- In 2020, nearly all Deposit Guarantee Schemes (DGS) in the EU, Iceland, Lichtenstein and Norway have increased their available financial means (AFM) for reimbursing depositors in case of bank failures by more than 12%*.
- In the same period, covered deposits in the EEA grew by 8.6%*, which is twice the annual growth rate of the four preceding years.
- The strong increases in covered deposits in the pandemic year raise the likelihood of higher contributions from the industry in the coming years to meet the target level of 0.8% of AFM to covered deposits. This is because despite the increase in DGSs’ AFM, the relative amount of AFM to covered deposits has in aggregate increased only slightly.
The European Banking Authority (EBA) has published 2020 data relating to two key concepts and indicators in the Deposit Guarantee Schemes Directive (DGSD): available financial means, and covered deposits. The EBA publishes this data on a yearly basis to enhance the transparency and public accountability of deposit guarantee schemes (DGSs) across the European Economic Area (EEA) to the benefit of depositors, markets, policymakers, DGSs and Members States.
AFM 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 data as of 31 December 2020 shows that 34 of 36 DGSs in EU Member States, Iceland, Lichtenstein and Norway had increased their funds since the previous year by more than 12%*. In general, the increase stems from levies paid by banks that are members of those DGSs. In some cases, a significant increase in AFM in 2020 was the result of the DGS receiving recoveries from a previous intervention. In other instances, DGSs experienced a significant drop in AFM following bank failures where they had to use their AFM to reimburse depositors.
Covered deposits, in turn, are guaranteed up to 100,000 Euro or the equivalent in other currencies per depositor at each bank. In 2020, they increased significantly throughout the European Economic Area, reaching a year on year growth rate of 8.6%*, which is twice the annual growth rate for the period from 2015-2019 of 4.3%*. About half the DGSs even saw double-digit growth rates of the covered deposits they protect. The increase could be a consequence of the global COVID-19 pandemic as households may have delayed purchases due to commercial restrictions or sought to store their savings safely.
Changes in the AFM and covered deposits are relevant, because the ratio of AFM to covered deposits is the measurement for the target level of 0.8% of covered deposits set out in the DGSD, which the DGSs needs to reach by 3 July 2024. As of 31 December 2020, 18 DGSs have already reached the target level while 16 DGSs have yet to reach it. The above-average increases in covered deposits mean that the ratio of AFM 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 AFM to covered deposits.
Legal basis and background
The EBA is collecting this data in accordance with Article 10(10) of the DGSD.
On 23 July 2018, the EBA issued a decision to explain that it will make this data publicly available on its website.
(*) The growth rates in this press release are measured based on the aggregate for the EU 27, Iceland, Lichtenstein and Norway in Euros at constant exchange rates as of 31 December 2019.