Deposit guarantee in Europe
The deposit guarantee schemes of EU Member States have been harmonised. Deposit guarantees are governed by the EU Deposit Guarantee Scheme Directive, which includes harmonised provisions concerning rapid payment, depositors and deposits to be protected as well as the maximum compensation amount of EUR 100,000.
Determination of applicable deposit guarantee scheme for a bank
Deposit guarantee schemes are statutory systems protecting deposits and maintained by the deposit bank's home country. Deposits within the scope of a scheme are covered regardless of the depositor's country of residence or nationality.
The deposit bank's permanent domicile determines the country whose deposit guarantee scheme the bank falls within. As regards deposit banks operating in several countries, the responsibilities and duties of each national deposit guarantee scheme are determined based on whether the deposit bank has a subsidiary or branch in the country, or whether it operates on a cross-border basis without a permanent establishment.
All Finnish deposit banks are covered by the Finnish deposit guarantee scheme.
- A Finnish deposit bank refers to a deposit bank which has been granted authorisation in Finland.
- A foreign deposit bank’s subsidiary operating in Finland is also considered a Finnish deposit bank from the perspective of deposit guarantee.
Foreign banks operating in Finland are covered by the deposit guarantee of their home country.
- Where a foreign bank has a branch in Finland, the Financial Stability Authority pays deposit guarantee compensations to the depositors of the branch on behalf of the deposit guarantee scheme of the deposit bank’s home country. In this context, a branch refers to a permanent establishment of a bank from another EEA country in Finland, from which the bank pursues its business activities in Finland.
- Where a foreign bank provides deposit services to Finland on a cross-border basis without a branch, or a depositor has a deposit in a foreign bank, the payment of deposit guarantee compensations will be made by the home country of the deposit bank. In this case, the Financial Stability Authority is not involved in the payment of the compensations.
Which deposit guarantee scheme is responsible for my deposit?
In Finland, the Financial Stability Authority is responsible for the deposit guarantee scheme. In Sweden, the authority responsible for the deposit guarantee scheme is Riksgälden, which also has information on deposit guarantees in Finnish on its website. The deposit guarantee schemes in Denmark, Norway and Estonia are the responsibility of Finansiel Stabilitet, Bankenes sikringsfond and Tagatisfond, respectively.
We maintain a list of deposit guarantee schemes applicable to banks operating in Finland. You can check the home country and deposit guarantee scheme applicable to your deposit bank on the list.
The payment of deposit guarantee compensation for foreign branches of banks
To make the payment of deposit guarantee compensation to depositors as quick and easy 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 country the branch is located in only carries out the reimbursement 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.