One week after the European Union Economic and Finance Counsil (ECOFIN) endorsed an increase in member states’ deposit guarantee programs to a minimum of €50,000, the European Commission issued a statement today confirming that it had presented a proposal to the European Parliament and the Council of Ministers seeking to revise its present Directive on Deposit Guarantee Schemes (1994/19/EC). This proposal reinforces actions already taken by other European countries to increase their respective deposit insurance coverage limits to €100,000 or comparable levels following the emergency summit meeting held in Paris this past weekend among the EU Finance Ministers.
Under the present Directive, which has not been amended since 1994, Member States are only required to guarantee up to € 20,000 of bank deposits. The revisions would make the following changes:
- Increase the minimum level of coverage for deposits within one year from €20,000 to
€100,000, and during the interim period to €50,000;
- Eliminate the concept of co-insurance (where the depositor assumes part of the losses,
which had been a feature in a number of member states’ regimes). Under the proposed
revisions Member States will now be required to “ensure that the deposit is reimbursed
up to the coverage level”; and
- Reduce the time permitted for banks to pay depositors in the event of a bank failure
from three months to three days.
Mr. Charlie McCreevy, Internal Market and Services Commissioner, noted that “[i]creasing the minimum protection will strengthen Europeans’ confidence in the safety of their deposits. The new rules go hand in hand with the commitment made by EU Finance Ministers only one week ago, and are another sensible and proportionate response to the financial turmoil we are experiencing.” The proposal will be available to the public tomorrow.
In addition today the Commission released an overview of national rescue measures and deposit guarantee schemes. Since we last reported on recent changes in member state deposit guarantee coverage limits, the Commission has confirmed that the following countries intend to implement the following actions:
- Bulgaria – legislation pending to increase the deposit guarantee to up to €50,000.
- Cyprus – legislation pending to increase the deposit guarantee to up to €100,000.
- Czech Republic – legislation pending to increase the deposit guarantee to €50,000.
Customers of bankrupt banks will be compensated for 100% of their savings (change
- Hungary – political pledge by the government to guarantee 100% of deposits and to
increase deposit guarantee from HUF6m to HUF13m.
- Italy – approved legislation providing for government guarantees of bank debt and the
possibility to exchange government bonds for bank obligations.
- Lithuania – legislation pending to increase the deposit guarantee from €100,000