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A European Deposit Insurance and Resolution Fund

  • Schoenmaker, Dirk
  • Gros, Daniel

The eurozone is caught in a ‘diabolical loop’ in which weak domestic banking systems damage sovereign fiscal positions and conversely, in which risky sovereign positions disproportionately threaten domestic banking stability. A European-level banking system could go a long way towards breaking this unfortunate loop and stabilising the eurozone. This would require a European safety net for cross-border banks. This paper sketches the building blocks of a European Deposit Insurance Fund. We calculate that such a Fund would amount to €55 billion for the 35 largest European banks. This Fund could be created over ten years through risk-based deposit insurance premiums levied on the top 35 banks. Once fully up and running, the Fund could also deal with the resolution of one or more of these 35 banks. The Fund would then be turned into a European Deposit Insurance and Resolution Fund. The paper aims to promote debate among policy-makers, industry and academia.

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Paper provided by Centre for European Policy Studies in its series CEPS Papers with number 6918.

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Length: 12 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:eps:cepswp:6918
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  1. Maurice Obstfeld, 2011. "International Liquidity: The Fiscal Dimension," NBER Working Papers 17379, National Bureau of Economic Research, Inc.
  2. Benedicta Marzinotto & André Sapir & Guntram B. Wolff, 2011. "What kind of fiscal union?," Policy Briefs 646, Bruegel.
  3. Dirk Schoenmaker, 2011. "The Financial Trilemma," Tinbergen Institute Discussion Papers 11-019/2/DSF 7, Tinbergen Institute.
  4. repec:cup:cbooks:9781107025943 is not listed on IDEAS
  5. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
  6. Repullo, R., 1999. "Who Should Act as Lender of Last Resort? An Incomplete Contracts Model," Papers 9913, Centro de Estudios Monetarios Y Financieros-.
  7. Jean Dermine, 2000. "Bank Mergers in Europe: The Public Policy Issues," Journal of Common Market Studies, Wiley Blackwell, vol. 38(3), pages 409-425, 09.
  8. Hertig Gerard & Lee Ruben & McCahery Joseph A., 2010. "Empowering the ECB to Supervise Banks: A Choice-Based Approach," European Company and Financial Law Review, De Gruyter, vol. 7(2), pages 171-215, January.
  9. Gerhardt, Maria & Lannoo, Karel, 2011. "Options for reforming deposit protection schemes in the EU," ECRI Papers 4339, Centre for European Policy Studies.
  10. repec:cup:cbooks:9781107635920 is not listed on IDEAS
  11. María J. Nieto & Larry D. Wall, 2006. "Preconditions for a successful implementation of supervisors' prompt corrective action: Is there a case for a banking standard in the European Union?," FRB Atlanta Working Paper 2006-27, Federal Reserve Bank of Atlanta.
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