Almost fifteen years ago, the financial and economic crisis caused almost a trillion euros to “disappear” from the balance sheets of European banks. The recent bankruptcies of various US institutions such as Silicon Valley Bank and Swiss Credit Suisse, and the subsequent turbulence in the markets, once again sounded alarm bells and highlighted the need to strengthen banking’s arsenal of precautions. unity.
In the absence of the third column, joint deposit guarantee guarantee fund The European Commission, which has been blocked for years, said this Tuesday, deposit protection -Deposits up to 100.000 Euro will remain 100% guaranteed- and banking crisis management system medium and small organizations.
The proposal, adopted this Tuesday, is Brussels’ response to the decree last June. European groupafter confirming that it is insufficient Eurozone economy and finance ministers Agree on a work program to complete the banking union with the creation of European deposit guarantee program, blocked by Germany. Brussels in general, the EU financial institutions are well capitalizedIt is highly liquid and closely monitored, with a strong crisis management framework that has been strengthened in recent years.
However, experience has shown that many bankrupt medium and small banks It was managed with solutions outside the framework of the solution by resorting to taxpayers’ money instead of private safety nets (deposit guarantee systems and resolution funds) financed by bank resources or the sector. “We want to broaden the scope of the resolution to ensure that more failed banks can be resolved effectively, rather than being dealt with outside the established system in the EU,” said the Vice-President of the Commission. Valdis DombrovskisAgainst the background of a plan that proposes to facilitate the use of funds in crisis situations in order to protect depositors from loss-makers, prevent them from infecting other banks and reduce the negative impact on the economy.
100,000 deposits
What does not change is the level of coverage. 100,000 Euros per depositor and bank established directive on deposit guarantee schemes protected for all EU eligible depositors. innovation is that prolongs the protection also to cover public institutions (hospitals, schools, town halls) and customer funds deposited in certain client funds (investment companies, payment institutions, electronic money institutions). The proposal, which now needs to be negotiated by Ecofin, is also harmonize the protection of temporary high balances in bank accounts of more than 100,000 Euros linked to certain life events (such as inheritance or insurance claims).
European rules require troubled banks that are restructured or liquidated to cover at least 8% of their losses with their own funds. Commission, these bank mattresses It will remain responsible for covering losses in the first place, but when it is not sufficient and the option is less costly than failing the bank and paying off guaranteed deposits, authorities may turn to national deposit guarantee funds. The Single Solution Fund, which is expected to reach over 55,000 million euros in 2024 and will reach 80,000 million next year.
bridge mechanism
“The recommendations ensure that the failure of any bank, regardless of size or business model, can be managed regularly and consistently to avoid a domino effect across the banking system.” “protects financial stability, taxpayer money and depositors confidence”He added the VP of Community Executive on the creation of a “bridge mechanism” to transfer deposits—insured and uninsured—from a bankrupt bank to a sound bank.
“The first and main line of defense in this type of crisis should be a bank’s capacity to absorb losses” and therefore “authorities must ensure that banks have adequate absorption capacity.” The ‘bridge’ will only be used for banks that have exited the market and previously left for settlement, but national authorities will still be able to choose between settlement or national bankruptcy. “We do not pre-determine the list of banks subject to settlement or national bankruptcy proceedings. Authorities have a margin of decision in each case and use the best responsive and least costly solution,” said the financial services commissioner, Mairead MacGuinness.