[ParlTrack]

Proposal for a regulation
Recital 5 a (new)

(5a) In October 2016, the Commission published an effects analysis on EDIS following calls of the ECON rapporteur in June 2016 to study the impact of EDIS. The effects analysis uses simulations based on the SYMBOL model to assess the likely effects of three European risk pooling arrangements for bank deposits. The usefulness of the effects analysis is constrained by the following facts: (i) While the effects analysis compares three different European risk pooling arrangements with each other, it does not compare any of them with the natural benchmark of a complete set of fully functional, unpooled national deposit guarantee schemes. (ii) While one of the concerns over a common European deposit insurance is moral hazard and increased risk taking by banks, the SYMBOL model is - by construction - unable to evaluate any effects caused by higher moral hazard in a risk pooling arrangement. Neglecting moral hazard issues biases the results of the effects analysis in favour of EDIS. (iii) While one concern over a common European deposit insurance is an increased risk of bank runs in countries which have partially or fully depleted their own DGS or similar resources in aiding other countries' banking systems, the SYMBOL model is - by construction - unable to assess increased risks of bank runs after partial or full depletion of resources. Neglecting increased risks of bank runs biases the results of the effects analysis in favour of EDIS. (iv) While one of the justifications for a common European deposit insurance is the assertion of a better defence against asymmetric shocks, the effects analysis does not reveal if and how the SYMBOL model simulations are based on any degree of assumed asymmetry. No information is provided about the correlation structure of the shocks across European banks. However, if shocks are generated from the same distribution (i. e. with the same covariance of shocks) in each of the 100,000 simulations, than either they are set up completely symmetric or they impose just one particular type of asymmetry without giving any information, explanation and justification for this particular form. In the unlikely event that shocks are not generated from a constant distribution, changes in the distribution would necessarily be arbitrary and the number of simulations way too small. In any case the effects analysis is unsatisfactory as far as asymmetry of shocks is concerned. (v) While risk-weighted contributions to a common European deposit insurance are a key element of the EDIS proposal, the Commission's effects analysis does not study the competitive effects in an upcoming Capital Markets Union of higher contributions to EDIS by precisely those banks which are particularly vulnerable because they have riskier assets in their balance sheets. Nor does the effects analysis try to quantify if this cost-increasing effect would be partially or fully compensated by reduction in risk premia those banks have to pay to creditors. Neglecting cost and competition issues is a serious shortcoming of the effects analysis.

2016/12/20
Committee: ECON

Bernd LUCKE

Proposal for a regulation
Recital 5 b (new)

(5b) The effects analysis of EDIS published by the Commission has not been subject to any external and independent scientific referee process. Even without that, various shortcomings are apparent. Due to the importance of the matter, the effects analysis should not fall short of normal scientific standards, but should be submitted to the scrutiny of external and independent experts in a revised form which takes into account the deficiencies already identified. Moreover, before any further decisions on EDIS are taken, the effects analysis should be extended to cover the case of a complete set of fully functional, unpooled national deposit guarantee schemes as the natural benchmark for supranational risk pooling arrangements. Since the EDIS proposal is asserted to imply no long-run net transfers between the resources of different Member States, temporary liquidity support is the key issue in any comparison between purely national solutions and EDIS-type supranational risk-pooling. This has not been sufficiently dealt with in the Commission's proposal on EDIS or its effects analysis and should be done without delay. Various arrangements for temporary liquidity support are conceivable, including voluntary lending with discretionary decision-making by the boards of national deposit guarantee schemes which act contingent on DGS compliance of the receiving countries, size and scope of the shocks and the contagion effects of the crisis. Quite naturally, an extended and unbiased effects analysis should study the setup which is optimal in terms of timeliness, incentive compatibility (moral hazard reduction), subsidiarity, proportionality and ex-post protection for the liquidity provider. Clearly, this type of effects analysis should also be reviewed by a scientific referee process before any further decision on EDIS is taken.

2016/12/20
Committee: ECON

47 Amendments of Bernd LUCKE related to 2015/0270(COD)

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