2. Europeanisation of Supervision and Deposit Insurance 2.1 New European supervision structures for the financial markets The currently discussed new European supervisory system comprises two central components: (A) The European Systemic Risk Board(ESRB), responsible for macro-prudential supervision. (B) The European System of Financial Supervisors(ESFS), responsible for micro­prudential supervision(institute level). The establishment of a European Systemic Risk Board is especially innovative, satisfying the need for a macro-prudential supervisory component(i.e. taking into account explicit macroeconomic developments and intersectoral effects of institute-specific supervisory decisions). It is necessary, and in the interest of a stable integration process, for the newly created European supervisory regime to take adequate account of national and regional differences in banking markets. It would therefore be of concern if the European authorities were to acquire direct powers of intervention in the banks in question, above and beyond their power to set uniform standards of supervision. The right of the European Parliament to be involved in the development of supervisory standards must also be assured. The question of an emergency plan for coordinated intervention in the event of serious liquidity or solvency problems at internationally active banks has yet to be satisfactorily resolved. 2.2 The European Commission’s proposals for harmonising deposit guarantees A certain minimum degree of harmonisation is required for the functioning of an internal market in banking services. It makes sense to harmonise the definition of who is protected, the range of protected products and the compensation payout periods. But neither a pan­European safety net nor maximum limits are necessary for the functioning of an internal market. The measures taken thus far at the European level are sensible. Raising the minimum protection from€20,000 to€50,000(and later€100,000) helped to reassure depositors. However, the creation of a pan-European deposit guarantee scheme would be unnecessary and counterproductive. Yet another reform of the deposit guarantee directive within such a short space of time would provoke discussion about a suspected lack of viability of the existing systems and lead to a fundamental debate about the credibility of the new system. The German deposit guarantee arrangements especially have proven to be viable in systemic crises and enjoy great credibility among depositors. Above all, a pan-European deposit guarantee scheme lacks credibility because it cannot resolve the central question of burden sharing. A situation of widespread instability would potentially require a state guarantee for the deposit guarantee scheme. However, due to the fact that the European level does not possess any tax­raising powers such a guarantee can only be given by the nation-states. Furthermore, it is hard to imagine a national government giving a guarantee for a pan-European scheme. Therefore, this deposit guarantee scheme lacks fundamental credibility, ultimately rendering it useless. Moreover, it has yet to be clarified whether a pan-European deposit guarantee scheme is covered by existing powers at the EU level, especially in terms of the implicit fiscal burdens that would be involved for the member states. 4