Savings Banks and cooperative banks: Decentralized Security Systems Must Not Be Restricted in Their Functionality

The ECON Committee of the European Parliament intends, in an expedited procedure, to communalize national deposit insurance systems and to forcibly include national institution protection systems without considering the significant structural implications associated with them. Savings Banks as well as cooperative banks in Germany call on the committee to leave the national institution protection systems, which protect nearly 100 million customers across the EU, untouched.

"Decentralized security systems such as those of Savings Banks and cooperative banks stabilize regional markets throughout Europe. They thereby ensure the performance of the financial system. The planned European Deposit Insurance Scheme (EDIS) jeopardizes this important function", says Marija Kolak, President of the National Association of German Cooperative Banks, ahead of the committee's deliberations next week. The trust of the citizens of the European Union in the banking market is too important to jeopardize it with hastily made decisions without thorough discussion, according to Kolak.

EDIS disregards the existing differences in the countries of the eurozone as well as different risk profiles among financial service providers and creates incorrect incentives. "Nothing is gained by homogenization. Instead, institutions and financial service providers without their own security system are tempted to shift burdens deliberately onto EDIS and take higher risks. This would open the door to moral hazard", says Ulrich Reuter, President of the German Savings Banks Association. Furthermore, a common European deposit insurance system would increase the risk of contagion between countries in times of crisis, thereby weakening the financial stability of the entire eurozone.

The two associations advocate for more unity within the EU – but in the right areas. The European Union, alongside China and the USA, is a driver of the global economy because it has made its diversity a source of strength. This strength derives considerable support from a financial system that accommodates regional peculiarities. Kolak states, "In Germany, it is the many small and medium-sized enterprises that form the backbone of the German economy. Their financing depends on cooperative banks and Savings Banks."

Decentralized deposit insurance systems act preventively and comprehensively protect the deposits of customers. Reuter adds, "They provide comprehensive prevention, thus ensuring that deposit insurance cases do not occur in the first place. In doing so, they serve depositors and institutions alike, providing double protection."