Proposal for a COUNCIL DIRECTIVE on deposit-guarantee schemes
Date: 1992-06-04
Institutions: European Commission
Subjects: bank deposit, banking, credit guarantee, credit institution, financial institution, management audit

COMVTISSION OF  THE EUROPEAN  COMVIDNITIES 

C0M(92) 188 final - SYN 415 

Brussels,4  June 1992 

Proposal  for a 

COUNCIL DIRECTIVE 

on deposit-guarantee schemes 

(presented by the Commission) 

-  2 -

EXPLANATORY MEMORANDUM 

A. General considerations 

(1)  Main obiectives of the proposal 

This  proposal  for  a  Directive  has  a  dual  objective:  to  protect  the 

depositors  of  each  credit  institution  and  to ensure  the  stability  of  the 

banking system as a whole. 

Deposit-guarantee  schemes,  which  are  based  on  a  system  of  solidarity 

between credit  institutions, protect depositors  in the event of a financial 

crisis  in  an  institution  and  in  particular  those  depositors  who  have 

insufficient  financial  knowledge  to discriminate between  sound  and  unsound 

credit  institutions. 

But, by  the same  token, guarantee  schemes  also protect  the banking  system 

from  the  risk  resulting  from  the withdrawal  of  their  funds by depositors, 

not  only  from  an  institution  in  difficulty,  but  also  from  banks  in 

relatively sound condition which may be the subject of unfounded  rumours. 

One  of  the  principles  underlying  the  establishment  of  such  guarantee 

schemes  is  therefore  that  the  costs  or  possible  distortions  caused  by 

introducing  such  schemes  are  outweighed  by  potential  economic  costs  to 

society as a whole of a "run" on the banking system. 

(2)  Need  for deposit-guarantee schemes 

At  the  end  of  1986,  the  Commission  was  already  convinced  of  the 

desirability  of  credit  institutions  of  all  Member States  belonging  to  a 

deposit-guarantee  scheme  and  had  published  a  Recommendation  to  this  end, 
87/63/EEC,1  since  it  considered  that  this  instrument,  although  not 

binding, was sufficient  to persuade  those Member States which  did  not  have 

a guarantee scheme at the time to  introduce one. 

1  OJ No L 33, 4.2.1987. 

-  3 -

Despite  this  Recommendation,  some  Member  States  are  not  yet  convinced  of 

the  need  for  all  their  credit  institutions  to  be  required  to  belong  to  a 

deposit  guarantee  scheme,  and  two Member  States  have  not  yet  introduced  one 

at  all. 

It  is  certain  that  the  strengthening  of  national  and  international 

prudentiai  measures  is  designed  to  avoid  financial  crises  in  credit 

inst i tut ions. 

However,  in the  same way  as prudentiai  rules,  a deposit-guarantee  scheme  is 

an  element  in  the  safety  net  with  which  the  Commission  and  the  supervisory 

authorities  are  endeavouring  to surround  credit  institutions  in  preparation 

for  the extension  of  their  activities  which  wiII  start  in 1993. 

This  guarantee  meets  the  need  of  foreseeing  that,  although  it  may  be 

subject  to  very  strict  rules  and  severe  prudentiai  controls,  a  credit 

institution  can  experience  financial  difficulties. 

In  this  case,  the  cost  of  compensating  depositors  wi I I have  to  be  weighed 

against  that  of  reorganization  measures  which  might  be  essential  in  order 

to  rescue  the  institution. 

The  provisions  of  this  proposal  for  a  Directive  therefore  meet  a  need  and 

take  account  of  the  experience  acquired  during  the  implementation  of  the 

abovementioned  Recommendation  87/63/EEC  and  at  the  time of  recent  crises  in 

institutions  that  had  branches  in  several  Member  States.  The  proposal 

tries  to  satisfy  the  wishes  expressed  on  this  subject  by  the  European 

Parliament  in  its  opinion1  on  the  proposal  for  a  Directive  C0M(88)42 

concerning  the  reorganization  and  the winding-up  of  credit  institutions  and 

deposit-guarantee  schemes  and  by  the  Banking  Advisory  Committee,  in  its 

opinion of  4 July  1991.3 

1 

2 
3 

Opinion  of  the  European  Parliament  at  first  reading  of  13 March  1987, 
OJ  No C 99,  13.4.1987, p. 211. 
OJ  No C  36, 8.2.1988,  p. 3. 
Report  of  the Chairman  1988-91, Annex  C. 

- 4 -

(3) 

Principle  of  guarantee  by  the  scheme  of  the  credit  institution's  home 

Member  State 

Protection  is  based  on  the  principle  that  branch  depositors  wiII  be 

guaranteed  by  the  scheme  existing,  for  this  category  of  institution,  in  the 

Member  State  where  the  institution  has  its head  office  (home  Member  State). 

On  completion  of  the  internal  market,  all  the  activities  exercised  by  a 

credit  institution  in the Community  through  its branches  wiII  be  subject  to 

a  single  accounting  system,  balance  sheet  and  profit  and  loss  account,  and 

a  system  of  monitoring  solvency. 

According  to  the  opinion  of  the  Banking  Advisory  Committee,  failure  to 

respect  the  home  country  principle,  in  a  field  as  closely  Iinked  to  bank 

supervision  as  deposit  guarantee  schemes,  would  have  created  a  dangerous 

precedent  for  the  realization  of  the  Internal  Market  in banking  services. 

This  wi I I  lead  to  the  coexistence  on  the  same  territory  of  several 

deposit-guarantee  schemes.  But  the  experience  of  Member  States  in  which, 

for  many  years,  various  types  of  credit  institutions  have  been  exercising 

their  activities,  while  being  covered  by  different  guarantee  schemes, 

proves  that  this  can  work  very  well,  especially  if  the  minimum  level  of 

coverage  set  by  the  proposal  ensures  that  small  depositors  are  compensated 

in all  Member  States. 

(4) 

Choice  of  minimum  level  of  coverage 

Recommendation  87/63/EEC  did  not  suggest  a  harmonized  level  of  coverage. 

Yet  it seems essential  in the  run-up  to completion  of  the  single  market  for 

depositors  to  be  given  basic  protection,  regardless  of  whether  their 

deposits  are  in an  office  of  a  home-country  bank  or  in an  office  of  a  bank 

based  in another  Member  State. 

-  5  -

The  minimum  level  of  coverage  set  for  the  Community  should  not  be  too  high 

in  order  to  avoid  what  has  occurred  in  the  United  States  in  particular, 

where  the  risks  taken  by  individual  depositors  have  been  lowered  so  much 

that  such  depositors  have  become  virtually  indifferent  to  the  soundness  of 

their  credit  institutions. 

In  addition,  managers  of  credit  institutions  have  been  encouraged  to  hold 

risky  portfolios,  without  market  discipline  requiring  them  to  pay  their 

guarantee  scheme  high  premiums  because  of  the  increased  risk  of  bankruptcy 

which  such  investments  represented  for  the  inst i tut ion.  In  this  way 

institutions  benefited  from  taking  risks  while  losses  were  borne  by  the 

guarantee  scheme. 

Conversely,  coverage  must  not  be  too  low  and  leave  too  many  deposits 

outside  the minimum  threshold  of  protection. 

The  only  unaggregated  data  readily  available  to  the  Commission  relate  to 

the  average  size  of  deposits  held  at  Community  savings  banks. 

The  average  for  such  deposits  is about  ECU  2 500, which  reflects  a weighted 

average of  ECU  30 000  for  time  deposits,  ECU  2 600  for  current  accounts  and 

ECU  2 150  for  savings  accounts. 

