Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224831 
Year of Publication: 
2020
Citation: 
[Journal:] DIW Weekly Report [ISSN:] 2568-7697 [Volume:] 10 [Issue:] 32/33 [Publisher:] Deutsches Institut für Wirtschaftsforschung (DIW) [Place:] Berlin [Year:] 2020 [Pages:] 325-333
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
The European banking union has so far lacked its third pillar: a joint insurance fund for bank savings deposits. As the present study shows, this could be a major disadvantage in dealing with the economic impact of the corona pandemic. A scenario in which a wave of corporate insolvencies leads to loan and deposit losses reaching six percent over a year would over- whelm Germany's national deposit insurance scheme. Even if the government were to step in and guarantee all deposits, a European deposit insurance scheme (EDIS) would be by far the better option. With EDIS in place, private consumption would fall by 20 percent less and lending by around ten percent less than if the government were to initiate a bailout, which would also significantly increase public debt. From a German perspective, a swift introduction of EDIS would greatly increase risk-sharing. However, it is important to develop an efficient EDIS funding mechanism in order to minimize the burden on banks. Precautions should also be taken to prevent banks from taking greater risks as a result of EDIS being implemented.
Subjects: 
banking union
deposit insurance
risk-sharing
JEL: 
E61
F42
F45
G22
G28
Persistent Identifier of the first edition: 
Document Type: 
Article

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