2015/0270(COD) European deposit insurance scheme (EDIS)

Progress: Awaiting Parliament's position in 1st reading

Lead ECON KARAS Othmar (icon: EPP EPP) FERNÁNDEZ Jonás (icon: S&D S&D), KELLEHER Billy (icon: Renew Renew), PETER-HANSEN Kira Marie (icon: Verts/ALE Verts/ALE), ZANNI Marco (icon: ID ID), VAN OVERTVELDT Johan (icon: ECR ECR), PAPADIMOULIS Dimitrios (icon: GUE/NGL GUE/NGL)
Former Responsible Committee ECON
Committee Opinion BUDG
Committee Opinion EMPL
Committee Opinion IMCO
Committee Opinion REGI
Committee Opinion JURI
Committee Opinion AFCO
Former Committee Opinion BUDG
Former Committee Opinion EMPL
Former Committee Opinion IMCO
Former Committee Opinion REGI
Former Committee Opinion JURI
Former Committee Opinion AFCO Sylvie GOULARD (icon: ALDE ALDE)
Lead committee dossier:
Legal Basis:
TFEU 114


   EP - Committee report tabled for plenary, 1st reading/single reading
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   EP - Vote in committee, 1st reading
   EP - Amendments tabled in committee
   EP - Committee draft report
   EP - KARAS Othmar (EPP) appointed as rapporteur in ECON
   EP - Committee referral announced in Parliament, 1st reading
   CSL - Debate in Council
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   IT_CHAMBER - Contribution
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   CofR - Committee of the Regions: opinion
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   RO_CHAMBER - Contribution
   CZ_SENATE - Contribution
   ECB - European Central Bank: opinion, guideline, report

EUROPEAN CENTRAL BANK OPINION OF THE EUROPEAN CENTRAL BANK on a proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014 in order to establish a European Deposit Insurance Scheme.

Overall, the ECB:

fully shares the Commission's view that a single system of deposit protection is the necessary third pillar of the Banking Union and that it is needed to further enhance depositor protection and to underpin financial stability, thus contributing to the deepening of Economic and Monetary Union (EMU); welcomes the fact that the proposed regulation puts in place a gradual process of increasing the mutual insurance of participating DGSs in order to finally achieve a uniform system of deposit insurance that limits the link between a bank and its home sovereign; welcomes the fact that the proposed regulation sets a clear roadmap and timeline with clearly defined and limited transitional steps towards a fully-fledged EDIS.

The ECB also supports all other risk reduction measures in the banking sector, in addition to the creation of European Deposit Insurance Scheme (EDIS), as recommended by the Commission in its Communication " Towards the completion of the Banking Union ". In this context, it emphasises the importance of the full and timely implementation of Directive 2014/49/EU of the European Parliament and of the Council as a necessary precondition to the EDIS.

The ECB states that a solution that makes the transition from one phase of EDIS to the next dependent on the progress with regard to risk reduction could cause delay. If such a conditional phasing-in of EDIS is supported, any milestones on risk-reduction would have to be precisely defined ex-ante, objectively verifiable, realistically achievable and legally linked to the transitions between the phases in the EDIS proposal. In order to ensure that EDIS is not postponed indefinitely, the list of milestones should include the most important elements that are needed to further strengthen the Banking Union.

The ECB makes a number of specific comments on the following issues:

Objective of the proposed regulation : the ECB considers it necessary to expressly clarify, within the text of the proposed regulation, that the EDIS also has the objective of ensuring the highest possible level of depositor protection across the Member States of the Banking Union.

Scope of the EDIS : the ECB welcomes the fact that the proposed regulation should apply to all DGSs that are officially recognised in the Member States participating in the Banking Union under Directive 2014/49/EU. However, all credit institutions with access to EDIS resources must be regulated and supervised on the basis of Regulation (EU) No 575/2013 of the European Parliament and of the Council and Directive 2013/36/EU of the European Parliament and of the Council. This is fully in line with the recommendation of the Five Presidents' Report that the EDIS's scope should coincide with that of the SSM and that the risk-based fees should be paid by all the participating banks in the Member States.

Governance of the EDIS : the ECB welcomes the fact that the EDIS will be administered by the Board. Resources for both the Single Resolution Fund (SRF) and the Deposit Insurance Fund (DIF) should be clearly earmarked for their respective purposes, specifically avoiding the risk that resources for deposit protection might be commingled and potentially ‘consumed’ for resolution purposes.

