The European Commission is to present a proposal for a controversial reform of guarantee schemes for bank deposits despite opposition from EU member states. 

The proposal, which is currently being drafted, is expected to be presented in the first half of this year. The Commission plans include setting a minimum required contribution from banks to guarantee funds, sharply reducing the time it takes schemes to pay out, harmonising the scope of covered deposits, and possibly replacing national schemes with a single, EU-wide one.

A spokesperson for Michel Barnier, the European commissioner for the internal market, said that the current “fragmentation” of guarantee schemes in Europe was “not effective”. She said that national schemes should “at least” be networked and that “a single scheme offers even more advantages for banks and depositors”. She added that the Commission still had to work through “complex” legal issues before deciding whether to propose a pan-EU scheme.

But the direction of the Commission’s plans was last week challenged by a spokesman for the German finance ministry, who said that Germany would “push” to “maintain the current structure” of its deposit guarantee scheme. According to sources, other member states share German concerns about replacing national schemes with a single EU system.

‘Utopian’

The Commission’s internal market department held a seminar with national experts on 9 February to discuss the reforms.

A leaked paper from the meeting proposes, among other ideas, that banks should be required to place 2% of the deposits they hold into guarantee funds. The paper has been heavily criticised by the German banking industry, which described the proposal as “utopian”.

Barnier’s spokesperson said that the paper was a discussion document that had not received “political endorsement” from the Commission.

The current directive, originally adopted in 1994, was revised at speed in March 2009 in the midst of the financial crisis. The revision was largely limited to raising the minimum threshold of protected deposits from €20,000 to €50,000 (with a further increase to €100,000 to follow by the end of this year).

Ministers and MEPs agreed at the time that the Commission should evaluate the need for a deeper revision.

Guarantee schemes help-ed to prevent a run on the banks in the wake of the collapse of Lehman Brothers in September 2008. Under the schemes, member states promise to repay any savings people might lose if a bank goes bankrupt, up to a certain financial ceiling.