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The Macroeconomic Effects of a European Deposit (Re-) Insurance Scheme

Discussion Papers 1873, 67 S.

Marius Clemens, Stefan Gebauer, Tobias König


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While the first two pillars of the European Banking Union have been implemented, a European deposit insurance scheme (EDIS) is still not in place. To facilitate its introduction, recent proposals argue in favor of a reinsurance scheme. In this paper, we use a regime-switching open-economy DSGE model with bank default and bank-government linkages to assess the relative efficiency of such a scheme. We find that reinsurance by both a national fiscal backstop and EDIS is efficient in stabilizing the macro economy, even though welfare gains are slightly larger with EDIS and debt-to-GDP ratios rise under the fiscal reinsurance. We demonstrate that risk-weighted contributions to EDIS are welfare-beneficial for depositors and discuss trade-offs policy makers face during the implementation of EDIS. In a counterfactual exercise, we find that EDIS would have stabilized economic activity in Germany and the rest of the euro area just as well as a fiscal backing of insured deposits during the financial crisis. However, the debt-to-GDP ratio would have been lower with EDIS.

Tobias König

Ph.D. Student in the Macroeconomics Department

Marius Clemens

Research Associate

Stefan Gebauer

Research Associate

JEL-Classification: E61;F42;F45;G22;G28
Keywords: Banking Union, Deposit Insurance, Risk-Sharing
Frei zugängliche Version: (econstor)