EU, the bank plan ready
Guarantees up to 100,000 euros

Currently the protection reaches 20,000, but in Italy the deposits are guaranteed up to 103,000 euros. Furthermore, for the European Commission the repayment time, currently very diluted, should be set at seven days

BRUSSELS– A plan to protect the saver, which must not lose even one euro, or suffer minimal losses from the bank crash: this is the basic principle that inspires the legislation presented by the EU Internal Market Commissioner Michel Barnier, which strengthens the guarantees for holders of bank deposits and reduces the risk of losses for those who rely on an investment company. The package of measures also raises the level of consumer protection in the event of insolvency of an insurance company. Among the measures introduced, the raising to 100,000 euros of the minimum level of guarantees, greater speed for repayments (seven days), less administrative formalities and better information. In Italy the guarantee provided for by the law is in any case already higher, in fact it reaches € 103,291.38.

At the moment, however, the European guarantee is far lower: when the financial crisis broke out in 2008, a series of measures were taken at European level to increase the minimum coverage of bank deposits from 20 thousand euros to 50 thousand euros by June 2010 and to standardize the maximum coverage of 100 thousand euros by the end of 2010.

With today’s proposal, within the framework of the revision of the directive on deposit guarantee schemes, the European Commission proposes governments to confirm the maximum ceiling at 100 thousand euros. Based on this ceiling 95% of bank accounts would be fully covered, indicates the European Commission, equal to 7% more than in the period preceding the financial crisis. Coverage excludes all deposits from public authority financial institutions, structured investment products and debt certificates. Although the timing of the repayment, which the European Commission believes should be set at a maximum of seven days, currently in many cases weeks must pass if not months before the bank’s customers can see their entitlement recognized.

Regarding the financing of deposit guarantee schemes, the EU proposals will ensure that they are financed up to 75%. If necessary, banks will have to pay the additional contributions equal to an additional 25% of the funds. And if this turns out to be insufficient the guarantee schemes will be able to borrow from other guarantee schemes up to a certain limit (25% of the total) or use additional financing sources such as loans on the financial markets, for example by issuing bonds.

The contributions of the banks will be calculated, states a note from the Commission, in a fair way since they will be “adjusted to the risks posed by the individual banks”. In particular, banks that have a riskier business model than others “will pay higher contributions to deposit guarantee schemes up to three times more”. The European Commission has also adopted a white paper in which it proposes a series of options to ensure fair and comprehensive protection at European level based on the principle that citizens will not have to pay the bills in the event that the insurance company should fail. The consultation will last until November 30th 2010.

(12 July 2010)