Abstract
The creation of deposit insurance systems in world practice has become a tool for solving problems of maintaining the stability of banking systems, increasing customer confidence in banks and other credit institutions, and preventing cases of mass withdrawal of deposits during economic crises. The paper aims to examine why such an important pillar of the banking union as the European Deposit Insurance Scheme (EDIS) has not yet been implemented. The deadlock in the EDIS negotiations is unprecedented, and the likelihood that the agreement towards this pillar will be reached is rather low. The main reason for its blocking is the existing differences of interests between the main actors, and as a consequence, it makes the progress towards the completion of this process impossible. This study attempts to structure these interests, and it seems that the necessary tool to help bring them together is the concept of moral hazard. The results obtained confirmed the hypothesis that the main barrier for EDIS introduction is the severe difference of interest between countries that can be potentially major contributors and those that hope to benefit from that. Moreover, one of the arguments for such a delay is that cross-border subsidization leads to the problem when the country with better economic indicators pays for the debts of weaker economies as the costs should be socialized.
Highlights
Among the components of the economic and monetary union, the creation of a banking union is perhaps the least controversial and enjoys the greatest support
The main purpose of this paper was to answer the following question: Why such an important pillar of the banking union as European Deposit Insurance Scheme (EDIS) has not yet been implemented? To answer this question, there was a need to disclose the concept of moral hazard and its existence within the deposit insurance framework
An analysis of the banking union structure and all its pillars was provided, which allowed assessing the EDIS delay form the perspective of different states
Summary
Among the components of the economic and monetary union, the creation of a banking union is perhaps the least controversial and enjoys the greatest support. The following achievements can be observed: The EU has two fully operational pillars, the first one is the Single Supervisory Mechanism (SSM), a new approach of banking supervision for Europe. It consists of the ECB and the national supervisory authorities of the member states, which provide consistent supervision based on knowledge-sharing path and with the aim of ensuring the protection and sustainability of the European banking system in order to increase financial integration and stability in the Eurozone. The problem of delaying the European deposit insurance scheme will be considered in terms of moral risk theory
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