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Government: European deposit insurance requires a level playing field

Ministry of Finance
Publication date 11.2.2016 13.37
Press release

The Government considers that European deposit insurance may, under the right conditions, be in Finland’s interests. There are, however, big differences between countries in banking regulation and risks, so introducing the scheme is not yet justified on the present basis.

On 24 November 2015, the EU Commission issued a proposal for a regulation on the establishment of a European Deposit Insurance Scheme. A common system for deposit insurance would be introduced gradually in the Banking Union over the period 2017–24. The Commission’s objective is that confidence in deposit insurance would not vary according to the geographical location of banks.

Under the right conditions, in Finland's interests

The Government supports a strong Banking Union that is based on the responsibility of shareholders and creditors. The proposal for European deposit insurance should be considered as part of measures designed to improve the effectiveness of the Banking Union and to reduce risks arising to public finances from the banking sector.

Government considers that, under the right conditions, the establishment of a European Deposit Insurance Scheme could be in Finland’s interests. Finland’s banking system is highly concentrated, so risks cannot be effectively distributed among banks.

Differences between countries in banking sector regulation and risks are, however, so big that the benefits and costs of European deposit insurance would be unevenly distributed. The Government considers, therefore, that introducing European deposit insurance is not yet justified on the present basis.

First reduce the risks

In the Government’s view, European deposit insurance can be considered only when an equal foundation has been established for it.

This would require at least that banking regulation and supervision practices are standardised and that the risks of different countries’ banking sectors are reduced. In addition, it must be ensured that differences in funding levels of deposit insurance do not place Member States in unequal positions.

The Government considers that the schedule for European deposit insurance will depend on how quickly risks are successfully reduced. The Government, therefore, has reservations about the Commission’s targeted timetable, according to which a European Deposit Insurance System would start operating as early as 2017.

The Government sent a Union communication on the matter to Parliament on 11 February. A Union communication is used in EU matters involving an EU legislative proposal or other proposal falling within the competence of Parliament.

Union communication and other decision documents (in Finnish, Government website)

EU Commission press release (24.11.)


Jaakko Weuro, Ministerial Adviser, Ministry of Finance tel. +358 2955 30302, [email protected]