The European Central Bank is pressing EU governments to rapidly finalize a common deposit insurance scheme, aiming to dismantle a major obstacle in European banking integration. Frankfurt policymakers argue that completing this pan-European safety net is necessary to level the playing field, which currently suffers from fragmentation hindering cross-border growth and mergers.

Resistance, particularly from members like Germany concerning cross-border risk sharing, has kept the project stalled for years, leaving depositors backed solely by national schemes up to €100,000. A unified fund, the ECB contends, offers greater stability, ensuring the ultimate fiscal backstop is less likely to be exhausted than disparate national guarantees.

Simultaneously, the central bank rejected industry pleas to ease existing regulatory guardrails, asserting that rules on internal risk-weighting and sour loan management are essential to prevent underestimating systemic risks. This defense of current capital requirements contrasts with the ECB’s renewed scrutiny over Additional Tier 1 hybrid debt.

Policymakers suggested the loss-absorbing capacity of AT1 instruments could be improved, even proposing complete abolition if replaced by costlier Common Equity Tier 1 capital. This pressure directly impacts how banks structure their balance sheets and manage regulatory compliance costs.