In Austria, savings deposits of up to 100,000 euros are protected, even if a bank goes bankrupt; the institutes have set up deposit protection funds for this purpose. Under the EU plan, some of this money could also be used in the future for bankruptcies of foreign banks, but if necessary, less would be left for our savers.
In concrete terms, the Economic Committee of the EU Parliament recently voted in favor of the establishment of a European deposit guarantee scheme. The respective national funds should therefore flow half of their capital into a common EU pot. If a bank in a Member State goes bankrupt and the funds collected there are not enough to compensate savers, the European fund should step in and make up the difference.
The idea is that even major bankruptcies in one country will not trigger a domino effect and endanger the financial system as a whole. In this way, Brussels wants to further its long-standing plans for a “banking union”. The danger, however, is that after a few such emergencies, the well-stocked Austrian deposit insurance system would be ‘cleaned out’ and domestic savers could no longer be fully compensated if a financial institution were to fail. But that’s not the only poison in the proposal.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
