Home News Finance News The ECB is pushing for steps towards the EU Deposit Guarantee Scheme

The ECB is pushing for steps towards the EU Deposit Guarantee Scheme

ECB deposit guarantee schemes

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European Central Bank President Mario Draghi told Eurozone ministers that the conditions for at least starting negotiations on the first phase of the general Deposit Guarantee Scheme in the European Union have already been met. His comments stem from a statement by Eurozone finance ministers that a rapid breakthrough in the banking union is not expected – the bank’s main plan for strengthening the banking sector.
“There has been a significant and sufficient reduction of risks that allows for the start of negotiations on the transition to the first phase of the Deposit Guarantee Scheme”, said the EU representative, quoting Mario Draghi’s words during a regular Eurogroup meeting.
Germany wants banks in the bloc to become healthier before a comprehensive Deposit Guarantee Scheme is built. This requires more risk reduction. Berlin fears the scheme will force German creditors to pay for losses to weaker banks in other countries.
Mario Draghi told ministers that risk mitigation measures should be pursued in any case, especially for the contraction of bad loans, which are still a burden for many banks, especially in southern Europe.
According to the October proposals of the European Commission, the pan-European scheme will only apply when national schemes have exhausted all of their available money.
In its first phase, the pan-European scheme will give loans to national Deposit Guarantee Schemes to cover 30% of its losses. This percentage will gradually increase to 90% by 2021.
In the second phase, the scheme will directly cover depositors’ losses, but only in part, and national Deposit Guarantee Schemes will continue to bear the burden of a banking crisis.