Unfortunately  averages  alone  do  not  provide  an  answer  to  the  question  of 

what  proportion  of  deposits  or  depositors  would  have  balances  above  or 

below  any  particular  minimum  level  of  protection. 

Without  direct  empirical  evidence  on  the  size  and  distribution  of  accounts, 

it seemed  reasonable  to  try  to establish  a minimum  level  of  coverage  in  the 

Community,  based  roughly  on  the  levels  of  coverage  now  chosen  by  guarantee 

schemes  in  Member  States.  If  the  two  Member  States  with  extremely  high 

levels  of  coverage  (Germany  and  Italy)  are  excluded,  together  with  those 

where  there  is  no  protection  at  all  (Greece  and  Portugal),  the  median  of 

existing  levels  is  approx imately  ECU  15 000,  which  is why  this  figure  has 

been  chosen. 

-  6  -

When  the  proposal  was  being  prepared,  the  question  arose  of  whether  it 

might  be  preferable  to  set  a  percentage  limit  for  repayment  which  would  be 

more  egalitarian  but  less  protective  of  small  depositors.  This  solution 

was  not  adopted  because  it  would  have  led  to  very  major  changes  in  some 

solidarity  schemes  which  take  responsibiIity  for  rescuing  the  failing 

institution  and  therefore  compensate  its depositors  in  full. 

The  compromise  solution  finally  adopted  makes  it  possible  to  limit  the 

guarantee  to  a  percentage  of  the  deposit  but  requires  that  this  covers  at 

least  90%  of  deposits,  up  to  a  payment  of  ECU  15 000.  Above  this  limit, 

Member  States  or  schemes  remain  free  to provide  for  lower  payment  ratios or 

even  to  refuse  any  guarantee  whatsoever. 

(5) 

Setting  very  limited  time  limits  for  payment 

Most  of  the  existing  guarantee  schemes  provide  for  a  prompt  payout  to 

depositors,  but  unt i I  now,  this  payout  has  very  often  been  tied  to  the 

progress  of  liquidation  procedures  and  to  the  diligence  of  liquidators 

appointed  by  the  courts. 

This  has  often  led  to  delays  causing  depositors  very  understandable 

distress.  It  is  also  a  source  of  numerous  disputes  which  can  make  payout 

operations  even  slower. 

This  proposal  permits  a  starting  point  for  the  time-limit  which  is  not 

I inked  to  insolvency  procedures:  the  length  of  time  for  which  the  deposit 

is unavailable  has  been  taken  into consideration  and  if  it  is more  than  ten 

consecutive  days  procedures  for  paying  out  the  guarantee  can  be  started; 

these  must  be  completed  within  a  three-month  time  limit  unless  there  are 

special  circumstances. 

This  three-month  time-limit  results  from  the  practical  experience  of 

managers  of  guarantee  schemes.  In most  of  the  cases  where  it  has  not  been 

possible  to  observe  such  a  time  limit,  a  legal  procedure  was  under  way  and 

the  valuation  of  deposits  for  the  purposes  of  the  guarantee  was  not 

distinguished  from  the  valuations  necessary  for  liquidation  which  relate  to 

all  the  assets  and  are  bound  to  take more  time. 

- 7 -

(6) 

Depositor  information 

The  priority  goa I  of  depositor  protection  suggests  that  the  depositor 

should  be  fully  informed  of  the  extent  of  coverage  of  his  funds. 

Complete  information  is  also  important  in  reducing  systemic  risk:  in 

particular,  the greater  the  depositor's  awareness  of  risk,  the  greater  care 

he  wi I I take  to  discover  whether  the  institution  to  which  he  entrusts  his 

deposits  is weIl-managed,  and  the  less  sensitive  he  wiII  be  to  unjustified 

rumours. 

(7) 

Questions  not  deaIt  with  in the  proposaI 

Several  points  have  not  been  the  subject  of  harmonized  provisions;  the  main 

ones  are: 

(a) 

the  legal  status  of  guarantee  schemes 

As  already  stated  in  the  Recommendation,1  it  was  necessary  to 

acknowledge  the  coexistence  in  the  Community,  and  sometimes  in  the 

same  Member  State,  of  deposit  protection  schemes  set  up  by  private 

institutions  and  schemes  administered  on  a  statutory  basis;  most 

private  schemes  are  set  up  under  the  responsibiIity  of  professional 

organizations,  but  they  are  just  as  effective  as  the  schemes  managed 

by or  with  the  assistance  of  the  public  authorities. 

It  was  therefore  considered  advisable  not  to  change  this  state  of 

affairs  and  not  to  compel  Member  States  and  credit  institutions  to 

adopt  a specific  statute  for  their  deposit  guarantee  schemes. 

Fourth  recital  of  Recommendation  87/63/EEC. 

-  8  -

(b) 

financing  mechanism 

there  are  also  wide  differences  in  the  financing  of  schemes.  The 

main  difference  is  whether  or  not  a  guarantee  fund  exists.  If  it 

does,  credit  institutions  pay  contr ibut ions  to  the  said  fund  at 

specific  intervals  of  time;  these  contributions  are  based  on  the 

value  of  the  deposits  insured  or  on  other  parameters;  the  funds  are 

managed  by  the  guarantee  schemes  themselves. 

In other  cases,  the  guarantee  scheme  is  funded  by  commitments  to  pay 

on  the  part  of  the  member  credit  institutions;  no  payments  are  made 

into  the  scheme  except  in  the event  of  a claim.  Lastly,  some  schemes 

are  mixed  (funds  plus  commitments  or  possibiIities  of  exceptional 

contributions  in the event  of  a  claim). 

After  receiving  the  assurance  that  the  financing  arrangements  were 

sufficiently  sound  to pay  off  all  depositors  covered,  including  those 

at  branches  in  another  Member  State,  it  was  not  considered  necessary 

to  harmonize  rules  which  are  closely  linked  with  the  management  of 

the  schemes  in  question. 

The  question  of  whether  the  public  sector  would  be  able  to  provide 

assistance  for  guarantee  schemes  in  emergency  situations  of  exceptional 

gravity  and  when  the  schemes'  resources  have  been  exhausted,  has  been 

raised  in order  to enable  them  to  respect  their  commitments  to  depositors. 

It  did  not  seem  appropriate,  in  the  proposal  for  a  Directive,  to  prohibit 

such  assistance,  which  could  prove  necessary  in  practice,  although  it  is 

not  desirable  as  a  general  rule  and  could  not  be  allowed  to  contravene  the 

rules of  the  Treaty  concerning  state  aid. 

-  9  -

B. Commentarv  on  the  Articles 

Art icle 1 

Article  1 gives  a  few  definitions  which  are  necessary  for  the  Directive  to 

be  understood  properly.  In order  not  to make  this  I ist  of  definitions  too 

long, those  already  contained  in several  Directives  have  not  been  repeated; 

these  include  "credit  institutions"  and  "branches"  which  can  be  found  in 

Directive  77/780/EEC,1  and  "home  Member  State"  or  "host  Member  State", 

which  can  be  found  in Directive  89/646/EEC.2 

Paragraph 1 

The  idea  of  deposi t as  it  appears  in paragraph  (1)  has  been  envisaged  from 

the  depositor's  point  of  view.  The  depositor  has  a  "credit  balance"  or 

"claim"  whereas  in  the  Directives  relating  to  annuaI  accounts,  this 

naturally  appears  in  the  credit  institution's  accounts  in  the  form  of 

"debt" or  "loan".  This  terminology  has, on  the other  hand,  been  adopted  in 

paragraph  2, which  deals with  non-repayable  funds. 

Guaranteed  deposits  are  those  which  result  from  funds  left  in  accounts 

either  permanently  or  temporarily,  or  from  claims  for  which  negotiable 

certificates  have  been  issued. 