Minimising costs for liquidation and control over the use of the EDIS : resolution authorities should try to minimise resolution costs and avoid destruction of value, the authorities in charge of liquidation should also have the general objective of minimising liquidation costs, thereby also ensuring that losses for covered deposits, and consequently, the DGSs, are minimised. In order to achieve this goal, the authorities in charge of liquidation should be permitted to carve out the covered deposit book together with certain other assets of the failing credit institution and transfer them to a private sector purchaser.

It is also important that the Board has the possibility to exercise some control over the national liquidation process. It should be able to have a say in the liquidation proceeding if it is likely that EDIS resources will be needed.

Risk-based contributions : the ECB supports the fact that the proposed regulation introduces a methodology throughout the Banking Union for calculating risk-based contributions from the co-insurance stage and that it designates the Board to set each credit institution's contribution level relative to all other participating credit institutions.

An important issue to consider will be whether, and if so to what extent, the risk-based approach to determine the level of contributions should also reflect the likelihood to trigger deposit insurance for a credit institution, and especially the likelihood that it should be put into liquidation as opposed to resolution.

Use of resources : the ECB welcomes the fact that the proposed regulation requires the use of resources, not only for pay-outs, but also in the event of resolution occurring in any of the three stages of the EDIS. However, the proposed regulation needs to expressly address whether deposit balances above EUR 100 000, which are temporarily protected from 3 to 12 months according to the legislation of the Member State concerned, should be covered by EDIS.

Duty of the EDIS towards DGSs in both the partial and full insurance stages : the ECB states that at the full insurance stage, the proposed regulation should clearly stipulate a legal obligation for the EDIS or the DIF to meet all resource needs related to depositors' claims following an event notified by a national DGS. The same legal obligation, albeit limited to the specific share that is co-insured, must also apply to the obligations of the EDIS towards the DGSs during the co-insurance phase. This also confirms the need for a fiscally neutral public backstop for the EDIS. The length of time for the Board to take a decision on the available financial means should be reduced, since DGSs are expected to compensate depositors within seven working days.

Disqualification from coverage by the EDIS : the ECB supports the fact that the proposed regulation provides safeguards aimed to ensure that all DGSs comply with their respective obligations. Infringements triggering a disqualification should be established in a more precise way in order to enhance legal certainty. Other sanctions, including penalty payments, could be considered for lesser breaches. Furthermore, where a disqualification is decided, a proper mechanism needs to be in place to ensure that the overarching aim of ensuring the adequate protection of all guaranteed deposits is fully respected at any given time. The ECB suggests several solutions in this context.

Backstop arrangements : the ECB is of the view that a fiscally neutral common public backstop for the EDIS at the latest as of the full insurance stage is necessary to ensure a uniformly high level of confidence in deposit protection under all circumstances and to effectively weaken the bank/sovereign link at the national level. However, the proposed regulation does not provide such a measure.

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   ESC - Economic and Social Committee: opinion, report
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   PT_PARLIAMENT - Contribution
   EP - Committee referral announced in Parliament, 1st reading
   CSL - Debate in Council
   CSL - Council Meeting
   EC - Document attached to the procedure

This Communication, which accompanies the Commission’s legislative proposal to establish the European Deposit Insurance Scheme (EDIS), is placed in the broader context of completing the Banking Union and the necessary additional measures of risk sharing and risk reduction in the banking sector.

Completing Banking Union : the Banking Union was established primarily in response to the financial crisis that evolved into a sovereign debt crisis in particular in the euro area. The crisis was driven by the link between banks and their respective national sovereign.

To this end, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) – the first two pillars of the Banking Union – have been established. The SSM became operational in November 2014 and is already delivering independent and uniform prudential supervision. The SRM will be fully operational from January 2016, when contributions to the Single Resolution Fund (SRF) will also begin.

However, while some components of the Banking Union are already or will soon become operational, the overall construction is clearly incomplete. One of the missing elements, as underlined in the Five Presidents’ Report and set out in this Communication, is a common deposit insurance scheme.

The Commission therefore proposes a common deposit insurance scheme (EDIS) for Banking Union, based on a reinsurance approach that will be progressively converted to a full insurance scheme over a number of years.

