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The Political Economy of European Banking Union$
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David Howarth and Lucia Quaglia

Print publication date: 2016

Print ISBN-13: 9780198727927

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780198727927.001.0001

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Deposit Guarantee

Deposit Guarantee

(p.138) 7 Deposit Guarantee
The Political Economy of European Banking Union

David Howarth

Lucia Quaglia

Oxford University Press

This chapter first outlines the purpose and main types of Deposit Guarantee Scheme (DGS) and the main features of existing DGS in selected countries prior to the negotiations on the revised DGS directive and the proposal for a Common DGS in Banking Union, in order to understand national preferences on those matters. The chapter then traces the evolution of EU legislation on DGS. It is argued that the difficult harmonization of national DGS and the failure to agree the proposal to create a Common DGS were due to two main reasons. The first reason was the different configuration of existing national DGS, linked to the different configuration of national banking systems. Second, there was the perennial problem of moral hazard linked to the ‘perceived manageability’ of current and potential bank losses.

Keywords:   Deposit guarantee scheme, DGS, Common DGS, banking systems, moral hazard, EU legislation, bank losses

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