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Brussels, 17 December 2013
Commissioner Barnier welcomes agreement between the European Parliament and Member States on Deposit Guarantee Schemes
I welcome the political agreement reached today between the European Parliament and EU Member States on the new rules on Deposit Guarantee Schemes (DGS). Just a few days after the agreement on bank recovery and resolution (BRRD), we are taking another important step towards completing the single rulebook on crisis management for credit institutions in the EU.
These new rules will benefit all EU citizens: not only will their savings be better protected, but they will also have the choice of the best savings products available in any EU country without worrying about differences in the level of protection. The new Directive will require better information to be provided to depositors to ensure that they are aware of how their deposits are protected by the guarantee schemes.
The Directive will strengthen the existing system of national DGS to respond to the weaknesses that the financial crisis revealed. Depositors will continue to benefit from a guaranteed coverage of € 100 000 in case of bankruptcy, but access to the guaranteed amount will be easier and faster. Repayment deadlines will be gradually reduced from the current 20 working days to 7 working days in 2024.
For the first time since the introduction of DGS in 1994, there are financing requirements for DGS in the Directive. In principle, the target level for ex ante funds of DGS is 0.8% of covered deposits to be collected from banks over a 10-year period.
I would like to thank all the actors who have been involved in the negotiations which started back in September 2010 and which have not always been easy, in particular rapporteur Peter Simon and the shadow rapporteurs, the Council, and the Lithuanian Presidency (and all preceding Presidencies who have worked on the file) for this major achievement. I look forward to the European Parliament and Council confirming this political agreement in the forthcoming weeks.
Key elements of the recast Directive:
1. A universal guarantee of deposits up to € 100 000
The new Directive preserves the harmonised coverage level of € 100 000 per depositor and per bank. The guarantee will continue to be offered in the form of repayment in case of a bank’s liquidation where deposits would become unavailable.
2. Easier and faster access to repayment
Repayment deadlines will be gradually reduced from currently 20 working days to 7 working days. This reduction will be made in three phases:
While DGS will remain responsible for all banks authorised in their jurisdictions, they will also act as a “single point of contact” and manage, on behalf of the home DGS, the claims of depositors of local branches of banks opened in other EU Member States.
3. A robust financing regime
The recast confirms the fundamental principle underpinning DGS whereby it is banks that finance deposit guarantee schemes, and not the taxpayers. In addition, for the first time since the introduction of DGS in 1994, there are financing requirements for DGS in the Directive. In principle, the target level for ex ante funds of DGS is 0.8% of covered deposits to be paid by member banks (in case of highly concentrated banking sectors, the Commission may authorise a Member State to set a lower target level for its DGS, but not lower than 0.5% of covered deposits). A maximum of 30% of the funding can be made up of payment commitments. The target fund level must be reached within a 10-year period (which can be extended by 4 years if there is a substantial disbursement of DGS funds during the phasing-in period). In case of insufficient ex ante funds, DGS will collect immediate ex post contributions from the banking sector, and, as a last resort, they will have access to alternative funding arrangements such as loans from public or private third parties. There will also be a voluntary mechanism of mutual borrowing between DGS from different EU countries. Last but not least, bank contributions to DGS will reflect individual risk profiles, which means that more risky banks will have to pay more.
4. Better information for depositors
The new Directive improves depositor information to ensure that depositors are aware of the key aspects of protection of their deposits by DGS. For example, while depositing money at a bank, depositors will be obliged to countersign a standardised information sheet containing all relevant information about the coverage of the deposit by the responsible DGS. Banks will be obliged to inform their depositors about DGS protection of their deposits on the statements of account. There will also be some restrictions on advertising on deposit products, by limiting it to factual information, without referring to unlimited protection, etc.
The political agreement reached today is subject to technical finalisation and formal approval by the co-legislators.