EDIS would increase the resilience of the Banking Union against future financial crises by reducing the vulnerability of national deposit guarantee schemes to large local shocks and further reducing the link between banks and their home sovereign . In such circumstances, EDIS could help to reassure depositors across the Banking Union and so reduce the risk of bank runs and increase financial stability.

Bridging finance for the Single Resolution Fund (SRF) and provision for a common fiscal backstop : in the context of establishing Banking Union, Member States should also begin work to reinforce the agreed bridge-financing arrangements for the SRM and on developing a common fiscal backstop:

1) Bridging finance : bank contributions to the SRF will begin in 2016, but the SRF will not reach its steady state size of approximately EUR 55 billion until 2024. Contributions will be mutualised on a progressive basis over an eight-year period. These features, during the transition to full mutualisation, will limit the borrowing capacity of the SRF in the coming years.

To address the risk of inadequate SRF capacity, the participating Member States are discussing the establishment of national credit lines to support their respective compartments. Member States’ credit lines would be supporting a declining share of the total SRF over time. The Commission considers it essential, therefore, that Member States (i) take the necessary steps to put these national credit lines in place before 1 January 2016 when the Single Resolution Board becomes fully operational, (ii) begin discussion of a more robust mutualised credit line via the European Stability Mechanism (ESM).

2) A common fiscal backstop : even this extensive menu of prudential and crisis management measures cannot eliminate entirely the risk that public funding may be required to enhance the financial capacity of resolution funds. For this reason, Member States have agreed that the Banking Union requires access to an effective common fiscal backstop to be used as a last resort . Such a backstop would imply a temporary mutualisation of possible fiscal risk related to bank resolutions across the Banking Union. However, use of the backstop would be fiscally neutral in the medium term, as any public funds used would be reimbursed over time by the banks (through ex-post contributions to the SRF).

Risk reduction measures : the Commission considers that the risk sharing implied by these measures must be accompanied by measures to reduce risk in the banking sector by weakening the link between banks and their national sovereigns. From this point of view, the first priority is to ensure that Member States deliver full transposition of the Bank Recovery and Resolution Directive (BRRD) and the Deposit Guarantee Scheme Directive .

(DGSD). The Commission has begun infringement proceedings against several Member States. It has also called on Member States to ratify the Inter-Governmental Agreement on the SRF.

Furthermore, additional risk-reducing measures will be needed in parallel with work to establish EDIS:

to ensure that the SSM can function effectively, it is necessary to reduce national options and discretions in the application of prudential rules, e.g. in the Directive and Regulation on own funds ( CRD IV and CRR) that apply to banks under the responsibility of the SSM. Significant progress has been made in this respect; the harmonisation of national deposit guarantee schemes will need to advance in parallel with the establishment of EDIS; the Single Resolution Board must be enabled to operate as effectively as possible so that it might respond in a timely and effective manner in the event that a bank(s) is failing or likely to fail. In addition, the TLAC (total loss absorbing capacity) requirement has been developed at the international level by the Financial Stability Board. The Commission will bring forward a legislative proposal in 2016 so that TLAC can be implemented by the agreed deadline of 2019. The operation of the SRF should also begin smoothly; it is essential that the use of public funds to sustain a solvent and resilient banking sector be minimised and be available only as a last resort . To this end, there must be a consistent application of the bail-in rules under BRRD so as to ensure that the costs of resolving banks that are failing or likely to fail are borne primarily by their shareholders and creditors; as identified in the Commission’s action plan on building a capital markets union of 30 September 2015, there is a need for greater convergence in insolvency law and restructuring proceedings across Member States; lastly, a number of further targeted prudential measures addressing weaknesses identified should be put in place. These measures include the remaining elements of the regulatory framework agreed within the Basel Committee, and in particular measures to limit bank leverage, to assure stable bank funding and to improve the comparability of risk-weighted assets.

The Commission will work to ensure that further measures to reduce risk are taken in parallel with ongoing work to establish EDIS, including any necessary regulatory changes.

It will continue the dialogue on the overall package of EDIS and risk reduction measures with the European Parliament, Member States and all interested parties.

   EC - Legislative proposal published

PURPOSE: to establish a European Deposit Insurance Scheme (EDIS) as the third pillar of Banking Union.

PROPOSED ACT: Regulation of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with Council.

