EBA report on deposit guarantee coverage

Current coverage level 

With the current coverage amount of € 100.000, at the moment 96% of eligible depositors in the European Economic Area (EEA) are fully covered. This means that, in case of bank failure, they would be paid back by the DGS the full amount of their respective deposit(s) at the failed bank. The 4% of depositors that are not fully covered are mostly legal entities. They hold more than half of deposits held in the EEA. In the Netherlands, the percentage of fully covered depositors is approximately 97%. Together they hold approximately € 600 billion covered deposits. In the Netherlands, this vast majority of accounts contain just over half of the total amount of eligible deposits. 

Conclusions  

Based on the analysis, the EBA concludes that there is no need to change the current coverage level of € 100.000. According to the EBA, a potential increase in the coverage would have a limited positive impact on financial stability and consumer protection, because more depositors would be fully covered by the DGS. However, a higher coverage level means that only a limited number of additional depositors would be fully protected. At the same time, a higher coverage level would mean that more funding would be needed in the Deposit Guarantee Fund, leading to higher costs for the sector. The target level of the fund is a fixed percentage (0,8%) of the total balance of covered deposits held at Dutch banks. In addition, an increase in coverage level could lead to increased moral hazard, because depositors may be less inclined to consider the risk of bank failure when opening an account. The EBA also concluded that, based on the analysis, the impact of a potential extension of coverage to include public authorities’ deposits would be limited. This type of depositors is currently (in the Netherlands and in the EEA) excluded from protection by the DGS. 

Background 

The report presents the EBA’s analysis of the data collected from 28 EEA countries covering the period between January 2022 and August 2023.  

The report aims at informing the review of the existing EU bank crisis management and deposit insurance (CMDI) framework. On 18 April 2023, the European Commission (EC) adopted and published a proposal for the review of this framework. In June, the EC sent to the EBA a request to get insight in deposits and depositors that are fully covered as well as on public authorities’ deposits. The EC asked the EBA to also assess the impact of a potential increase of the coverage level to € 150,000, € 250,000 and a specific case of a targeted € 1,000,000 coverage only for companies. 

It should be noted that the coverage level is one of a number of important elements of the crisis management and deposit insurance framework. The report does not cover a holistic assessment of all the elements. 

Publication  

The report was submitted by the EBA to the EC and published on the EBA-website.