The  idea  of  "credit  balance"  is relatively  clear:  in particular  it  is used 

for  current  accounts  but  it  is supplemented  by  the  idea  of  "funds  left  in 

accounts",  which  is  intended  to  indicate  savings  books  or  accounts  or  any 

other  instrument  in which  funds  generally  remain  for  longer  than  in current 

accounts. 

1 
2 

OJ  No L 322, 17.12.1977. 
OJ  No L  386,  30.12.1989. 

-  10  -

On  the  other  hand,  in  order  to  understand  the  idea  of  "claims  for  which 

negotiable  certificates  have  been  issued"  it  has  to  be  seen  in  the  context 

of  Articles  19  and  20  of  Directive  86/635/EEC1  on  annual  accounts,  the 

first  of  which  deals with  "amounts owed  to customers" while  the  second  uses 

this  formula  and  spells  it  out  in  detail:  "debts  for  which  negotiable 

certificates  have  been  issued,  in  particular  deposit  receipts,  'bons  de 

caisse'  and  liabilities  arising  out  of  own  acceptances  and  promissory 

notes". 

The  above  Directive  distinguishes  these  debts  from  debt  securities  which 

appear  in  a  separate  heading.  This  distinction  is  not  retained  in  the 

definition,  but  debt  securities  may  be  excluded  from  the  guarantee  if 

Member  States  do  not  wish  to cover  them  (option  11 of  the  Annex). 

The  definition  does  not  specify  that  deposits  have  to  be  nominative;  here 

too  an option  is possible  and  Member  States may  provide  for  bearer  deposits 

to be excluded  from  the  guarantee  (point  9 of  the  Annex). 

It was  necessary  to define  the  idea of  Joint  account,  because  of  the  option 

chosen  of  a  limit  per  depositor,  so  as  not  to  disadvantage  holders  of  such 

accounts  (Article  5(2)). 

Lastly,  the  idea of  unavailable  deposit  has  been  defined;  in order  to  speed 

up  the  payout  of  the  guaranteed  amount,  it  was  decided  not  to  I ink  this 

payout  with  the  uncertainties  of  the  procedures  of  reorganizing  and 

liquidating  the  credit  institution  but  to keep  to an objective  observation, 

namely  that  for  ten  consecutive  days  a  depositor  has  been  deprived  of  the 

funds which  should  have  been  repaid  by  the  credit  institution. 

This  period  of  ten  days  should  normally  make  it  possible,  in  most  Member 

States,  to  obtain  a  decision  by  a  judicial  or  administrative  authority 

establishing  that  payments  have  ceased.  The  period  wiII  be  shorter  if  such 

a  decision  results  in  the  closure  of  banks  since,  in  that  case,  the  payout 

time  limit  (three  months) wiII  count  from  the  day  of  the  decision. 

1 

OJ  No  L  372, 31.12.1986,  p.  8. 

-  11  -

Paragraph  (2) 

Some  deposits  are  excluded  from  the  guarantee.  First  of  all,  interbank 

deposits:  the  main  just i f icat ion  for  this  is  that  banks  are  supposed  to 

know  the  crisis  bank's  situation  better  than  other  persons  in  a  business 

relat ionsh ip wi th  i t. 

With  regard  to  subordinated  loans,  the  existence  of  the  clause  recalled  in 

the  definition  contractuaIly  excludes  them  from  the  guarantee,  since  by 

their  nature  they  are  not  to  be  repaid  unt i I the  liquidation  is  completed 

and  repayment  depends  on  its  results. 

Art icle 2 

Paragraph  (1) 

Paragraph  (1) of  this  Article  contains  two  fundamental  principles: 

(a) 

The  principle  that  all  authorized  institutions  must  take  part  in  a 

deposit-guarantee  scheme.  The  introduction  of  at  least  one  deposit-

guarantee  scheme  in each  Community  Member  State  had  already  been  the 

subject  of  recommendation  87/63/EEC,  mentioned  above;  not  only  does 

the  proposal  for  a  Directive  repeat  this  requirement  (still  not 

satisfied  in  two  Member  States),  but  it  makes  it  compulsory  for  all 

authorized  institutions  to belong  to  the  schemes  set  up  in this  way. 

This  requirement  is  the  counterpart  of  the  freedom  of  establishment 

of  branches  and  the  freedom  to provide  services. 

Since  credit  institutions  enjoy  these  freedoms,  it  is  absolutely 

necessary  for  depositors  of  branches  located  in  other  Member  States 

and  not  supervised  by  local  authorities,  and  depositors  who  entrust 

deposits  to  banks  not  established  in  the  country  where  they  reside, 

to  be  protected  against  any  risk  of  financial  crisis  in  the 

institution  in question. 

-  12  -

This  wi I I  be  an  innovation  in  several  States  where  membership  is 

optional,  even  though  most  credit  institutions  do  in  fact  take  part 

in a deposit-guarantee  scheme. 

(b) 

The  principle  that  the  guarantee  scheme  of  the  home  Member  State 

shall  cover  the  deposits of  branches. 

This  principle 

is  the  logical  result  of  supervision  by  the 

Member  State  where  the  head  office  is  located.  Once  the  competent 

authority  of 

the  home  country 

is  responsible 

for 

issuing 

authorizations  making  it  possible  to  open  branches  and  engage  in 

activity  with  the  freedom  to  provide  services  throughout  the 

Community,  and  supervision  of  such  activity,  in  particular  the 

monitoring  of  solvency,  take  place  at  the  head  office,  the 

implications  for  guarantee  schemes  have  to be  recognized. 

Since  the  credit  institution  and  its branches  are  considered  to  be  a 

single  un i t,  from  both  the  legal  and  the  banking  point  of  view,  it 

seems  natural  for  this  institution  to  take  part  in  the  solidarity 

scheme  for  credit  institutions  in  the  country  where  its  head  office 

is established.  The  Iinks  between  this  institution  and  host  country 

for  its  branches  wi I I be  far  looser  than  they  are  now  when  branches 

are  "author ized"  in  the  same  way  as  local  institutions  and  have  to 

respect  the  requirements  of  the  Member  State  in  which  they  are 

located: 

Paragraph  (2) 

This  principle  of  belonging  to  the  home  country  scheme,  vigorously  stated 

in paragraph  (1), has  to be  tempered  by  the  provision  in paragraph  ( 2 ), the 

purpose  of  which  is  to  enable  branch  depositors  to  enjoy  the  advantages  of 

the  host  country's  guarantee  scheme. 

-  13  -

This  is not  strictly  speaking  a  derogation  from  the  principle  of  belonging 

to  the  home  country  scheme  since  the  latter  is stiII  required  to  guarantee 

branch  depositors  up  to  the  amount  offered  to  depositors  with  the 

institution's  head  office  but  it  is,  as  it  were,  an  additional  guarantee 

which  must  be  available whenever  branch  managers  consider  it appropriate  to 

extend  it  to  their  customers  in  order  not  to  suffer  a  competitive 

disadvantage. 

Guarantee  schemes  which  provide  a  high  level  of  protection  wiII,  in  order 

to  enable  branches  to  belong,  have  to  find  solutions  to  problems  which  are 

different  from  those  they  have  had  to  settle  in  order  to  guarantee  the 

institutions  that  have  their  head  office  on  their  territory. 

These  schemes  wi I I probably  have  to  avaiI  themselves  of  the  disclosure  of 

information  as  mentioned  in  Article  12(5) of  Directive  77/780/EEC,  amended 

by  Article  16  of  Directive  89/646/EEC1  in  order  to  obtain  data  which  wi I I 

be  useful  to  them  on  the  activity  and  solvency  of  the  inst i tut ion  whose 

branch  wiII  be  applying  for  membership. 

