Banks warn EU: Stay away from deposit insurance

“The proposals go in the wrong direction,” says Willibald Cernko. The chairman of the banking division in the Chamber of Commerce and Erste Group boss is sounding the alarm because current EU plans provide for a change in the rules for bank restructuring and resolution, which could “weaken” the Austrian deposit insurance.

To explain: As a lesson from the financial crisis, the EU bank resolution regime was installed around nine years ago – with a pot of money available for the resolution of medium and large banks that collapse. This pot was also filled by medium-sized and large European banks and is worth around 190 billion euros. It hasn’t had to be used yet.

At the same time, Austria has national deposit protection systems that apply to smaller banks – the ESA (Einlagensicherung Austria) for Aktienbanken, Hypos and Volksbanks and separate deposit protection systems for the Raiffeisen banks and the savings banks. These are filled by the respective banks and guarantee that savers receive deposits of up to 100,000 euros if a bank collapses – which was the case four times (Sberbank, Commerzialbank Mattersburg, Autobank, AAB (formerly Meinl Bank)). “Our systems have proven themselves,” says Franz Rudorfer, head of the supervisory board of the ESA, which has around 800 million euros.

“Do not agree under any circumstances”

Some EU representatives and countries like Italy have been pushing for a complete standardization of the systems for some time. The current plans therefore stipulate, among other things, that the money from national deposit insurance schemes flows into the European settlement pot. This would then usually also be responsible for smaller banks. “As a result, deposit protection funds could be emptied by resolution authorities within a very short time without any payouts being made to savers,” says Raiffeisen Association General Secretary Johannes Rehulka. Cernko: The regulation according to which shareholders and large creditors of the bank should be liable first would also be undermined.

The EU Commission plans passed the responsible committee in the EU Parliament last week. Cernko is now appealing to the member states and Finance Minister Magnus Brunner “not to agree under any circumstances.”