EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits. In 2020, nearly all DGS in EU, Iceland, Lichtenstein, and Norway increased their available financial means for reimbursing depositors in case of bank failures by more than 12%. Additionally, covered deposits in the European Economic Area grew by 8.6%, which is twice the annual growth rate of the four preceding years. Changes in the available financial means and covered deposits are relevant, because the ratio of available financial means to covered deposits is the measurement for the target level of 0.8% of covered deposits set out in the DGS Directive, which the DGSs need to reach by July 03, 2024.
As of December 31, 2020, 18 DGSs have already reached the target level while 16 DGSs have yet to reach it. Available financial means is the amount of funds raised by DGSs from credit institutions and its main purpose is to reimburse depositors in case of bank failures. The increase in the available financial means as of December 31, 2021 stems from levies paid by banks that are members of those DGSs. In some cases, a significant increase in available financial means in 2020 was the result of the DGS receiving recoveries from a previous intervention. In other instances, DGSs experienced a significant drop in available financial means following bank failures where they had to use their available financial means to reimburse depositors.
In 2020, about half the DGSs even saw double-digit growth rates of the covered deposits they protect. The increase could be a consequence of COVID-19, as households may have delayed purchases due to commercial restrictions or sought to store their savings safely. The above-average increases in covered deposits mean that the ratio of available financial means to covered deposits increased by less than it would have otherwise. The consequence might be that the DGS contributions might need to be higher in the coming years, particularly where the DGS has not yet reached the target level of 0.8% of available financial means to covered deposits. Covered deposits, in turn, are guaranteed up to EUR 100,000 or the equivalent in other currencies per depositor at each bank.
Keywords: Europe, EU, Banking, Deposit Guarantee Schemes, DGSD, Available Financial Means, Covered Deposits, EBA
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