EP and Council had introduced a deposit-backing scheme, to protect deposit holders, as they were required to do by article 57 of the treaty. Germany argued that they failed to explain in the directive how the subsidiarity principle was not being infringed, as they were obliged to do under art. 190 EC treaty. ECJ did not accept this challenge, holding that there was adequate explanation.
ECJ: The explanation given was that it is important for assets to backed throughout the internal market, as the consequence of deposits becoming unavailable, and ensuing financial panic, could easily spread across borders. Therefore it was insufficient that member states develop their own rules about capital reserves. Good- makes economic sense