The Belgian deposit guarantee scheme in a European perspective

During the recent financial crisis, the deposit guarantee scheme in Belgium – as in other European countries – played a role in preventing bank runs and restoring confidence : to that end, the intervention ceilings were raised substantially and the scope of the scheme was extended to include certain life insurance policies. Finally, the expansion of the system’s coverage had to be financed by a sharp increase in the contributions from financial institutions. First of all, that measure had a positive impact on the budget ; secondly, increased contributions may also boost the credibility of the deposit guarantee system. A recent European initiative proposes further ambitious reforms. Besides a better consumer protection, the European deposit guarantee schemes would be largely harmonised, thus also promoting European financial integration. Risk-weighted financing of the schemes should counteract moral hazard, benefiting financial stability. However, this proposal has yet to be approved by the European Parliament and the Council. Its impact ought to be assessed in the light of the broader package of measures aimed at making the financial system more resilient, such as the new prudential supervision structure, the Basel III proposal for stricter capital and liquidity requirements, and the possible new levies on the financial sector.