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EU bids to boost bank deposit guarantees

European regulators want banks to increase guarantees on depositor funds in a bid to avoid a repeat of the acrimony pitting EU hopeful Iceland against Britain and the Netherlands, the European Commission said Friday.

The commission is planning "to improve the financing of deposit guarantee schemes ... basically, the way the banks pay contributions to these schemes," said a spokeswoman for Financial Services Commissioner Michel Barnier.

"We want to assess the feasability of a pan-European deposit guarantee scheme," to replace a patchwork of national plans, Chantal Hughes underlined.

Commission experts have drawn up plans that could cut bank profits by 10 percent, forcing financial institutions to pay "on average three or five times more for the guarantee system, and in the long term devote two percent of deposits to security systems" for accounts, the Financial Times Deutschland said.

Moves to legislate will be brought forward before the summer, the spokeswoman said, although she refused to confirm the two percent figure.

The news comes after Iceland this week entered fresh negotiations with Britain and the Netherlands for billions of euros in compensation over the collapse of the Iceesave bank.

The compensation is for the two governments which have already compensated 320,000 British and Dutch savers who lost money in the collapse of the online bank. Iceland's parliament narrowly approved on December 31 the terms of a payout to London and The Hague, but Iceland's president refused to sign the bill and put the question to a referendum.

At present, European reserve funds which guarantee deposits amount to some 23 billion euros (31 billion dollars), the newspaper said.

"In 10 years, 128 billion euros would be pre-financed, and 43 billion more could be added later," it quoted an EU document as saying.

BRUSSELS, AFP

 

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