June 1, 2012 / 11:58 AM / 8 years ago

German banks slam European deposit guarantee idea

FRANKFURT, June 1 (Reuters) - Germany’s banking associations voiced their opposition to a pan-European deposit guarantee scheme on Friday, pouring cold water on efforts to create such a safety net by the European Central Bank and the European Commission.

“In view of the current state of the financial sector in some euro zone states, it would lead to a spreading of risks to the detriment of the German financial institutes,” the joint statement by banking associations representing private sector banks, savings banks and cooperative banks said.

A better solution would be to pursue common standards and procedures which the European parliament is already working on, the banking associations said: “This would be a rapid and appropriate measure to head off the prospect of capital flight from weaker countries.”

Earlier this week EU Commission president Jose Manuel Barroso campaigned in favour of a banking union, joint financial supervision and bank deposit guarantees as elements of a deeper economic union.

While a year ago many EU member states were opposed to a collective bank deposit guarantee scheme, there was now much more support for the initiative, which was discussed at the last EU summit on May 23, Barroso said.

Earlier this month, European Central Bank policy maker Joerg Asmussen called for the creation of a European deposit insurance scheme and fellow ECB executive board member Peter Praet called for the creation of a “banking union.”

Reporting By Edward Taylor

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