They  will  probably  have  to stipulate  special  conditions  for  contributing  to 

their  guarantee  scheme  in  keeping  with  the  risks  taken,  since  part  of  the 

risk will  already  be  covered  by  the  head  office  guarantee. 

These  technical  difficulties  should  not  conceaI  the  essential  advantage  of 

this 

provision 

in  preventing 

distortions 

of 

competition 

between 

institutions  and  differences  in  protection  levels,  which  depositors  of  the 

same  country  would  find  difficult  to  accept. 

Paragraph  (3) 

Since  some  of  the  deposit-guarantee  schemes  which  exist  in  the  Community 

are  schemes  set  up  under  private  law  contracts,  the  fact  that  all 

institutions  are  required  to  take  part  in  deposit  guarantee  schemes  will 

lead  to  a  constraint  not  envisaged  so  far,  but  which  should  not  create 

undue  problems.  On  the  other  hand  keeping  them  in  the  scheme  if  they  do 

not  comply  with  its  contractual  requirements,  for  example  with  regard  to 

financial  contributions or  information,  is  liable  to prove  very  difficult. 

1 

OJ  No  L 386,  30.12.1989,  p. 8. 

-  14  -

The  fact  that  a  guarantee  scheme  will  be  allowed  to  exclude  an  institution 

means  that  depositors  will  be  deprived  of  the  protection  to  which  they  are 

entitled  under  the  Directive  or  that  the  public  authorities  will  be 

compelled  to  withdraw  authorization;  such  withdrawal  will  therefore  depend 

on  the  decision  of  a  private  body,  which  is unacceptable  in  principle  and 

in some  cases  unduly  severe  if  the  breach  of  obligations  is a minor  one. 

As  a  way  out  of  this  dilemma,  the  proposal  for  a  Directive  accepts  the 

possibility  of  exclusion  when  all  measures  to  secure  the  defaulting 

institution's  compliance  with  its  obligations  have  been  fruitless,  but 

requires  the  guarantee  to  be  maintained  for  one  year  after  exclusion, 

whatever  the  decision  taken  by  the  supervisory  authority. 

This  measure  will  enable  the  credit  institution's  supervisory  authorities 

not  to  resort  to  the  extreme  sanction  of  withdrawing  authorization  too 

automatically  and  to  find,  where  appropriate,  another  solution  for 

safeguarding  the  rights  of  the  excluded  institution's  depositors. 

Art icle 3 

This Article  establishes  that  branches  of  institutions  that  have  their  head 

office  outside  the  Community  cannot  be  compulsorily  required  to observe  the 

rule of  belonging  to  the  home  country  scheme  as  are  Community  institutions. 

As  a  result,  depositors  of  these  branches  could  be  entirely  deprived  of 

protection  if  Member  States  did  not  take  the  necessary  steps  to  secure 

their  membership  of  the  local  scheme  where  they  are  not  covered  by  another 

guarantee  scheme,  for  example  in their  home  country. 

This  is why  paragraphs  (2)  and  (3)  of  this  Article  require  the  depositors 

of  these  branches  to  be  provided  with  information;  this  is  in  fact  an 

application,  adapted  to  this  particular  case,  of  the  rules  on  providing 

depositors  with  information  which  are  contained  in  Article  6  of  the 

proposal  for  a  Directive  and  relates  to  institutions  that  have  their  head 

office  in the  Community. 

-  15  -

Art icle  4 

This  essential  provision  of  the  Directive  specifies  the  minimum  level  of 

protection  for  depositors  which  has  to be  guaranteed  within  the  Community. 

Paragraph  (1) 

Paragraph  (1) specifies  that  the  lower  limit  of  coverage  per  depositor,  for 

his  aggregate  deposits,  is  ECU  15  000,  which  is  a  little  higher  than  the 

maximum  coverage  provided  in  Spain  (11.700  ECU),  Belgium  and  Luxembourg 

(11.900  ECU),  Ireland  (13.200  ECU), and  a  little  lower  than  the  coverage 

provided  in  the  Netherlands  (17.400  ECU)  and  the  United  Kingdom  (21.400 

ECU). 

This  minimum  guarantee  wi I I cover  total  deposits  of  less  than  ECU  15  000 

and  the  sum  paid  to  a  depositor  wi I I  therefore  be  ECU  15 000  for  total 

deposits  of  ECU  15 000,  ECU  12 000  for  total  deposits  of  ECU  12 000, 

ECU  10 000  for  total  deposits  of  ECU  10 000, etc. 

But,  in order  to  take  account  of  the  anxieties,  in particular  of  economists 

and  financial  experts  who  would  I ike  part  of  the  risks  to  be  borne  by 

depositors,  in order  to encourage  them  to  take  an  interest  in  the  soundness 

of  the  institution  to which  they  entrust  their  deposits  (even  if  the  latter 

are  not  considerable),  paragraph  (4) allows  the  minimum  coverage  to  be  set 

in the  form of  a percentage  and  not  in  the  form  of  a  fixed  amount. 

As  a  result,  the  ECU  15 000  minimum  wi I I  not  be  paid  out  to  repay  a 

ECU  15 000  deposit  but  a  larger  deposit  -  namely  ECU  16 650  -  if  the 

percentage  guaranteed  is  90%  of  total  deposits.  For  total  deposits  of 

ECU  15 000,  the  same  depositor  wi I I receive  only  ECU  13 500,  st i I I on  the 

assumption  that  the  percentage  guaranteed  is  equal  to  9 0%  of  the  total; 

this  is  the  minimum  percentage  which  has  to  be  observed  within  the  limits 

of  minimum  coverage. 

-  16  -

It  is  important  to  note  that  the  introduction  of  a  percentage,  within  the 

limits specified  in paragraph  (4), will  not  have  the effect  of  reducing  the 

minimum  payout  due  from  the  scheme  which  is  st i I I ECU  15 000;  however,  in 

order  to  arrive  at  this  amount,  in a  scheme  where  each  depositor  is  repaid 

only  a  percentage  of  his  deposits,  it  is clear  that  the  amount  to  be  taken 

into  account,  in  order  to  establish  the  minimum  limit  of  deposits  to  be 

covered  for  each  depositor,  will  have  to  be  higher  than  ECU  15 000  (and, 

depending  on  the  payout  ratio  chosen, will  have  to  range  from  ECU  15 000  to 

ECU  16 650). 

Paragraph  (2) and  Annex 

Paragraph  (2)  provides  that  Member  States  may  authorize  the  exclusion  from 

the  guarantee  of  certain  depositors  or  certain  deposits  Iisted  in  the 

Annex. 

These  exclusions  relate  mainly  to  the  deposits  of  financial  instItutions, 

insurance  companies,  central  and  local  authorities,  and  other  depositors 

which  can  hardly  be  considered  as meriting  protection  because  of  their  lack 

of  economic  expertise  or  economic  weakness.  However,  the  number  of  these 

institutions  and  persons  is fairly  large and  the  appraisal  of  whether  it  is 

advisable  to exclude  them  varies  from  one  Member  State  to  another. 

This  is  why  it  has  not  been  possible  to  achieve  ful ler  harmonizat ion  on 

this  point  because  the  arrangements  covering  these  different  institutions 

and  depositors  very  largely  depend  on  the  guarantee  amount  which  the  scheme 

provides  and  on  national  practice.  In  this  way  several  schemes  in  certain 

circumstances  take  bearer  deposits  into consideration  because  they  are  used 

by  the  smallest  savers  (non-nominative  savings  books)  whereas  most  other 

countries  wish  to exclude  them. 

