FRANKFURT: The head of Germany's Bundesbank has signalled that Germany won't back a common deposit guarantee scheme for euro zone savers, saying that banks' risks are still too entangled with their home countries.
Jens Weidmann said the fact that banks still owned many bonds of their home countries meant that any such pan-European shield for savers would mean Germany, as the richest country, would be exposed.
"The fact that member states have significant influence on the quality of banks' balance sheets speaks against hasty mutualisation of deposit protection in the euro zone," Weidmann said in remarks made in Rome.
He signalled that there would first need to be stricter rules on the capital that banks are required to hold to cover the risks from state bonds they own.
Currently banks are required to hold little capital to cover sovereign debt holdings which have long been regarded as "risk free" in regulatory terms, a view the euro zone debt crisis has shaken. The European Union's financial services chief, Jonathan Hill has ruled out proposing new bank capital rules for government bonds until there is first a deal among global regulators, which could take years.
Earlier in the week, the ECB had appealed for the introduction of common deposit protection. This would eventually replace the current country-by-country patchwork and help stop a repeat of the bank runs seen during the financial crisis.
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