May 19, 2024 11:29 pm
EU plans for 100,000 euro deposit insurance at banks spark controversy

In a joint statement, Willi Cernko, the chairman of Raiffeisen Bank and Johannes Rehulka, general secretary of the Raiffeisen Association, have raised concerns about potential changes to the deposit protection system. They are particularly worried about how failing banks will be handled in the future and who will ultimately bear the costs in case of bankruptcy.

To reassure the public, the Ministry of Finance has emphasized that efforts are being made at EU level to strengthen the banking sector. The Austrian deposit insurance system has been successful in the past and should continue to protect secured savings deposits in the future.

One of the main concerns raised by domestic bank representatives is a potential expansion in the use of deposit insurance funds as proposed by EU Parliament. This could weaken owner and creditor participation in bank failures and leave the deposit insurance pot vulnerable. Additionally, there is a possibility that preferential treatment of deposit protection in insolvency cases could be eliminated, resulting in banks having to contribute more to the deposit insurance fund.

The debate stems from a need to improve planned resolutions for large banks in Europe while liquidation for smaller or medium-sized banks is already well established under existing law. The EU resolution law is set to expand in this area, although there is political resistance due to concerns about cross-border financial responsibility.

The stakeholders involved are working together to address these challenges and find a balanced approach that protects both savers and the banking sector.

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