The  list  contained  in  Annex  I  is  limitative  and  Member  States  may  exclude 

from  the  guarantee  only  the  institutions  and  persons  mentioned  therein, 

with  any  other  exclusion  contravening  the  Directive. 

-  17  -

Paragraph  (3) 

Paragraph  (3)  however  permits  the  retention  or  adoption  of  provisions 

raising  the guarantee  ceiling  on  which  there  is no maximum  limit. 

This  provislorf"wiTl  permit  the  retention  of  cerTaTn  schemes  which  provide 

depositors  with  ful I  compensation;  these  are  the  result  of  a  solidarity 

arrangement  designed  to  avoid  member 

institutions  being  put 

into 

liquidation  and  which  therefore  provides,  in  the  event  of  closure,  for  the 

fulI  repayment  of  all  deposits. 

Disregarding  this  extreme  case  of  the  100%  repayment  of  deposits,  schemes 

such  as  the  Danish,  French  or  Italian  ones,  which  under  the  guarantee  pay 

out  amounts  higher  than  the  minimum  contained  in  the  proposal  for  a 

Directive  wiII  be  able  to maintain  their  present  level  of  repayment.1 

Art icle 5 

This  Article  states  the  principle  of  a guarantee  per  depositor  and  not  per 

deposit  with  a  view  to avoiding  abuse, as  is the  case  in the  United  States, 

and  makes  some  provision  for  special  cases  which  have  given  rise  to 

difficulties  in some  countries  and  have  been  solved  in a variety  of  ways. 

Paragraph  (2)  lays  down  a  supplementary  rule  for  Joint  accounts  and 

paragraph  (3)  provides  for  the  case  of  special  accounts  where  the  account 

holder  acts  on  behalf  of  the  beneficial  owners  who  are  the  real  owners  of 

the  funds  deposited  in the  account. 

Classic  cases  are  those of  property  managers who  receive  the  tenants'  rents 

before  handing  them  over  to  the  owners,  lawyers,  who  pass  certain  sums 

intended  for  their  customers  through  their  accounts  and  trustees who  act  on 

behalf  of  their  beneficial  owners. 

Guarantee  schemes  wi I I  be  able  to  lay  down  certain  formalities  enabling 

them  to ascertain  the  identity  and  rights of  depositors. 

Denmark:  31.500  ECU 
France: 57.500  ECU 
Italy: 511.000  ECU  per  deposit 

-  18 

In some  countries  these  formalities  precede  the  provision  of  the  guarantee. 

The  proposal  for  a  Directive  does  not  take  a  position  on  this  question; 

this  depends  on  national  practice  in  relation  to  these  accounts  which  is 

far  from  being  standardized. 

Art icle 6 

This  Art icle  lays  down  the  rules  relating  to  the  necessity  to  inform 

customers of  credit  institutions. 

Such  information  must  be  ful I and  accurate  because  the  schemes  which  the 

branches  of  the  same  Member  State  wi I I join  may  be  far  more  numerous  than 

they  are  at  present.  It  is  therefore  important,  especially  if  the  branch 

depositors  do  not  enjoy  supplementary  coverage  by  the  local  scheme,  as 

provided  for  in Article  2(2), for  these  depositors  to  be  well  informed  of 

the  advantages  and  disadvantages  of  the  guarantee  scheme  covering  the 

institution  to which  they  entrust  their  deposit. 

Art icle  7 

This  Art icle  represents  one  of  the  main  results  to  be  achieved  by  the 

proposal,  namely  that  of  permitting  the  promptest  possible  payout  of  the 

guarantee  provided  for  by  the  scheme. 

In order  to achieve  this, a  three-month  time  limit  (renewable  only  once)  is 

set  for  payouts. 

This  period  wi I I  normaliy  count  from  a  decision  by  the  supervisory 

authorities  or  a  court  which  often  act  very  rapidly  once  the  solvency  of  a 

credit  institution  is called  into  question. 

-  19  -

However,  in  order  to  save  depositors  and  especially  small  depositors  from 

having,  as  is  sometimes  the  case,  to  endure  a  delay  during  which  a 

reorganization  solution  is  sought  and  implemented  without  the  institution 

returning  to  normal  activity,  or  a  lengthy  procedure  of  legal  liquidation, 

the  proposal  provides  for  a  ten-day  period  of  unavailabiIity  at  the  end  of 

which,  if  no  decision  has  been  taken  as  to  the  institution's  activity,  the 

depositor  is entitled  to payment  of  the guaranteed  amount  and  the  scheme  is 

required  to comply  with  the  three-month  time  limit. 

Paragraphs  (2) and  (3) 

Nevertheless,  there  is  provision  for  the  time-limit  to  be  extended,  but 

only  in  the  event  of  difficulties  encountered  in  the  settlement  of 

particular  cases,  e.g.  difficulties  in  proving  the  amount  of  the  deposit 

(case  of  joint  accounts  or  accounts  where  the  account  holder  is  not  the 

beneficial  owner),  and  difficulties  in  identifying  the  depositor,  or  even 

in  finding  him  (if  he  has  changed  his  address  or  is  I iving  in  another 

country). 

The  very  short  time  limits are  stipulated  in order  to  favour  depositors  and 

should  not  operate  against  their  interests;  the  proposal  therefore  sets  no 

time-limit  within  which  they  have  to enforce  their  rights. 

Paragraph  (4)  supplements  the  provisions  relating  to  depositor  information 

contained  in  Article  6  by  information  to  be  provided  at  the  time  of  the 

cla im. 

Lastly,  paragraph  (5) states  that  the  payment  shall  be  effected  in  national 

currency  or  in  ecu;  it  is  necessary  to  make  this  clear  because  the 

guarantee  is  not  confined  to  deposits  in  Community  currencies  or  in  ecu, 

but  also  covers  deposits  in  third-country  currencies,  in  keeping  with 

Art icle 5(1). 

-  20  -

Art icle 8 

The  first  subparagraph  of  paragraph  1  calls  upon  Member  States  to  comply 

with  the  Directive  on  1 January  1994. 

The  second  subparagraph  provides  that,  where  Member  States  adopt  the 

necessary  provisions  of  national  law,  the  latter  are  to contain  a  reference 

to  this  Directive  or  are  to  be  accompanied  by  such  reference  on  the 

occasion  of  their  official  publication. 

The  second  paragraph  deals  with  the  requirement  to  communicate  to  the 

Commission  the main  provisions  of  national  law adopted  by  Member  States. 

Art icle 9 

This Article  contains  the usuaI  formula  that  this  Directive  is addressed  to 

ail  the Member  States. 

