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EU plans for 100,000 euro deposit insurance at banks spark controversy

The Raiffeisen Association and the Bank Chairman, Willi Cernko, are raising concerns about potential changes to the deposit protection system that has been in place for years. They fear that failing banks will be handled differently in the future and that ultimately, it will be the customers who bear the costs in case of bankruptcy. The current deposit insurance amount of 100,000 euros per customer and bank must be maintained to protect savers and preserve financial market stability.

The Ministry of Finance is working on reassuring the public about efforts at the EU level to strengthen the banking sector. They emphasize that strict bail-in regulations should continue to require creditors and owners of failing banks to cover losses and costs. The Austrian deposit insurance system has been successful in the past and should continue to protect secured savings deposits in the future.

One concern raised by domestic bank representatives is a potential expansion in the use of deposit insurance funds as proposed by the EU Parliament. This could weaken owner and creditor participation in bank failures and leave the deposit insurance pot vulnerable. Additionally, preferential treatment of deposit protection in insolvency cases could be eliminated, requiring banks to contribute more to the deposit insurance fund.

The debate arises from a need to improve planned resolutions for large banks in Europe compared with liquidation procedures for smaller or medium-sized banks. The EU resolution law plans to expand this area, although political resistance due to concerns about cross-border financial responsibility remains an issue regarding EU-wide deposit insurance from a single pot.

In conclusion, stakeholders are working together to find a balanced approach that protects both savers and ensures financial stability while preserving depositors’ confidence in their savings accounts.

Overall, it is crucial that any changes made to deposit protection systems are done carefully so as not to jeopardize financial stability or negatively impact customer trust. It is essential that stakeholders work together with regulators at all levels of government to ensure that these systems remain robust and effective in protecting depositors’ funds while ensuring long-term sustainability of our financial institutions.

By Samantha Jones

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