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Adopted text

Scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency (DGSD2)

TA-9-2024-0328 · P9_TA(2024)0328 · PE753.698

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Parliament's amended version of the proposed directive amends Directive 2014/49/EU on deposit guarantee schemes (DGSs). It expands deposit protection to certain financial institutions' client funds and public authorities, and sets temporary high balances protection at EUR 500,000 to EUR 2,500,000 for 6 months. It harmonises DGS interventions, including preventive and alternative measures, with a least cost test, and requires DGSs to repay depositors within 7 working days, extendable to 20 working days for certain deposits. It strengthens cross-border cooperation, requiring third-country branches to join a DGS in the host member state, and enhances transparency through standardised information sheets and reporting to the European Banking Authority.

Key points

  1. Deposits of public authorities and client funds deposits of financial institutions are covered, provided clients are identified or identifiable.
  2. Temporary high balances from real estate transactions are protected at EUR 500,000 to EUR 2,500,000 for 6 months, with a Commission review after 36 months.
  3. DGSs must repay within 7 working days, extendable to 20 working days for certain deposits, and must provide cost-of-living access within 5 working days if delayed.
  4. Repayments above EUR 10,000 must be made via credit transfer.
  5. DGSs may suspend repayments if money laundering or terrorist financing concerns exist, following financial intelligence unit instructions.
  6. DGS contributions to resolution or alternative measures give them a claim ranking pari passu with covered deposits in winding-up.
  7. Target level calculation uses a reference period, and replenishment periods are set at 4 years if funds fall below two-thirds, or 2 years if reduced by less than one-third.
  8. Payment commitments can count up to 30% of available financial means, and alternative funding arrangements must not be from public funds.
  9. Preventive measures require a note, business reorganisation plan, and conditions including no dividends or variable remuneration; failure leads to remediation plan and possible assessment of failure.
  10. Alternative measures must follow open marketing and DGS contributions are limited to covered deposits and capital neutrality.
  11. Least cost test compares costs of intervention vs. repayment, with EBA developing regulatory technical standards.
  12. Third-country branches must join a DGS in the host member state, and DGSs do not cover deposits in third-country branches unless contributions are raised.

Who is affected

  • Credit institutions and their branches, including those from third countries, must join DGSs and comply with new obligations.
  • Depositors, including public authorities and clients of financial institutions, gain broader protection and clearer information.
  • Deposit guarantee schemes and designated authorities have new tasks, including stress tests, least cost tests, and reporting.
  • Financial institutions such as e-money and payment institutions see their client funds deposits covered under conditions.
  • Institutional protection schemes (IPSs) recognised as DGSs get a 36-month transition period and must segregate funds.

Figures and deadlines

  • EUR 500,000 minimum and EUR 2,500,000 maximum for temporary high balances, for 6 months.
  • EUR 10,000 threshold for mandatory credit transfer reimbursement.
  • 7 working days for repayment, extendable to 20 working days.
  • 5 working days for cost-of-living access.
  • 30% maximum share of payment commitments in available financial means.
  • Two-thirds and one-third thresholds for replenishment periods of 4 and 2 years.
  • 40% of target level threshold for extraordinary contributions.
  • 24 months for transposition, 36 months for preventive measures application.

Legal basis: Article 53(1) of the Treaty on the Functioning of the European Union