SRF). After the chairman of the board, Christian Sewing, called for this on Monday, the chief legal counsel Karen Kuder followed up on Wednesday. According to their information, the resolution fund currently comprises almost 42 billion euros. Originally, it was to be provided with 55 billion euros through contributions from the banks by the end of 2023. The fund should comprise one percent of the covered deposits, i.e. all accounts up to the legal guarantee of 100,000 euros per customer and bank.
Among other things, due to the high inflow of deposits in the Corona crisis by savers who want to be on the safe side, the target volume has increased to 65 billion euros. Because of the higher deposits, the contributions of the banks are now increasing. While it was 6.4 billion euros in 2016, it was 30 percent higher this year at 9.2 billion euros, said Kuder.