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Deposit guarantee schemes: non-legislative improvements enough - for now

Self-regulatory measures will suffice to improve deposit guarantee schemes for the time being, according to the Economic and Monetary Affairs Committee, though new legislation could be needed if differences between the schemes are shown to cause distortions of competition or problems in risk management.

In an own-initiative report adopted on Monday, the Committee backed the Commission’s view that the results of further research was needed before deciding whether any new legislation was needed. This research should cover cross-border risk and crisis management, as well as distortions of competition and unequal treatment between customers. If these analyses reveal problems, the question of harmonising these schemes in terms of their financing, competence and the role of supervisory authorities would need to be addressed.

Self-regulatory improvements
In any case, say MEPs in the committee, self-regulatory steps by the banking industry could already improve matters. They welcome the Commission’s dialogue with industry with this aim and suggest improvements should include better information for customers and faster reimbursement through more modern procedures, with a cross-border reimbursement taking no longer than a purely national one.

Managing a financial crisis together
The committee asks the Commission and EU finance ministers also to analyse the issue of burden-sharing before and after a potential crisis. It adds that it is necessary for procedures and interaction between all parties involved in financial crisis management to be determined in advance. Finally, it says principles should be developed for cross-border risk and crisis management which reduce the free-rider problem and the risk of moral hazard.

The committee was responding to a Commission paper reviewing the directive in place since 1994 under which Member States all had to put in place deposit protection schemes for bank customers.  The way there operate varies considerably between Member States.