BACKGROUND: in 2012, the Commission called for a Banking Union that would place the banking sector on a more sound footing and restore confidence in the Euro. The Banking Union should be implemented by:

shifting supervision to the European level; establishing an integrated framework for bank crisis management and, setting up a common system for deposit protection .

While the establishment of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) has achieved the first two steps, a common system for deposit protection has not yet been established.

The Five Presidents' Report set out a clear plan for deepening Economic and Monetary Union (EMU), including steps to further limit risks to financial stability. For the single currency, a unified and fully integrated financial system is key for effective monetary policy transmission, adequate risk diversification across Member States and general confidence in the euro area banking system.

The Commission undertook in its follow-up Communication to put forward a legislative proposal before the end of 2015 on the first steps towards EDIS with a view to creating a more European system, disconnected from the sovereign, so that (i) financial stability is enhanced, (ii) citizens can be certain that the safety of their deposits does not depend on their geographical location, and (iii) sound banks are not penalised by their place of establishment.

IMPACT ASSESSMENT: a quantitative analysis has considered the effectiveness of a fully mutualised EDIS in coping with potential pay-outs. The analysis indicates that the number and size of banks for which the Deposit Insurance Fund could handle pay-outs increases significantly for all Member States under EDIS compared to national DGSs.

CONTENT: the proposal envisages the establishment of a European Deposit Insurance Scheme (EDIS) as the third pillar of Banking Union through an amendment of Regulation (EU) No 806/2014 (SRM Regulation). It builds on the existing framework of national DGSs as governed by la Directive 2014/49/EU (the DGS Directive). Depositors will continue to benefit from the same levels of protection (EUR 100 000).

Gradual evolution of EDIS : the proposed amendment to the SRM Regulation establishes EDIS in three successive stages. National DGGs would benefit from:

a reinsurance scheme for participating national DGSs in a first period of three years (Phase I), a co-insurance scheme for participating national DGSs in a second period of four years (Phase 2), and a full insurance scheme for participating national DGSs in the steady state (phase 3).

Management of the European Deposit Insurance Fund would be entrusted to the existing Single Resolution Board during the 3 phases. The Deposit Insurance Fund is part of EDIS. It would be filled by contributions owed and paid by banks directly to the Board and calculated and invoiced by participating DGSs.

EDIS applies to all DGSs that are officially recognised in a participating Member State and to all credit institutions affiliated to such schemes. The participating Member States are those whose currency is the euro and those other Member States that have established a close cooperation with the European Central Bank.

The different stages of EDIS: in all three stages, reinsurance, co-insurance and full insurance, EDIS would both provide funding, and cover losses of participating deposit guarantee schemes.

The funding provided by EDIS addresses the initial liquidity need of a DGS to compensate

Depositors within the pay out deadline set by the Directive (normally seven working days), but also to satisfy the request for contribution to a resolution procedure in time . The funding must be reimbursed by the participating DGS to the SRB.

EDIS, would, in all stages, also cover losses that the participating DGS ultimately incurs by compensating depositors or contributing to resolution.

The level of funding provided and the share of loss covered by EDIS increase in each stage:

in the reinsurance phase , EDIS would provide additional funds to a national system, but only up to a certain level (20% maximum of the participating DGS’s excess loss, the remaining 80% being covered by other sources of financing); in the co-insurance phase , the EDIS contribution would be 20% in the first year and increases each subsequent year by 20 percentage points, reaching 80% in the last year of co-insurance; following the co-insurance phase , EDIS will fully insure national DGS as of 2024.

Safeguards for coverage by EDIS : the proposal includes safeguards against incorrect or unwarranted access to EDIS by national DGS. A national DGS can only benefit from EDIS if its funds are being built up in line with a precise funding path and it otherwise complies with essential requirements under Union law. The Board can decide to disqualify a participating DGS from EDIS coverage by specific voting requirements.

BUDGETARY IMPLICATIONS: concerning its EDIS-related functions, the Board would be fully financed by administrative contributions from credit institutions affiliated to participating DGSs. In turn, this means that the EDIS-related functions will not necessitate a contribution from the EU budget.


1041 2015/0270(COD)
2016/12/09 AFCO 19 amendments...
source: 595.608
2016/12/20 ECON 251 amendments...
source: 595.742
2016/12/21 ECON 450 amendments...
source: 595.743
2024/03/13 ECON 321 amendments...