Funding of national Deposit Guarantee Schemes in the EU – State of Play

Briefing 03-10-2022

The Deposit Guarantee Schemes Directive harmonises a minimum requirement for the funding of Deposit Guarantee Schemes through available financial means, a reserve paid in ex-ante. The Deposit Guarantee Schemes must observe the harmonised minimum target levels as of July 2024. The latest EBA data shows progress in that direction at most Deposit Guarantee Schemes. Three considerations should in particular be borne in mind when assessing the level of funding through available financial means: First, the guarantee provided to covered depositors is not conditional on the availability of financial means paid in ex-ante. Second, available financial means are complemented by alternative financing arrangements (loan arrangements). There is only very limited information publicly available about the specifics of such alternative financing arrangements, though. Third, there are scenarios of large or multiple bank failures where any national Deposit Guarantee Scheme will face difficulty funding its intervention from contributions of its member banks alone, keeping in mind the need to safeguard the banking sector’s profitability.