Deputy Prime Minister for Economy Ivan Mikloš said July 10 that the Deposit Protection Fund (FOV) should cover only 90% of depositors' funds, up to 30 times the average monthly wage in Slovakia (11,000 Slovak crowns).
The proposal goes against a Finance Ministry call for 100% coverage of deposits to a limit of 50 average monthly wages. Mikloš argued that the current 100% protection of bank deposits led to 'moral hazard' - people taking greater risks with unstable banks because they know their deposits are protected. He said that some banks were offering excessively high interest rates to attract clients, while the FOV had to pay compensation to their clients in the event of bankruptcy.
The last 18 months have seen a number of smaller banks in Slovakia collapse.
The Deposit Protection Fund was set up on July 1, 1996, to provide guarantees for private deposits in commercial banks in Slovakia.
