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This paper aims to analyze the development of European Deposit Insurance (DI) and assess the recent development at the EU level to establish a European Deposit Insurance Scheme (EDIS) in the context of a more integrated financial framework: the Banking Union (BU).

The author uses literature review and empirical evidence to analyze the dynamic interaction among European governments in an effort to attract aggressive deposits with severe repercussion for financial stability.

The paper argues that a liquidity providing EDIS would render regulatory subsidy and rent-seeking behavior persisting by allowing national policies to be pursued with considerable discretionary power and in the context of increasing competition for deposits. This would run contrary to the BU objectives and constitute a major failure of the program.

The findings of the study can be helpful in understanding the DI policies pursued by European governments and their implications.

To the best of the authors’ knowledge, this is the first study that examines the interactions among European governments in pursuing DI policies and assesses the implications of EDIS.

Suggests that EU legislation has induced enormous changes in the structure of the European financial markets, and that financial institutions increasingly modify their strategies to cope with the new developments. Identifies which type of corporate strategy enhances organizational efficiency. The position developed is that, at the national level, a multipurpose institution (or “financial supermarket”, offering a range of financial services, such as banking, insurance, pensions, etc.), with quasiindependent entities, could serve this objective. At the European level, given the remaining obstacles to financial integration, the risks and the high costs of cross‐border mergers and acquisitions, alliances of financial institutions appear to be the appropriate response.