2023-05-15 11:17:49
Taking a lesson from the recent banking turmoil in the US, ECB Vice President Luis de Guindos is pushing for cross-border protection of bank customers’ funds in Europe. “The crisis in the US regional banks has shaken us up: we have seen how market sentiment can change abruptly,” de Guindos told Italian daily Il Sole 24 Ore (Sunday) in an interview published by the European Central Bank.
Although the situation in Europe is different, it has been shown that social networks, for example, can contribute to a rapid rush to financial institutions. Therefore, a common European deposit insurance system (EDIS, European Deposit Insurance Scheme) is “absolutely necessary,” said de Guindos.
“An incomplete banking union could end up being one of the biggest vulnerabilities we have. In fact, I would say that the lack of EDIS is the biggest vulnerability for the European banking system. Not introducing it would be a grave mistake.”
For years, Europeans have been arguing about cross-border safeguarding of customer funds as the third pillar of the European banking union, alongside joint banking supervision and joint resolution of crisis institutions. There is resistance in Germany, where there are well-stocked pots for emergencies. Savings banks and cooperative banks fear that their money will be used to finance institutions in other countries that are in distress.
In the USA, three regional banks had collapsed since the beginning of March after enormous withdrawals of funds due to liquidity concerns. In Europe, Credit Suisse, which had previously had problems, was saved from collapse thanks to a state-organized emergency takeover by the larger UBS. A problem for the institutes: the rapidly increasing interest rates after years of zero and negative interest rates.
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