HELSINKI (Reuters) - Finland will not support the European Commission’s plans for a common deposit insurance scheme until European banking risks are significantly reduced, the government said on Friday.
The Commission in October presented member states with its plan to reduce bank risks after a decade-long economic crisis, and at the same time urged the EU states to share those risks.
The centerpiece of the plan is the introduction of a European Deposit Insurance Scheme (EDIS), which would cover savings up to 100,000 euros in case of bank failure by the end of 2018.
Stronger economies such as Germany have opposed the scheme because they are concerned that they would be backstopping weaker economies.
“The Finnish Government will be ready to proceed towards a European deposit insurance scheme...only when banking sector risks have been reduced and shared to a considerable extent and in a way that is tangible and verifiable,” the government said in a statement.
“The measures proposed by the European Commission are, for the most part, already in preparation and are not sufficient for reducing and sharing banking sector risks.”
Under the Commission proposal, EDIS would intervene only after national schemes had spent all the money they had available to shore up failing banks.
In an initial phase, EDIS would lend to national insurers only enough to cover 30 percent of their losses. That would increase in stages to 90 percent in 2021.
In a second phase, EDIS would directly cover depositors’ losses, but national insurance schemes would continue to bear the brunt of a banking crisis.
Reporting by Tuomas Forsell; editing by Emelia Sithole-Matarise