Joint Research Centre - European Commission

The European Commission's in-house science service
European Commission

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European deposit protection schemes provide an adequate safety net

Reinforcing the stability of the financial system


The European Commission has put forward a revision of EU rules on capital requirements for banks that is designed to reinforce the stability of the financial system, reduce risk exposure and improve supervision of banks that operate in more than one EU country. Under the new rules, banks will be restricted in lending beyond a certain limit to any one party, while national supervisory authorities will have a better overview of the activities of cross-border banking groups. The proposal, which amends the existing Capital Requirements Directives, reflects extensive consultation with international partners, Member States and industry. It now passes to the European Parliament and the Council of Ministers for consideration.

In light of the ongoing banking crisis, questions are also being raised regarding the protection of citizens savings in case of further bank failures. In the past 15 years there have been nearly a hundred cases of banks running into financial difficulties in the EU, resulting in interventions up to a total of €4 billion, both in payouts to depositors and in preventive actions in order to avoid the failure of credit institutions.

A recently released JRC study investigating the level of efficiency of the European Deposit Protection Schemes shows that the EU's own safety net has been quite efficient in repaying depositors: in cases of bank failures, 90% of deposits have been reimbursed within a three month deadline enforced by EU legislation.

The Econometrics and Applied Statistics Unit at the JRC Institute for the Protection and Security of the Citizen (ISPC) in Ispra, Italy, aided by the European Forum of Deposits Insurers (EFDI), was tasked with investigating the efficiency of Europe's deposit guarantee schemes within the framework of the Directive 94/19/EC on deposit protection, and highlighted points to be addressed to further reinforce the level of protection.