-  21  -

Proposal  for  a 

COUNCIL  DIRECTIVE 

on  deposit-guarantee  schemes 

THE  COUNCIL  OF  THE  EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic  Community, 

and  in particuiar  the  first  and  third  sentences  of  Article  57(2)  thereof, 

Having  regard  to  the  proposal  from  the  Commission, 

In cooperation  with  the  European  Parliament, 

Having  regard  to  the opinion  of  the  Economic  and  Social  Committee, 

Whereas,  in  accordance  with  the  objectives  of  the  Treaty,  the  harmonious 

development  of  the  activities  of  credit  institutions  throughout  the 

Community  should  be  promoted  through  the elimination  of  any  restrictions  on 

freedom  of  establishment  and  the  freedom  to  provide  services  while 

increasing  the  stability  of  the  banking  system  and  the  protection  of 

savers ; 

Whereas,  at  the  same  time  as  restrictions  on  their  activities  are 

eliminated,  consideration  should  be  given  to  the  situation  which  might 

arise  if  a  credit  institution  that  has  branches  in  other  Member  States 

suffers  a  financial  crisis;  whereas  it  is  indispensable  to  ensure  a 

harmonized  minimum  level  of  deposit  protection  wherever  in  the  Community 

deposits  are  located;  whereas  such  deposit  protection  is  as  essential  as 

the  prudentiai  rules  for  the  completion  of  the  single  banking  market; 

Whereas,  in  the  event  of  the  closure  of  an  insolvent  credit  institution, 

the  depositors of  branches  situated  in a Member  State  other  than  that  where 

the  credit  institution  has  its head  office  must  be  protected  by  a  guarantee 

scheme,  in the  same  way  as all  the  institution's other  depositors; 

-  22  -

Whereas  the  cost  to  credit  institutions  of  participating  in  a  guarantee 

scheme  bears  no  relation  to  the  cost  that  would  result  from  a  massive 

withdrawal  of  bank  deposits  not  only  from  a  credit  institution  in 

difficulties  but  also  from  healthy  institutions  following  a  loss  of 

depositor  confidence  in the  solidity  of  the banking  system; 

Whereas  only  ten  Member  States  have  a  guarantee  scheme  in  accordance  with 

Commission  Recommendation  87/63/EEC  of  22 December  1986  concerning  the 

introduction  of  deposit-guarantee  schemes  in  the  Community1;  whereas  this 

situation  may  prove  prejudicial  to  the  proper  functioning  of  the 

Single  Market; 

Whereas  the  Second  Council  Directive  89/646/EEC2,  as  amended  by  Directive 

92/30/EEC3  provides  for  a  system  for  authorizing  and  supervising  credit 

institutions  which  wiII  enter  into  force on  1 January  1993; 

Whereas 

branches 

wiII 

no 

longer 

require 

authorization 

in  host 

Member  States,  because  they  wi I I  be  granted  a  single  authorization  valid 

throughout  the  Community,  and  their  solvency  wi I I  be  monitored  by  the 

competent  authorities  of  the  home  Member  State;  whereas  this  situation 

justifies  all  branches,  set  up  in  the  Community,  of  the  same  credit 

institution  in belonging  to a single  guarantee  scheme;  whereas  this  scheme 

can  only  be  the  one  which  exists,  for  this  category  of  institution,  in  the 

state  where  the  head  office  is situated,  in particular  because  of  the  Iink 

which  exists  between  supervision  of  a  branch's  solvency  and  its  membership 

of  a deposit-guarantee  scheme; 

Whereas  harmonization  must  be  confined  to  the  elements  necessary  and 

sufficient  to  ensure,  within  a  very  short  period,  a  payment  under  the 

guarantee  calculated  on  the basis of  a  harmonized  minimum  level; 

1 
2 
3 

OJ  No  L 33, 4.2.1987,  p.  16. 
OJ  No L  386, 30.12.1989,  p.  1. 
OJ  No  L  110, 28.4.1992, p. 52. 

-  23 -

Whereas,  for  economic  reasons,  it  is undesirable  to  introduce  throughout 

the Community  a very  high  level of protection which  is  liable to encourage 

the  reckless  management  of  institutions;  whereas,  in  addition,  in  the 

event of a serious claim, contributions to the funding of  the scheme could 

become too burdensome for the member  institutions; 

Whereas,  however,  the  harmonized  guarantee  level  must  not  be  too  low  in 

order  not  to  leave  too  great  a  number  of  deposits  outside  the  minimum 

protection  threshold;  whereas  in  the  absence  of  statistics  on  the  amount 

and  distribution  of  deposits  in Community  credit  institutions,  it  seemed 

reasonable  to take as a basis  the median guarantee offered  by  the national 

systems; whereas that amount  is ECU 15 000; 

Whereas  in  the  six  Member  States  which  are  above  that  median  level, the 

guarantee  schemes  offer  depositors  a  coverage  of  their  deposits  which  is 

higher; whereas  it does not seem appropriate  to require that  these schemes, 

certain  of  which  have  been  introduced  only  recently  pursuant  to 

Recommendation 87/63/EEC, be amended on this point; 

Whereas  the  retention  in  the  Community  of  schemes  providing  coverage  of 

deposits which  is higher  than  the  harmonized  minimum  may  lead on  the same 

territory  to  disparities  in  compensation  which  are  prejudicial  to 

depositors  and  unequaI  conditions  of  competition  between  national 

institutions  and  the  branches  of  institutions  of  other  Member  States; 

whereas,  in  order  to  counteract  these  disadvantages,  branches  should  be 

authorized  to  Join  the  host  country  scheme  so  that  they  can  offer  their 

depositors  the  same  guarantees  as  those  offered  by  the  scheme  of  the 

country where  they are  located; 

Whereas,  in order  to speed up payments under  the guarantee, the  initiation 

of  insolvency  proceedings  should  not  be  awaited,  unless  the  latter  take 

place within ten days of the deposits becoming unavailable because a credit 

institution  finds  it  impossible to comply with  the obligation of  refunding 

them  in accordance with  the  legal  and  contractual  provisions applicable to 

them; 

-  24  -

Whereas  a number  of  Member  States  have  deposit-protection  schemes  under  the 

responsibiIity  of  professional  organizations;  whereas  other  Member  States 

have  schemes  set  up  and  administered  on  a  statutory  basis  and  whereas  some 

schemes,  although  set  up  on  a  contractual  basis  are  partly  administered  on 

a  statutory  basis;  whereas  this  variety  of  status  poses  a  problem  only 

with  regard  to  compulsory  membership  of  and  exclusion  from  the  scheme; 

whereas  it  is  therefore  necessary  to  take  steps  to  limit  the  powers  of 

schemes  in this  area; 

Whereas  one  of  the  objectives  of  the  harmonized  minimum  protection  laid 

down  by  the  Directive  is  to  ensure  depositor  protection  up  to  a  certain 

amount,  while  excluding  from  such  protection  only  deposits  of  other  credit 

institutions  and  claims which  are  the  subject  of  special  conditions  such  as 

subordinated  deposits;  whereas  it  should,  however,  be  possible  for  each 

Member  State  to  limit  such  protection  to  depositors  who  are  unable  to 

evaluate  the  financial  policy  of  the  institutions  to  which  they  entrust 

their  deposits,  by  enabling  certain  categories  of  depositors  or  of  deposit 

to be excluded  from  the  guarantee; 

Whereas  the  principle  of  a  harmonized  minimum  limit  per  depositor  and  not 

per  deposit  has  been  retained;  whereas  it  is  therefore  appropriate  to  take 

into  consideration  the  deposits  made  by  depositors  who  either  are  not 

mentioned  as  holders  of  the  account  or  are  not  the  sole  holders;  whereas 

the  limit  must  therefore  be  applied  to each  identifiable  depositor;  whereas 

the  same  does  not  apply  to  collective  investments  in  transferable 

securities  made  via  financial 

institutions  and  subject  to  special 

protection  rules which  do  not  exist  for  the  abovementioned  deposits; 

Whereas  in compliance  with  the  Directives  governing  the  admission  of  credit 

institutions  having  their  head  office  in third  countries,  and  in  particular 

Article  9(1)  of  Council  Directive  77/780/EEC1,  as  last  amended  by 

Directive  89/646/EEC,  Member  States  are  to  decide  whether  and  on  what 

conditions  to  admit  the  branches  of  such  credit  institutions  to  operate  on 

their  territory;  whereas  such  branches  wiII  not  benefit  from  the  free 

1 

OJ  No  L  322,  17.12.1977, p. 30. 

