Deposit Insurance

Wary Germans Drag Their Feet

Vice-President for the Euro and Social Dialogue Valdis Dombrovskis delivers the College decisions during a press conference at the EU headquarters in Brussels on July 1, 2015. The eurozone can "weather" the effects of the debt crisis in Greece because of steps taken in recent years to make it stronger, the European Commission Vice-President for the euro Valdis Dombrovskis said today. AFP PHOTO/ JOHN THYS
Not seeing eye-to-eye. German Finance Minister Wolfgang Schäuble and E.U. Commission Vice President Valdis Dombrovskis.
  • Why it matters

    Why it matters

    The E.U. Commission’s plan for a European bank deposit insurance scheme to shield savers is part of the bloc’s banking union initiative to strengthen its financial sector — but Germany says Europe isn’t ready for it yet.

  • Facts


    • E.U. Commission President Jean-Claude Juncker wants draft legislation on the scheme to be ready by the end of this year.
    • Berlin wants to delay the scheme because it’s worried that some E.U. countries may end up using German money to compensate their savers.
    • E.U. Commission Vice President Valdis Dombrovskis told Handelsblatt that only countries with fully paid-up deposit insurance funds would come under the scheme.
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It’s the final building block in creating a common set of banking rules for the euro zone, one of the most ambitious E.U. projects since the creation of the common currency more than 15 years ago. It’s also proving the hardest to reach a deal on between the currency bloc’s 19 members.

Germany has long opposed efforts in Brussels to build a common deposit insurance scheme across the euro zone, a plan under which the deposits in any euro-zone bank would be guaranteed up to €100,000, or $112,000, by all euro zone banks from contributions made to national guarantee schemes.

In an interview with Handelsblatt, the European Union Commission’s vice president said Brussels is prepared to make concessions to Germany in the dispute over guaranteeing bank deposits – the largest remaining part of the E.U.’s “banking union” initiative designed to strengthen the financial sector in response to the 2008 crisis.

But whether the latest concessions go far enough for Germany and its skeptical finance minister, Wolfgang Schäuble, remains to be seen.

Germany, Europe’s largest economy and one of very few euro-zone countries which already has a deposit insurance scheme paid into by its banks, is concerned that its national funds could be used to guarantee the deposits of savers in other European countries.

European Commission Vice President Valdis Dombrovskis tried to allay those fears, telling Handelsblatt that Germany’s concerns would “of course be taken into account” and saying Germany would not be placed at a disadvantage if banks in other countries fail to fill up their national deposit insurance funds.

Countries that haven’t set up their own deposit insurance funds yet can’t be integrated into the European insurance system, Mr. Dombrovskis said.

“It won’t happen that the fully equipped funds will have to cover those countries that don’t have funds yet,” Mr. Dombrovskis told Handelsblatt. “A European reinsurance scheme of course can’t step in to compensate for deficits in the implementation of E.U. rules.”

Countries that haven’t set up their own deposit insurance funds yet can’t be integrated into the European insurance system, he said. He declined to say when the E.U. Commission will present its draft legislation for the scheme.

So far, the 19 euro zone countries have agreed on two other key elements of the banking union project, creating a single bank supervisor in the European Central Bank and creating a Single Resolution Mechanism (SRM) for winding down failed banks, with the costs to be covered from a fund filled by the banks themselves.

The Commission is due to submit a timetable this month for the next steps towards the integration in the euro zone, of which establishing deposit insurance is a key part. E.U. diplomats said the draft law will be ready before the end of this year, with the E.U. Commission President Jean-Claude Juncker pushing for its completion.

By law, bank deposits in the European Union are already insured up to €100,000, but for the moment it is up to national governments in the European Union to foot the bill if a bank fails. Mr. Juncker wants the deposit scheme to be a kind of E.U.-wide insurance system in which national funds would be committed to assist other member states if their banks’ funds get depleted after compensating savers.

In a clear reference to Berlin’s misgivings, Mr.  Dombrovskis made clear that this shared liability would only apply to national funds paid into by all nations’ respective banks.

Mr. Schäuble, Germany’s finance minister, opposes the rapid introduction of an insurance system. His deputy, Jens Spahn, recently criticized Mr. Juncker for hurrying to set up the scheme at a time when many European countries don’t have their own deposit insurance yet.

Mr. Spahn said that as long as banks’ problems hadn’t been solved in many countries, deposit insurance should not be the next step towards European integration.

Chancellor Angela Merkel’s conservatives and their junior coalition partner, the center-left Social Democrats, are working on a joint parliamentary motion to emphasize their opposition to creating an E.U. insurance scheme at this juncture.

The motion is likely to echo Mr. Schäuble’s position that a whole raft of other measures need to be implemented before talks over deposit insurance can begin.

Those steps include fully implementing the winding-down fund for failed banks and ensuring that banks have rid themselves of bad debts in the wake of the financial and euro-zone debt crises.

Germany is also demanding that government bonds in future be backed by capital, an idea opposed by southern European countries. Some observers have reasoned this is likely a ploy by Mr. Schäuble to delay the planned deposit insurance.


Ruth Berschens heads Handelsblatt’s Brussels office, leading coverage of European policy. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the authors: and

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