The European Commission has published a legislative proposal for a European Deposit Insurance Scheme (EDIS). The EDIS would be developed over time and in three stages: (i) a re-insurance stage; (ii) a co-insurance stage; and (iii) a full European system of deposit guarantees.

The EDIS would be administered by a Single Resolution and Deposit Insurance Board (the Board) which would be part of the Single Resolution Board. The Board would be the body entrusted with decision-making and monitoring and be given enforcement powers relating to the EDIS framework. A European Deposit Insurance Fund would be established to insure national deposit guarantee schemes (DGS). National DGS would remain in place and be part of the EDIS. They would retain an important role and be first in line to cover pay-outs in the re-insurance period. In the co-insurance period, coverage of deposits would be shared between the European Deposit Insurance Fund and the national DGS.

The three sequential stages of the EDIS would be:

• the re-insurance stage would apply for 3 years until 2020. In this stage, the EDIS would provide a specified amount of liquidity assistance and absorb a specified amount of the final loss of the national scheme in the event of a pay-out or resolution procedure. In order to limit moral hazard and avoid “first-mover advantages”, a DGS will only benefit from the EDIS in this stage if it has met its requirements and filled its national fund to the required level, and only if those funds have been fully depleted;
• the co-insurance stage would apply for four years until 2024. During this phase a national scheme would not have to be exhausted before accessing the EDIS. The EDIS would absorb a progressively larger share of any losses over the four year period in the event of a pay-out or resolution procedure. Access to the EDIS would continue to be dependent on compliance by national DGS with the required funding levels; and
• in the final stage, the EDIS would fully insure deposits and cover all liquidity needs and losses in the event of a pay-out or resolution procedure. Full insurance of depositors in the EU Banking Union would fall under the EDIS from 2024 onwards.

View A stronger Banking Union: New measures to reinforce deposit protection and further reduce banking risks, 24 November 2015

View A European Deposit Insurance Scheme (EDIS) – FAQs, 24 November 2015