-  25  -

provision  of  services  by  virtue  of  Article  59,  second  paragraph  of  the 

Treaty,  nor  from  freedom  of  establishment  in Member  States  other  than  the 

one  in  which  they  are  established;  whereas  accordingly  a  Member  State 

admitting  such  branches  may  decide  to oblige or  permit  such  branches  access 

to  the  guarantee  system  in  place  on  their  territory;  whereas,  however,  it 

is  appropriate  that  such  branches  should  be  required  to  inform  their 

depositors  of  whether  or  not  they  belong  to any  guarantee  system  and  of  the 

extent  and  limits of  any  such  guarantees; 

Whereas  depositor  information  is  an  essential  element  in  their  protection 

and  must  therefore  also  be  the  subject  of  a  minimum  number  of  binding 

prov isions; 

Whereas  deposit  protection  is an essential  element  in the  completion  of  the 

Internal  Market  and  an  indispensable  supplement  to  the  system  of 

supervision  of  credit  institutions  on  account  of  the  solidarity  it  creates 

between  all  the  institutions  in  a  given  financial  market  in  the  event  of 

one  of  then  fa iIing, 

HAS ADOPTED  THIS  DIRECTIVE: 

Art icle 1 

1.  For  the  purposes  of  this  Directive,  the  following  definitions  shall 

apply: 

Depos i t:  credit  balances  which  result  from  funds  left  in  accounts  or 

from  temporary  situations  deriving  from  normal  banking  transactions  and 

which  the  credit  institution must  repay  under  the  legal  and  contractual 

conditions  applicable,  and  claims  for  which  negotiable  certificates 

have  been  issued  by  a credit  institution. 

-  26  -

Joint  account:  an  account  opened  in  the  name  of  two  or  more  persons  or 

over  which  two or  more  persons  have  rights  that  may  operate  against  the 

signature of  one  or  more of  those  persons. 

Unavailable  deposit:  a  deposit  which  a  credit  institution  experiencing 

a  financial  crisis  is  unable  to  repay  under  the  legal  and  contractual 

conditions  applicable  to such  repayment. 

This  suspension  of  payments  need  not  necessarily  be  declared  or  decided 

by  a  judicial  or  administrative  authority;  it  is  sufficient  for  it 

actually  to  iast  for  ten  consecutive  days. 

At  the  end  of  that  period,  the  deposit  sha I I  be  deemed  to  be 

unavailable. 

2.  The  following  sha I I  be  excluded  from  any  repayment  by  the  guarantee 

schemes: 

the obligations  towards  other  credit  institutions; 

subordinated 

loans  in  respect  of  which  there  exist  binding 

agreements  whereby  such  loans  are  not  to  be  repaid  untiI  after 

settlement  of  all  other  debts  in  the  event  of  the  bankruptcy  or 

liquidation of  the  credit  institution. 

Art icle 2 

1.  Each  Member  State  shaII  ensure  that  on  its  territory  one  or  more 

deposit-guarantee  schemes  are 

introduced 

in  which 

all 

credit 

institutions  authorized  in  that  Member  State  under  Article  3  of 

Directive  77/780/EEC  must  take  part.  The  schemes  shaII  cover  the 

deposi tors  of  branches  set  up  by  such 

inst i tut ions  in  other 

Member  States. 

-  27  -

A branch  of  a credit  institution  authorized  in another  Member  State  may 

apply  to  Join  voluntarily  the  scheme  covering  the  category  of 

institution  to  which  it  belongs  in  the  Member  State  in  which  it  is 

established  in  order  to  suppiement  the  guarantee  which  its  depositors 

already  enjoy  by  virtue  of  their  obligatory  coverage  by  the  scheme 

referred  to  in paragraph  1. 

Member  States  shaII  ensure  that  objective  conditions  relating  to  the 

membership  of  these  branches  form  part  of  all  deposit-guarantee 

schemes. 

If one  of  the  credit  institutions  required  by  paragraph  1  to  take  part 

in the  scheme  or  one  of  the  branches  granted  voluntary  membership  under 

paragraph  2  does  not  comply  with  the  obligations  incumbent  on  it  as  a 

member  of  the  deposit-guarantee  scheme,  the  supervisory  authority  which 

issued  the  authorization  shaII  be  notified. 

After  taking  all  the  measures  necessary  to  secure  compliance  by  the 

credit  institution,  or  branch  thereof,  with  its  obligations  and  after 

noting  the  decisions  taken  by  the  supervisory  authority  (for  example 

reorganization  or  withdrawal  of  the  authorization),  the  guarantee 

scheme  may  exclude  the  credit  institution  or  branch.  In  that  case,  the 

guarantee  covering  the  institution's  depositors  shalI  be maintained  for 

twelve months  from  the  date of  exclusion. 

Art icle  3 

Subject  to  Article  9(1)  of  Directive  77/780/EEC,  Member  States  may 

stipulate  that  the  branches  established  by  credit  institutions  with 

their  head  office  outside  the  Community  must  join  a  deposit-guarantee 

scheme  in operation  on  their  territory. 

-  28  -

2.  In  any  event,  the  managers  of  foreign  branches  shall  provide  their 

depositors  with  information  enabling  them: 

either  to  identify  the guarantee  scheme  to which  the  branch  belongs 

and  to  be  aware  of  the  limits  or  ceilings  which  exist  in  that 

scheme; 

or  to note  the  absence  of  any  such  guarantee. 

3.  The  information  referred  to  in  paragraph  2  shall  be  made  available  in 

the  official  language(s)  of  the  Member  State  in  which  the  branch  is 

established  and  shall  be  drafted  in a  clear  and  comprehensible  form. 

Article  4 

1.  The  deposit-guarantee  schemes  shall  stipulate  that  the  aggregate 

deposits  of  a  given  depos itor  must  be  covered  up  to  ECU  15 000  in  the 

event  of  a  financial  crisis  in a  credit  institution  rendering  deposits 

unavailable. 

2.  Member  States  may  provide  that  certain  depositors  or  deposits  shall  be 

excluded  from  the  guarantee  or  shall  be  granted  a  lower  level  of 

guarantee.  The  exceptions  are  listed  in the  Annex. 

3.  This Article  shall  not  preclude  the  retention  or  adoption  of  provisions 

which  offer  a  higher  guarantee  ceiling. 

4.  Member  States  may  limit  the  guarantee  provided  for  in  paragraph  1  or 

that  referred  to  in  paragraph  3  to  a  specified  percentage  of  the 

deposits.  However,  the  percentage  guaranteed  must  equal  or  exceed  9 0% 

of  the  aggregate  deposits  unt i I  the  amount  to  be  paid  under  the 

guarantee  reaches  ECU  15 000. 

-  29  -

Art icle 5 

1.  The  limits  referred  to  in Article  4(1), (3) and  (4)  shall  apply  to  the 

aggregate  deposits  placed  with  the  same  credit  institution  irrespective 

of  the  number  of  deposits,  the  currency  and  the  location  within  the 

Commun i t y. 

2.  The  share  of  each  depositor  in  a  joint  account  shall  be  taken  into 

account  in calculating  the  limits  provided  for  in Article  4 ( 1 ), (3) and 

(4). 

In  the  absence  of  special  provisions,  the  account  shall  be  divided 

equally  between  the  depositors. 

3.  Where  an  account  holder  is not  the  beneficial  owner  of  the  sums  held  in 

the  account,  it  is  the  beneficial  owner  who  shall  be  covered  by  the 

guarantee.  If  there  are  several  beneficial  owners,  the  share  of  each 

owner  shall  be  taken  into  account  in  calculating  the  limits  provided 

for  in Article  4(1), (3) and (4). 

This  provision  shall 

not  apply 

to  collective 

investments  in 

transferable  securities. 

