The potential use of deposits to absorb losses or recapitalize failing banks merely provides incentives for national authorities to avoid intervention or add to the plethora of national exceptions that seek to bypass the framework. Policy makers must ask themselves whether the reluctance of national authorities to implement the European framework is an attempt to avoid short-term political costs or something more fundamental.
I think it is the latter. European citizens seek a safe asset – and that is a bank deposit. This is not just crucial for retail depositors but also for SMEs which contribute considerably to the backbone of the real economy. 3.