Which of the following outcomes is most directly attributable to the absence of a fully mutualised European Deposit Insurance Scheme (EDIS)?

Question

BlackTom AI · Accepted Answer

To tackle this question, I will assess what the absence of a fully mutualised European Deposit Insurance Scheme (EDIS) would imply for the European banking framework.
Option a: Existence of the bank-sovereign nexus. This is the correct linkage: without a fully mutualised EDIS, bank failures or stress can feed into sovereign risk and create a bank–sovereign doom loop, since national governments may be forced to backstop banks, reinforcing fiscal pressures.
Option b: Neutralisation of the bank–sovereign doom loop. This would not occur in the absence of a full EDIS; in fact, the opposite is likely: the doom loop remains or intensifies because a mutualised scheme is the tool intended to break that loop.
Option c: Disappearance of moral hazard concerns. The absence of a mutualised EDIS tends to maintain or aggravate moral hazard concerns, as banks and national authorities might expect backstops, rather than disciplined risk-taking being constrained by shared rules.
Option d: Enhanced counter-cyclical capacity of national deposit guarantee schemes. Without a mutualised EDIS, national schemes typically lack the coordinated, cross-border counter-cyclical capacity that a common Europe-wide framework would provide, so this outcome is unlikely to be achieved; instead, the capacity may be more fragmented and less effective at stabilising across the euro area.

SESS0026_25-26 MCQ TEST (30%) in-class 11th December 2025, 1pm

Which of the following outcomes is most directly attributable to the absence of a fully mutualised European Deposit Insurance Scheme (EDIS)?

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SESS0026_25-26 MCQ TEST (30%) in-class 11th December 2025, 1pm

Which of the following outcomes is most directly attributable to the absence of a fully mutualised European Deposit Insurance Scheme (EDIS)?

View Explanation

Log in for full answers

Similar Questions

Risk-based deposit insurance premiums help control moral hazard by:

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

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

Part 1Consider a failing bank. If the FDIC uses the payoff method LOADING... ​, a deposit of ​$320,000320,000 is worth a minimum of ​$[input]enter your response here . ​(Round your response to the nearest whole​ number.)

What is the drawback of deposit insurance facility?

Financial consolidation of banks with other financial services in recent years poses government safety net problems. The safety net intended for depository institutions may be

The primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks is

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Part 1Consider a failing bank. If the FDIC uses the payoff method LOADING... , a deposit of $320,000320,000 is worth a minimum of $[input]enter your response here . (Round your response to the nearest whole number.)