European deposit insurance or deposit destruction?

Forced unification of national deposit guarantee schemes reduces both the incentives to reduce the proportion of non-performing loans and the incentives to keep the proportion of non-performing loans to a minimum from the outset through more solid business models. These systematic misplaced incentives for a European deposit guarantee scheme could even lead to an increase in the transnational risk of banking crises. As a result, there is an increased risk that the deposits of European banks will be completely destroyed rather than secured by a European deposit guarantee.

This comment is available in German only.