Yesterday, Spain’s Ministry of Economy and Finance announced that the Council of Ministers had approved the creation of a €30 billion fund (which may be increased to €50 billion) to purchase assets from Spanish banks, of which between €10 billion and €30 billion is expected to be invested before year end. Unlike the U.S. Troubled Asset Relief Program, the Spanish program is intended to “have zero cost to the public,” as its investments will be limited to financial assets “of the highest quality,” and to be temporary, ceasing “when financial market conditions become normal.”

The Council of Ministers also approved an amendment to the Deposit Guarantee Fund to increase coverage from €20,000 to €100,000 per account, effective today. Spain’s actions mirror actions taken in Sweden, Spain, the U.K., Finland, and other countries to increase deposit insurance coverage to €100,000 or comparable levels, but stop well short of the unlimited deposit guarantees previously announced by Ireland, Germany, Greece and Denmark.

Following the announcement last Monday by German Chancellor Merkel that the German government was making a “political” commitment that no German depositors would suffer any losses, the ECOFIN Council on Tuesday announced an agreement that “that all Member States would, for an initial period of at least one year, provide deposit guarantee protection for individuals for an amount of at least 50,000 euros” to provide assurance to European depositors, and acknowledged that “many Member States determine to raise their minimum to 100,000 euros.”

Previously, on September 30, the Irish government announced that it was guaranteeing “all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt (lower tier II)” for six specific Irish banks. On October 6, the Irish Minister of Finance and the European Competition Commissioner met to discuss the Commissioner’s concerns about “possible market discrimination between different banks operating in Ireland.” On Thursday, the Irish Minister for Finance announced that it was the government’s “intention that the Guarantee scheme for banks announced last week would be available to certain banking subsidiaries in Ireland with a significant and broadbased footprint in the domestic economy,” including specifically Ulster Bank, First Active, Halifax Bank of Scotland, IIB Bank and Postbank. He indicated that enabling legislation was “in the advanced stages of drafting” and would be presented to the Dáil Éireann “as quickly as possible.”

As of Friday, it appears that the state of individual account deposit guarantees in various countries was as follows:

  • Austria – political pledge by government to guarantee 100% of deposits, but statutory maximum remains €20,000
  • Belgium – maximum of €100,000 (previously €20,000)
  • Canada – maximum of CAD 100,000 (no change)
  • Denmark – 100% of deposits (previously maximum of 300,000 krona, or €40,201)
  • Finland – maximum of €50,000 (previously €25,000)
  • France – €70,000 (no change)
  • Germany – political pledge by government to guarantee 100% of deposits, but statutory maximum remains €20,000
  • Greece – political pledge by government to guarantee 100% of deposits, but statutory maximum remains €20,000 (legislation pending to increase the maximum to €100,000)
  • Ireland – 100% of deposits (previously maximum of €20,000)
  • Italy – €101,291.38 (no change)
  • Luxembourg – maximum of €20,000 (no change)
  • Netherlands – maximum of €100,000 (previously 100% of first €20,000 and 90% of next €20,000)
  • Portugal – 100% of deposits (previously maximum of €25,000)
  • Spain – maximum of €100,000 (previously €20,000)
  • Sweden – maximum of SEK 500,000 (approximately$70,000, up from SEK 250,000) United Kingdom – maximum of £50,000 (up from £35,000) United States – maximum of $250,000 (up from $100,000)