The European Commission will overcome differences among member states to propose a common deposit-insurance system for the euro area by Dec. 31, commission president Jean-Claude Juncker said.
The plans will use national guarantee schemes as a starting point to develop a system of reinsurance, Juncker told the European Parliament in Strasbourg, France, on Wednesday. This would protect households and businesses while stopping short of full mutualization, he said.
“We all saw what happened in Greece during the summer,” he said. “Citizens were, understandably, taking out their savings since they had little trust and confidence in the financial capability of the state to support its banking system. This must change.”
Common deposit insurance is “the missing part of our banking union,” Juncker said. He was referring to efforts to overhaul supervision of lenders in the 19-nation eurozone and break the link between banking woes and sovereign debt struggles that were made in the wake of the crisis that spread from Greece. Details of the proposal will be unveiled in coming weeks, he said.
The EU stopped short of creating a joint system when it last revamped its deposit-insurance rules, due to opposition from Germany and other nations that wanted to keep their banking protection separate from their euro-area counterparts. After bailouts in Cyprus and Greece raised the prospect of losses on insured deposits, the commission and the European Central Bank called for strengthening the existing consumer protection system.
“A more common deposit-guarantee system is urgently needed, and the commission will present a legislative proposal on the first steps towards this before the end of the year,” Juncker said. “I am of course fully aware there is no consensus on this yet.”
Austrian Finance Minister Hans Joerg Schelling said on Tuesday that common deposit insurance is “a singular goal of some” rather than a shared priority. He said talks on the issue should move step by step and he rejected EU President Donald Tusk’s call to tackle the matter more speedily.
Tusk, a co-author with Juncker of the EU’s most recent report on economic and monetary union, said this week that common deposit insurance is possible without changing the EU’s treaties.