Yesterday, the EU Council “adopted a directive raising guarantee levels and reducing payout delays in the event that deposits of a bank would become unavailable.” The new directive includes provisions:

  • Raising the coverage level to a minimum of €50,000 beginning June 30, 2009 (the current minimum is €20,000);
  • Further increasing the coverage level to €100,000 beginning December 31, 2010;
  • Reducing the payout delay following a bank's failure to 25 working days, consisting of five working days to establish that the bank has failed to repay deposits that are due and payable and 20 working days (subject to extension by 10 working days) to make the repayment. Currently, the corresponding periods are 21 working days and three months, subject to the possibility of two three-month extensions.

The stated purpose of the directive is to help restore confidence in the banking sector “by strengthening depositor protection through: drastically reducing the payout delays, eliminating co-insurance, increasing the coverage level … and enhancing cross border cooperation between the home Member State, where the bank is authorized, and the host Member State, where the foreign branch is located.”

Many European countries scrambled to expand deposit guarantees in October, raising competition concerns in the EU.