June 21, 2018 / 6:10 PM / a year ago

Euro zone deposit insurance scheme needed soon: IMF's Lagarde

FILE PHOTO: International Monetary Fund (IMF) Managing Director Christine Lagarde speaks at the Foreign Policy annual Awards Dinner in Washington, U.S., June 13, 2018. REUTERS/Yuri Gripas

LUXEMBOURG (Reuters) - The euro zone should accept a higher level of bad loans in banks than the 5 percent suggested by France and Germany to start its common deposit insurance scheme and finish its banking union, IMF head Christine Lagarde said on Thursday.

“Everybody agrees that it (the euro zone deposit insurance scheme) is indispensable,” she told a news conference.

“The whole issue is an issue of timing. Do we move forward without having finished the cleaning up job or do we want to wait until the non-performing loans are down to 5 percent limit as opposed to the 14 percent amount that we are seeing at the moment,” she said.

“Our sense is that it should be sooner rather than later because that reduction of NPLs might take quite a bit of time,” she said.

She was referring to the stalled talks on the launch of the European Deposit Insurance Scheme (EDIS). France and Germany proposed on Tuesday that risks in banks, represented by the level of ad loans, should first be reduced to 5 percent of all lending before the project is launched.

Reporting By Jan Strupczewski and Francesco Guarascio

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