Ireland one of 15 EU countries not yet to adopt European deposit insurance scheme

A European deposit insurance scheme to cover losses up to €100,000 per customer in the event of a eurozone bank failing has been proposed by the European Commission, but Germany and Austria have signalled their disapproval.

Seen as a third pillar for banking union, it would not become fully operational until 2024 according to the plan put forward by commissioner Jonathan Hill and commission vice president Valdis Dombrovskis.

Mr Hill said: “The crisis revealed the weaknesses in the overall architecture of the single currency.

"Since then, we have put in place a single supervisor and a single resolution authority. Now we need to take steps towards a single deposit guarantee scheme.”

To overcome German reservations in particular that their well-funded national bank reserve fund would end up rescuing the victims of other banks, the commission has proposed a three-year transition period.

Creation of a European Deposit Insurance Scheme #EDIS: @JHillEU press conference at 14h CET https://t.co/P0BIU0PzXA pic.twitter.com/nAt1DtzkGx

— European Commission (@EU_Commission) November 24, 2015

This would begin in 2017 when losses from a failing bank would come mainly from national bank funds under a reinsurance format with an initial 20% from the European Deposit Insurance Scheme (EDIS).

From 2020, the share covered by the EDIS would increase until 2024 when the full sum of €55 bn estimated to meet 0.8% of all covered deposits by 2024 would then take over from national funds.

The money would be paid in by the banks, gradually moving their contributions to their national schemes to the deposit scheme.

To counter arguments of moral hazard from Berlin, the commission said that payouts would depend on member states complying with the directive.

Ireland is one of 15 countries that has not yet adopted the deposit guarantee directive into national law.