Deposit protection in the EU: State of play and future prospects

Abstract

More than ten years have passed since the European Commission adopted Directive 94/19/EC on deposit guarantee schemes. The Directive laid the foundations for general harmonisation of deposit insurance across the European Union (EU) Member States (MSs), requiring them to legally set up deposit guarantee schemes by a specified deadline. Based on minimum harmonisation, the Directive left it to MSs to develop their own deposit insurance systems in terms of, for example, definition of eligible deposits, level of cover, types of funding mechanism, and calculation of members’ contributions. This autonomy has resulted in quite divergent evolution of deposit guarantee schemes and gives rise to a series of possible problems, which were the subject of the European Commission's review of the Directive in 2006. This paper overviews the current state of deposit insurance across the EU, highlights the main controversial issues that cause disparities in the implementation of deposit insurance between MSs (eg the definition of eligible deposits, the level of cover applied, the implementation of topping-up arrangements, the types of funding mechanism), and discusses the pros and cons of further harmonisation.