Strengthening The Banking Union By Establishing The European Deposit Insurance Scheme

The global financial crisis has revealed that the EU regulatory system was inadequate and hasemphasized the need for updating the regulations applicable to the banking sector. The existing disparitieson regulations amongst the EU countries were one of the causes of spreading the crisis in Europe. For abetter integration of banking systems and for achieving a genuine Economic and Monetary Union (EMU),European institutions have proposed to reform the regulatory and banking supervision framework at theEU level and to harmonize it. In this sense it was created a unique set of rules, which covers the whole EUarea, and was established a Banking Union. This will reduce the risk to financial stability at the EU levelalso creating a level playing field within the EU banking market that will increase the transparency andconfidence in this market. Besides already established pillars of the banking union, the Single SupervisoryMechanism and the Single Resolution Mechanism, the European institutions have come up with a proposalfor setting up a European Deposit Insurance Scheme (EDIS), which would close the gap in the legalframework governing the banking union and would increase the consistency with regard to these twomechanisms. Considering the above-mentioned, this article has the purpose to present the main argumentsfor an EDIS, to identify the benefits and the challenges of this system.