Potential Deposit Insurance System Weakened: Austrian Commercial Banks and Raiffeisen Association Issue Warning

Commercial banks and the Raiffeisen Association have issued a warning about the potential weakening of the deposit insurance system following a decision made in the EU Parliament. The concern arises from a ruling led by rapporteur Othmar Karas (ÖVP) which allows national deposit insurance funds to be used for resolution cases at an EU level. Specifically, half of the funds from national deposit protection funds in Austria, totaling two billion euros, could be transferred to an EU pot accessible by a European resolution authority if necessary.

The National Bank acknowledges the importance of being prepared for times of crisis but emphasizes the need for a coherent overall concept that significantly improves financial market stability before any decisions are made. The current proposal raises concerns about depositor protection as allowing European resolution authorities access to these funds could undermine the goal of safeguarding depositors’ savings according to Willi Cernko, bank chairman in the Austrian Economic Chamber (WKÖ).

Johannes Rehulka, Secretary General of the Raiffeisen Association, shares similar concerns and warns against conducting such broad experiments just before the EU elections. Maintaining financial market stability and preserving savers’ trust in functioning systems are paramount and should not be jeopardized without a clear necessity. The potential implications of these changes are significant and warrant careful consideration before any further action is taken.