Deposit insurance vital: Lagarde

The euro zone should accept a higher level of bad loans in banks than the five percent suggested by France and Germany to start its common deposit insurance scheme and finish its banking union, IMF head Christine Lagarde has said.
“Everybody agrees that it (the euro zone deposit insurance scheme) is indispensable,” she told a news conference.

“The whole issue is an issue of timing. Do we move forward without having finished the cleaning up job or do we want to wait until the non-performing loans are down to five percent limit as opposed to the 14 percent amount that we are seeing at the moment,” she said.

“Our sense is that it should be sooner rather than later because that reduction of NPLs might take quite a bit of time,” she said.

She was referring to the stalled talks on the launch of the European Deposit Insurance Scheme (EDIS). France and Germany proposed recently that risks in banks, represented by the level of ad loans, should first be reduced to five percent of all lending before the project is launched.