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    EBA Publishes Opinion on Improvement of Deposit Guarantee Directive

    February 11, 2020

    EBA published its third and final opinion, addressed to EC, on implementation of the Deposit Guarantee Schemes Directive (DGSD) in EU. The opinion focuses on deposit guarantee scheme (DGS) funding and uses of DGS funds and proposes a number of changes to the EU legal framework for DGSD. EBA invites EC to consider the proposals outlined in the opinions when preparing a report on the implementation of DGSD, for submission to the European Parliament and the Council. EBA also published a factsheet on improving depositor protection in EU.

    In its opinion, EBA assesses 33 topics related to DGS funding and uses of DGS funds, setting out 23 proposals for improving the legal framework for DGSD in EU. EBA calls for a clarification on what funds should count toward the available financial means (that is, ex-ante funds) of DGS and a clarification about when different DGS funding sources (including loans) can be used and under what conditions. The opinion also addresses the need to introduce more transparency in relation to the reporting of DGS funds, more consistency in the approach to payment commitments, and more precision in the DGSD in relation to how DGS funds should be invested.

    In addition, the opinion recommends the need for EC to further consider the consequences of the recent General Court ruling in the Tercas case, concerning the use of DGS funds to prevent failure of credit institutions and the ceiling up to which DGS funds can be used for such failure prevention. EC should also consider introducing, in the EU framework, the possibility to use assets of a failed institution to repay depositors. However, no changes have been proposed to the current DGSD provisions in relation to the minimum target level for the ex-ante funds, the target level basis, and the possibility for DGSs to continue collecting contributions above the minimum target level. The opinion also recommends that there is no need for changes in relation to contributions from third-country branches or for immediate changes to the risk-based contributions based on the assessment of their impact on different business models.

    Article 19(6) of the DGSD requires EBA to support EC in its development of a report on the progress toward implementation of the DGSD. The opinion on DGS funding and uses of DGS funds is the third part of the fulfillment of this mandate by EBA. This opinion follows the first opinion on eligibility of deposits, coverage level, and cooperation between DGSs (published in August 2019) and the second opinion on DGS payouts (published in October 2019).


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    Keywords: Europe, EU, Banking, Deposit Guarantee Schemes, DGSD, Opinion, Deposit Guarantee Fund, Resolution Framework, EC, EBA

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