EU Commission to put forward proposals for a deposit guarantee scheme

The European Commission will on Tuesday put forward proposals for a Deposit Guarantee Scheme (DGS) for the Eurozone. The cep, however, believes that here is no compelling case for such a Deposit Guarantee Scheme. According to economic theory, a Eurozone Deposit Guarantee Scheme may offer a comparative benefit over the existing deposit guarantee schemes. The prerequisites which have to be met in order to correct false incentives make it imperative to establish a scheme with “national compartments.” However, these compartments reduce the comparative advantage of a deposit guarantee scheme for the entire Eurozone. See also our cepInput.