Experts are warning of long delays in resolving differences on EU compensation scheme proposals after the European parliament commissioned a new study on funding methods to break a “Catch-22” deadlock.
The news raises questions over the FSA’s commitment to finalise its Financial Services Compensation Scheme reforms this year as they would have to take account of European rules.
The investor compensation scheme and the deposit guarantee scheme directives are deadlocked at the start of a second reading after the European Commission, Council and parliament failed to agree on compensation levels and whether schemes should be pre or post-funded. In a second reading, the European Council should bring forward fresh proposals.
Rickard Ydrenas policy adviser to Olle Schmidt, the MEP guiding the ICSD through parliament, says on both directives the council refuses to bring forward a proposal until the parliament clarifies its position while the parliament cannot publish its position before the council lays out a proposal. “It is a nightmare for us, we are stuck in Catch-22,” he says.
The European parliament has commissioned a study examining alternative schemes or funding methods, including private insurance.
Cicero Consulting Brussels analyst Tim Gieles says: “If the study finds a solution agreeable to everyone, it could kickstart negotiations. If not, you are looking at delays of at least a year.”
Centre for European Reform economics research fellow John Springford says: “I would not be surprised if it took 18 months before the three European institutions enter talks to come up with a final text.”