After Lehman Brothers in the US, Northern Rock in the UK and the EuroZone debt crisis, the ‘deposit guarantee scheme’ (DGS) in the EU was improved to boost the saver’s confidence in the banking sector.
What is the level of deposit protection in the EU?
From the initial 20’000 EUR, the protection was first increased to 50’000 EUR in 2009 and then again up to 100.000 EUR in 2010.
A DGS-revision was set in place in 2014 to further improve the protection of deposits. Depositors should benefit from quicker pay-outs and a stronger safety net. The deadline for these rules adopting into national law was in July 2015. But 10 EU countries (among them Romania) have so far failed to do so.
Which deposits and depositors will be protected?
Deposits are covered per depositor per bank. So if you have more than 100’000 EUR on deposits and fearful, you might disperse your cash on several independent banks.
How quickly will depositors get their money back after a bank failure?
Currently, depositors must be able to access their funds within 20 working days after a bank failure (or, more precisely, after the determination by the competent authority or a judge that deposits are unavailable).
European Deposit Insurance Scheme
The European Commission has published a legislative proposal for a European Deposit Insurance Scheme (EDIS). For EU-States within the Banking Union, the implementation of a the DGS-revision from 2014 is a pre-condition for the future use of the European Deposit Insurance.
Banks would send a gradually-increasing share of their insurance contribution to EDIS, riskier banks will pay higher contributions than safer banks.
The EDIS would be developed over time and in three stages:
- re-insurance stage
- co-insurance stage
- full European system of deposit guarantees.
Repayment deadlines will be gradually reduced from 20 working days to 7 working days. This reduction will be made in three phases:
- 15 working days as from 1 January 2019,
- 10 working days as from 1 January 2021,
- 7 working days as from 1 January 2024.