A key reason full European Deposit Insurance Scheme has faced political resistance is that:

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Question: A key reason full European Deposit Insurance Scheme has faced political resistance is that:

Option a: It would undermine the ECB’s supervisory independence. This argument centers on concerns about who controls bank supervision. In practice, EDIS is about guarantee funding for deposits, while the ECB’s supervisory role is separate and already established under the SSM framework. Critics often worry about fiscal transfers and moral hazard, not primarily about the loss of supervisory independence. So this option misattributes the main political friction to a sovereignty-related supervision issue rather than to financial risk-sharing and fiscal implications.

Option b: High-risk banking systems fear that mutualisation would require them to guarantee safer systems’ deposits. This statement reverses the dynamics: the concern is not that riskier systems would be forced to insure safer ones, but that financially stronger or lower-risk countries would end up bearing cross-country guarantees or losses in a mutualised scheme. The political debate is more about cross-border risk pooling and potential cross-subsidies than about punitive effects on high-risk banks themselves. Hence this option misframes the redistribution concern.

Option c: Low-risk countries are reluctant to mutualise banking risk with jurisdictions perceived as weaker. This captures a core political obstacle: the distribution of risk and potential costs in a mutualised scheme would mean wealthier, lower-risk countries could be asked to backstop weaker or higher-risk jurisdictions. The reluctance stems from fears of subsidising weaker systems and moral hazard, as well as concerns about fiscal exposure and cross-border solidarity without adequate safeguards. This aligns with real-world debates on EDIS.

Option d: The Single Resolution Board already fully mutualises all banking losses, making EDIS redundant. This claim is not accurate. The Single Resolution Board handles resolution costs within the banking union, but it does not fully mutualise all banking losses across the EU. EDIS and SRB operate in related but distinct domains, and EDIS would be a separate instrument for deposit guarantees, not a redundant mechanism. Thus this option inaccurately describes the current institutional arrangement.

In summary, option c accurately reflects the principal political concern driving resistance to a full mutualised European Deposit Insurance Scheme: the hesitation of low-risk member states to share banking risk with jurisdictions they view as weaker. The other options misstate the mechanisms, misattribute concerns, or falsely claim redundancy and completeness of existing arrangements.

A key reason full European Deposit Insurance Scheme has faced political resistance is that:

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