European Commission to increase bank depositor protection to €100,000
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The European Commission has formally proposed to increase the guarantee for bank depositors to €100,000 by the end of this year, which is significantly higher than the current £50,000 limit in the UK.
The EC published an EU-wide package of proposals today that aim to increase consumer protection and confidence in financial services.
It is proposing faster payments so that all depositors are reimbursed within seven days of a bank failure.
The EC says if a depositor has an account with a failing offshore bank, their national deposit guarantee scheme will repay any money owed and act as a contact point. The national scheme would then be reimbured by the scheme in the failing bank’s jurisdiction.
The Commission says this will mean less bureaucracy and faster payouts.
The EC is also proposing improvements to the investor compensation scheme by raising the upper limit from €20,000 to €50,000 per investor.
In the UK the FSCS compensation limit for investments for claims against firms in default from January 1, 2010 is £50,000.
The maximum level of FSCS compensation for claims against firms declared in default before January 1, 2010 is 100 per cent of the first £30,000 and 90 per cent of the next £20,000, up to £48,000 per person per firm.
The Commission says investors should receive compensation a maximum of nine months after the firm’s failure.
This would protect investors who use investment services in Europe by providing compensation in cases where an investment firm is unable to return assets belonging to an investor. It is not protection against investment risks.
The Commission says: “Currently, investors are not necessarily protected if the investment firm uses a third party custodian to hold the client’s assets and the third party defaults without returning the invested assets. Similarly, unit holders in investment funds can suffer loss if there is a failure of a depositary or a sub-custodian of the fund. The Commission now proposes to also cover such situations.”
In addition, the Commission has launched a public consultation on options to improve protection for insurance policy holders, including the possibility of setting up insurance guarantee schemes in all member states.
EC internal market and services commissioner Michel Barnier (pictured) says: “The adoption of today’s package marks the Commission’s latest endeavour to bring transparency and responsibility to Europe’s financial system in order to prevent and manage future crises.
“European consumers deserve better. They need reassurance that their savings, investments or insurance policies are protected no matter where in Europe they are based. To make this a reality, I now call upon the European Parliament and the Council to make rapid progress in approving today’s package.”
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Readers' comments (1)
Anonymous | 12 Jul 2010 1:50 pm
Better dig deeper then.
Is that possible?
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