• Tue. May 28th, 2024

Austrian Banking Sector Faces Uncertainty over Deposit Protection Changes: Will Owners and Creditors Bear the Brunt of Insolvency Costs?

BySamantha Nguyen

Mar 27, 2024
EU plans for 100,000 euro deposit insurance at banks spark controversy

The Austrian banking sector is facing a major challenge in the form of potential changes to the deposit protection system. Bank chairman Willi Cernko and Johannes Rehulka, general secretary of the Raiffeisen Association, are raising concerns about how failing banks will be handled in the future and who will ultimately bear the costs in the event of bankruptcy.

The Ministry of Finance is working to reassure the public about efforts at the EU level to strengthen the banking sector. They emphasize the importance of maintaining strict bail-in regulations that require creditors and owners of failing banks to cover losses and costs. The Austrian deposit insurance system has been successful in the past and should continue to protect secured savings deposits in the future.

However, one of the main concerns raised by domestic bank representatives is a potential expansion in the use of deposit insurance funds as proposed by the EU Parliament. This could weaken owner and creditor participation in bank failures and leave the deposit insurance pot vulnerable. Additionally, there are calls for preferential treatment of deposit protection in insolvency cases to be eliminated, resulting in banks having to contribute more to the deposit insurance fund.

The debate stems from a need to improve planned resolutions for large banks in Europe, particularly in contrast to liquidations for smaller or medium-sized banks. The EU resolution law is set to expand in this area, although there are political objections due to concerns about cross-border financial responsibility.

Overall, stakeholders involved are working together to ensure that a robust and effective deposit protection system remains in place while protecting both savers and maintaining financial stability

By Samantha Nguyen

As a content writer at newsqwe.com, I am passionate about crafting engaging and informative articles that captivate our audience. With a background in journalism and a keen eye for detail, I strive to deliver content that is not only well-researched but also adds value to our readers' lives. From breaking news stories to in-depth features, I take pride in my ability to tell compelling stories that resonate with our diverse audience. When I'm not typing away at my keyboard, you can find me exploring new cafes, practicing yoga, or getting lost in a good book. I am thrilled to be a part of the newsqwe.com team and look forward to sharing my love for writing with all of our readers.

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