A new type of equity savings account becomes available on 1 January 2020, and many savers are potentially considering opening one. In this article, the Financial Stability Authority (FFSA) as the Finnish authority responsible for deposit guarantee calls attention to which part of the savings assets under an equity savings account contract falls within the scope of deposit guarantee.
Savings assets under an equity savings account contract comprise both the monetary payments made by the saver on the account and investment assets purchased with the money as well as any returns accrued on them. Monetary assets on an equity savings account are covered by deposit guarantee. The deposit guarantee does not cover investments made under the equity savings contract.
Equity savings account contracts may be provided to customers by banks and investment firms. However, equity savings accounts linked to an equity savings account contract can only be opened at a deposit bank. Hence, the monetary assets on equity savings accounts are held in a bank and therefore covered by the deposit guarantee.
Deposit guarantee covers monetary assets on an account at a deposit bank in the event of default of the deposit bank. The maximum amount covered by deposit guarantee is EUR 100,000. This includes each depositor's all deposits at the same bank, including monetary assets on an equity savings account. In contrast, equities do not affect the maximum coverage of deposit guarantee, since only monetary assets deposited on an account are covered.
The customer's claims on an investment firm in the event of default of the investment firm are protected by the Investor Compensation Fund. Protection provided by the Investor Compensation Fund differs from the deposit guarantee. The protection provided by the Investor Compensation Fund for equity savings account contracts is similar to the protection for other investment services.
More information on the deposit guarantee is available on the website of the Financial Stability Authority. More information on protection provided by the Investor Compensation Fund is available on the website of the Fund (in Finnish only).