Art icle  6 

1.  Member  States  shall  ensure  that  the  managers  of  the  credit  institution 

provide  depositors  with  the  information  necessary  for  them  to  identify 

the  deposit-guarantee  scheme  in which  the  institution  and  its  branches 

take  part  within  the  Community.  The  limits  or  ceilings  applicable 

under  the  deposit-guarantee  scheme  shall  be  indicated  in  a  readily-

comprehensible  manner. 

2.  The  information  provided  for  in  paragraph  1  shall  be  available  in  the 

official  language(s)  of  the  Member  State  in  which  the  branch  is 

established  and  the  guarantee  limits  or  ceilings  and  the  level  of 

payments  shall  be  expressed  in ecus  and  in national  currency. 

-  30  -

Art icle  7 

1.  Payments  under  the  guarantee  provided  for  in Articles  4  and  5  shall  be 

effected  within  three  months  of  the  date  on  which  the  deposit  becomes 

unavailable,  or  of  a  court  or  other  authority  finding  that  payment  has 

ceased  if  this  has occurred  prior  to  that  date. 

2.  For  justified  reasons,  relating  solely  to certain  depositors  or  certain 

deposits,  the  guarantee  scheme  may  request  the  supervisory  authority 

for  an  extension  of  the  time  limit.  Such  extension  may  not  exceed 

three months. 

3.  The  time  limits  referred  to  in paragraphs  1 and  2 may  not  be  invoked  by 

the guarantee  scheme  in order  to deny  the  benefit  of  the  guarantee  to a 

depositor  who,  due  to  absence  or  for  any  other  justified  reason,  has 

been  unable  to  assert  his  claim  to  a  payment  under  the  guarantee  in 

t ime. 

4.  The  documents  relating  to  the  conditions  and  formalities  to  be 

fulfilled  in  order  to  benefit  from  a  payment  under  the  guarantee 

referred  to  in paragraph  1 shall  be  drawn  up  in detail  in  the  official 

language(s)  of  the  Member  State  in  which  the  guaranteed  deposit  is 

located. 

5.  Payment  under  the  guarantee  shall  be  effected  in  the  national  currency 

of  the  Member  State  in  which  the  guaranteed  deposit  is  located  or  in 

ecus 

irrespective  of  the  currency 

in  which  the  deposits  are 

denominated. 

-  31  -

Article  8 

1.  Member  States  shall  bring  into  force  the  laws,  regulations  and 

administrative  provisions  necessary  to  comply  with  this  Directive  by 

1  January  1994.  They  shall  forthwith  inform  the  Commission  thereof. 

When  Member  States  adopt  these  provisions,  these  shall  contain  a 

reference  to  this  Directive  or  shall  be  accompanied  by  such  reference 

at  the  time  of  their  official  publication.  The  procedure  for  such 

reference  shall  be  adopted  by Member  States. 

2.  Member  States  shall  communicate  to  the  Commission  the  text  of  the  main 

laws,  regulations  and  administrative  decisions  which  they  adopt  in  the 

field  governed  by  this  Directive. 

Art icle  9 

This  Directive  is addressed  to  the Member  States. 

Done  at  Brussels, 

For  the  Council 

The  President 

-  32  -

ANNEX 

List  of  deposits  referred  to  in Article  4(2) 

1.  Deposits  of  financial  institutions  within  the  meaning  of  Article  1(6) 

of  Directive  89/646/EEC. 

2.  Deposits of  insurance  companies. 

3.  Deposits of  the government  and  central  administrative  authorities. 

4.  Deposits  of  provincial,  regional,  local  or  municipal  authorities. 

5.  Deposits  of  undertakings  for  collective  investment  in  transferable 

securities. 

6.  Deposits of  pension  or  retirement  funds. 

7.  Deposits  of  directors,  managers,  members  personally  liable,  holders  of 

at  least  5%  of  the  capital  of  the  credit  institution,  members  of  the 

external  auditing  bodies  and  depositors  with  similar  status  in 

subs idiar ies. 

8.  Deposits  of  close  relatives  and  third  parties  acting  on  behaIf  of  the 

depositors  referred  to at  point  7. 

9.  Non-nom i na t i ve  depos i t s. 

10.  Deposits  for  which  the  depositor  has, on  an  individual  basis,  obtained 

from  the  credit  institution  rates  and  financial  concessions  which  have 

helped  to aggravate  the  financial  situation  of  that  credit  institution. 

11.  Debt  securities  issued  by  the  credit  institution. 

-  33  -

STATEMENT  OF  IMPACT ON  COMPETITIVENESS AND  EMPLOYMENT 

Title of  the  proposal: Coordination  of  laws,  regulations  and  administrative 

provisions  relating  to deposit-guarantee  schemes. 

1.  What  is the main  reason  for  introducing  the measure? 

The main  reason  is the  need  to ensure  throughout  the Community  that,  in  the 

event  of  a  financial  crisis  in a  credit  institution  having  its  head  office 

in  the  Community,  all  depositors  receive  a  payment  of  up  to  ECU  15  000 

within  three  months. 

This  minimum  protection  is also  intended  to  prevent  massive  withdrawals  of 

funds  where  rumours  emerge  (whether  or  not  justified)  about  a  bank's 

solvency. 

2.  Features of  the  businesses  concerned 

The  businesses  required  to  join  a guarantee  scheme  are  credit  institutions, 

i.e. a category  of  Iicenced  businesses  subject  to prudential  supervision. 

Apart  from  the  exceptions  given  in  an  exhaustive  list,  deposit  coverage 

extends  to all  deposits  of  less  than  ECU  15 000 made  by  depositors,  whether 

natural  or  legal  persons. 

3.  What  direct  oblioations  does  this measure  impose on  business? 

The  businesses  concerned,  i.e.  credit  institutions,  must  join  their  head 

office's  guarantee  scheme  in order  to  cover  their  depositors  and  those  of 

their  branches  situated  in  the  Community.  They  also  have  a  duty  to  inform 

their  depositors. 

-  34  -

The  businesses  benefiting  from  the  deposit  guarantee  have  no  obligations 
imposed  on  them  by  the  Directive  itself. 

4.  What  indirect  obligations  are  local  authorities  likely  to  impose  on 

bus iness? 

s 

The  branches  of  credit  institutions  having  their  head  office  outside  the 

Community  might  be  obliged  to  join  the  guarantee  scheme  of  their  host 

country. 

5.  Are  there  any  special  measures  in  respect  of  SMEs?  If  so.  what  are 

they? 

There  is  no  provision  in  the  directive  that  deals  specifically  with  SMEs 

but,  to  the  extent  that  the  deposits  of  legal  persons  are  covered  in  the 

same way  as  those  of  natural  persons,  they  wiII  benefit  from  this  extension 

of  the  guarantee  to  legal  persons  (not  provided  for  in  some  existing 

schemes). 

6.  What  is the  likely  effect  on: 

(a)  the  competitiveness  of  business? 
(b)  employment? 

There  should  be  no  direct  effect  on  competitiveness  or  employment.  This 
measure  comes  into  play  when  the  solvency  of  the  credit  institution  is 
seriously  compromised  and  its  recovery  is,  under  normal  circumstances,  no 
longer  possible. 

7.  Have  both  sides  of  industry  been  consulted7  What  are  their  views? 

• 

institutions  have  been 
The  various  European  federations  of  credit 
consulted,  as  has  EUROFIET,  the  body  representing  the  employees  of  credit 
inst i tut ions. 

AlI  the  associations  concerned  are  in  favour  of  introducing  a  minimum 
payment  of  ECU  15  000  by  way  of  a  guarantee.  They  have  submitted  comments 
on  some  of  the  detailed  rules  governing  that  guarantee. 

ISSN 0254-1475 

COM(92)  188final 

DOCUMENTS 

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ISBN 92-77-45286-2 

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