Director's Cut: Developing deposit insurance in Europe

In this week’s Director’s Cut of ‘The Sound of Economics’
podcast, Bruegel director Guntram Wolff talks with Nicolas Véron,
senior fellow at Bruegel, about the implementation of a European
Deposit Insurance Scheme (EDIS), one of the three pillars needed
for the completion of banking union.


Significant progress has been made on European banking
supervision and resolution schemes, but the debate on a common
framework for deposit insurance has remained stuck since the
first consistent proposal in 2012.


Member States are currently enjoying their own deposit insurance
system, an example of financial fragmentation through the various
national differentiations of policy instruments. The Cyprus case
highlights the flaws of a national-level system, based only on a
presumption of financial assistance between Member States in case
of bail-out.


The financial crisis has proven this is not sufficient. Referring
to his own research, Nicolas Véron, senior fellow at Bruegel,
recommends strengthening trust by setting up a fully integrated,
country-blind deposit insurance system to break the vicious
circle of the linkage between banks and sovereign debt.


In this episode of ‘The Sound of Economics’, Nicolas Véron joins
Bruegel director Guntram Wolff to debate the implementation and
advantages of such a common system, aiming in the long-term at
the completion of a harmonised banking union.