Deposit guarantee in Europe
If you deposit money in a deposit bank based in an EU or EEA country*, your deposits are automatically and legally protected in the event of the bank’s insolvency through the national deposit guarantee scheme of the bank’s home country. In Finland, the national authority responsible for the deposit guarantee is the Financial Stability Authority.
The deposit guarantee is regulated by the EU Deposit Guarantee Schemes Directive, which harmonises, among other things, the payout period for compensation to seven working days and sets the maximum compensation amount at EUR 100,000.
Determination of applicable deposit guarantee scheme for a bank
The deposit guarantee is a statutory scheme maintained by the deposit bank’s home country and protects deposits regardless of the depositor’s residence or nationality.
The home country of the deposit bank determines which country’s deposit guarantee scheme the bank falls under. When a deposit bank operates in multiple countries, the responsibilities and roles between national deposit guarantee schemes in a compensation situation are determined based on whether the bank has a subsidiary, a branch, or operates from another country without a permanent establishment in the host country.
All Finnish deposit banks are covered by the Finnish deposit guarantee scheme.
- A Finnish deposit bank refers to a bank whose home country is Finland.
- A subsidiary of a foreign deposit bank operating in Finland is also considered a Finnish deposit bank in terms of deposit guarantee.
- In a compensation situation, the Financial Stability Authority pays deposit guarantee compensation to depositors in banks covered by the Finnish deposit guarantee scheme.
Foreign banks operating in Finland are covered by the deposit guarantee scheme of their home country.
- A foreign deposit bank refers to a bank whose home country is other than Finland.
- If a foreign bank has a branch in Finland, the Financial Stability Authority pays deposit guarantee compensation to the branch’s depositors on behalf of the deposit guarantee scheme of the bank’s home country. In this context, a branch refers to a permanent establishment in Finland of a bank from another EU or EEA country, from which the bank conducts business in Finland.
- If a foreign bank offers deposit services in Finland without a branch located in Finland, the deposit guarantee compensation is paid by the deposit bank’s home country in a compensation situation. In such cases, the Financial Stability Authority has no statutory role in the payment of compensation, meaning the depositor deals directly with the foreign deposit guarantee scheme.
Which deposit guarantee scheme protects my deposits?
In Finland, the deposit guarantee scheme is administered by the Financial Stability Authority. In Sweden, it is administered by Riksgälden, in Denmark by Finansiel Stabilitet, in Norway by Bankenes sikringsfond and in Estonia by Tagatisfond.
The Financial Stability Authority maintains a list of deposit guarantee schemes applicable to banks operating in Finland. You can check the home country and deposit guarantee scheme applicable to the bank in quesition on the list.
Verify which national deposit guarantee scheme covers your bank
The payment of deposit guarantee compensation for foreign branches of banks
To make the payment of deposit guarantee compensation to depositors as easy and quick as possible, the deposit guarantee scheme in the country the branch is located in pays deposit guarantee compensation on behalf of the deposit guarantee scheme of the bank’s home country. In these cases, the deposit guarantee scheme in the bank’s home country makes the decisions concerning deposit guarantee compensation and funds the compensation. The deposit guarantee scheme in the host country of the branch is responsible solely for the payment of the compensation.
The future of deposit guarantees in Europe
The provision of banking services is becoming increasingly international, but deposit guarantees must continue to protect depositors effectively in the future. The Financial Stability Authority is closely involved in the development of European deposit guarantees and related legislation through international cooperation in the working groups of the European Banking Authority (EBA), for example. The Authority also assists the Ministry of Finance in EU legislative projects concerning deposit guarantees.
The EU’s banking union is said to consist of three pillars, with deposit insurance being the third. The first two pillars – the Single Supervisory Mechanism and the Single Resolution Mechanism – are already operational. The third pillar – the European Deposit Insurance Scheme (EDIS) – has not been decided on yet. It remains a subject of wide-ranging discussions concerning issues such as how to finance the single deposit insurance scheme, how the responsibilities would be allocated and how the scheme’s administration would be organised.
If the banking union’s single deposit insurance scheme is implemented, the Financial Stability Authority will become part of EDIS. The objective of a single deposit insurance scheme is to protect depositors and deposits in all of the countries in the banking union in a more credible and consistent manner.
More information on the Financial Stability Authority’s international cooperation
Useful links related to this topic:
EU Deposit Guarantee Scheme Directive
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*The European Union (EU) consists of 27 member countries: Austria, Belgium, Bulgaria, Czech Republic, Croatia, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
The European Economic Area (EEA) is a Single Market area consisting of the above mentioned EU member countries together with Norway, Iceland and Liechtenstein.