"For 90 years, the BVR protection scheme has been playing a crucial role in ensuring financial stability. No cooperative bank has ever become insolvent, nor has the need to compensate depositors ever arisen," states Marija Kolak, President of the BVR. She argues that the European Commission’s proposal largely ignores the special requirements that apply to a bank protection scheme recognized by law. In order to be recognized under EU law, such schemes must be able to deploy their funds quickly and effectively. “The European Commission’s proposed reforms would hamper this ability by adding a whole host of new requirements for the deployment of funds to the Deposit Guarantee Schemes Directive,” explains Kolak. This constitutes a clear contradiction that compromises the integrity of bank protection schemes substantially, at a time when the proper functioning of such schemes ought to be prioritized according to the statement adopted by the Eurogroup in June 2022. 

It seems to Kolak that it would only be a matter of time until a conflict arose between the expanded resolution mechanism and the bank protection schemes’ early intervention procedures for distressed banks. This is because the proposed reforms would significantly curb the time horizon during which bank protection schemes are permitted to implement measures, in favor of the resolution authorities. Substantial portions of the amendments proposed by the European Commission are deemed incompatible with the functioning of the cooperative institutional protection scheme. The BVR is therefore calling for recognized bank protection schemes to be fully exempted from the proposed reforms. In addition, the prerogative of bank protection schemes to remedy situations of distress arising at their member banks must be protected. 

“Otherwise, we will not see greater financial stability, but rather an erosion of depositors’ trust in our national protection schemes,” warns the President of the BVR. “And that really is the last thing we need right now.”