Finnish Government takes sound critical position on European deposit insurance scheme

On 11 February, the Finnish Government finalised its position on the proposed European Deposit Insurance Scheme (EDIS), stating that its implementation would not be justified on current basis due to the notable differences in the regulation and risks of banking sectors. FFI Chief Economist Veli-Matti Mattila considers this a sensible position. According to Mattila, the EU Commission’s proposal for EDIS was entirely premature.

​“We should not take a single step further toward risk mutualisation in the Banking Union. It is too early to discuss EDIS in the EU because of the pronounced health differences between banking systems of euro area countries. The systematic screening and analysis of banking systems’ balance sheets must continue. Recent years’ financial and economic crises will still burden certain countries’ banks for a long time. The past few months’ events in some euro area countries are another tangible reminder of how many problems are still unresolved”, Mattila states.

Mattila points out that the Banking Union already includes a Single Resolution Fund, which will establish extensive joint liabilities between the banks of different countries. “The Finnish financial sector does not want to impose any further joint liabilities to banks and, ultimately, their customers.”

According to Mattila, the deposit guarantee schemes of individual Banking Union countries currently differ a lot with respect to the amount of funds they have collected from banks. Finland has been building its national deposit guarantee scheme since the late 1990s, and has already accumulated more than one billion euros. This significantly exceeds the target level required by the EU Deposit Guarantee Schemes Directive.

The Finnish Government supports the idea of a strong Banking Union that is based on the responsibility of shareholders and creditors. The proposal for a European Deposit Insurance Scheme should be regarded in the broader context of measures designed to improve the effectiveness of the Banking Union and to reduce risks arising to public finances from the banking sector.

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Financial and Prudential Regulation

Veli-Matti Mattila

Director, Chief Economist