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.
Which deposit guarantee scheme is responsible for my deposit?
The Deposit Guarantee Scheme Directive and the national legislation to implement it ensure that deposits with deposit banks are always covered by some deposit guarantee scheme in the EU. As a rule, the authority responsible for a bank’s deposit guarantees is the deposit guarantee scheme of the bank’s home country.
The deposit guarantee scheme of a bank’s home country is also responsible for the deposit guarantees of the depositors of the bank’s foreign branches. In addition, the deposit guarantee scheme of a bank’s home country is also responsible for the deposit guarantees of depositors who have made a deposit to the bank when it operates abroad without having a branch there (known as passporting services, such as Bank Norwegian when it operates in Finland).
Although deposit guarantees have been harmonised in the EU in many ways, there may be differences in deposit guarantee schemes between countries with regard to the method of reimbursement of deposit guarantee compensation, for example. There may also be differences between countries regarding the circumstances in which a depositor is eligible for compensation exceeding EUR 100,000.
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.
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.
More information on the Financial Stability Authority’s international cooperation is available here.
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