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The deposit protection system has been in place for years, and now, the Austrian Bank Chairman Willi Cernko and Johannes Rehulka, general secretary of the Raiffeisen Association, are raising concerns about potential changes to it. They fear that failing banks will be handled differently in the future and that ultimately, it will be the public who bears the costs of bank bankruptcy. They urge that the current deposit insurance amount of 100,000 euros per customer and bank must be maintained to protect savers and preserve financial stability.

The Ministry of Finance is working to reassure the public about efforts at the EU level to strengthen the banking sector. They emphasize that maintaining strict bail-in regulations is crucial to prevent taxpayer subsidies for banks’ failures. They stress that the Austrian deposit insurance system has been successful in protecting secured savings deposits in past cases.

One of the primary 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 deposit insurance vulnerable. Additionally, there is a possibility that preferential treatment for deposit protection in insolvency cases could be eliminated, resulting in banks having to contribute more to deposit insurance funds.

The debate stems from a need to improve planned resolutions for large banks in Europe while liquidating smaller or medium-sized banks. The EU resolution law is set to expand this area, although there are concerns about cross-border financial responsibility due to political resistance. Despite this challenge, stakeholders are working together to find a balanced approach that protects both savers and the banking sector.

In conclusion, it’s essential that we maintain a robust and effective deposit protection system that safeguards savings deposits while preserving financial stability. We must ensure that we have strict bail-in regulations in place so that taxpayers do not have to bear losses caused by failed banks. We must also find a balance between protecting savers’ interests while ensuring sustainable growth for banks across Europe.

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