2023/0115/COD: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/49/EU as regards the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency

A proposed new DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/49/EU as regards the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency was published in the Official Journal (OJ) of the EU. The proposed new directive is part of a series of legislative measures known as the so-called 2023 Crisis Management and Deposit Insurance Legislative Package. The key purpose of the package is to strengthen the current bank resolution and deposit insurance frameworks so as to increase financial stability in the event of bank failures, protect tax payers money from being used to bail out failing institutions, and to provide further protection for depositors.
This particular directive would modify the Deposit Guarantee Schemes Directive (DGSD) to make targeted amendments to include further deposits and depositors in the deposit guarantee scheme (DGS), increase the efficiency of the current scheme, and enhance information to be provided to depositors. Specifically, the directive would, among other things,
– include „public authorities“ in the scope of the depositor protection scheme to ensure consistent protection across all member states;
– exclude from depositor protection any funds gained from or relating to criminal activities as regards money laundering and terrorist financing;
– include temporarily high balances up to EUR 500.000 for up to six months so as to enable protection of inheritances or the payout of life insurance;
– include funds resulting from the sale or transfer of private real estate in the DGS;
– require depositors to provide proof of „temporary“ high balances or entitlements as regards beneficiary accounts;
– require any reimbursements from a DGS exceeding EUR 10.000 to be made via account credits (no cash payout);
– provide for a distinction of DGS claims availability in the case of bank resolutions, depending upon the type of resolution: the DGS would have no claim against bail-in entities, but would be eligible for repayment, if an institution was to be transferred to another entity;
– require the European Banking Authority (EBA) to develop guidelines on how DGS‘ should invest their funds;
– clarify the distinction between preventive and alternative measures provided by a DGS: „Preventive measures are DGS interventions supporting financially a bank in distress, for example in the form of guarantees, cash injections, participation in capital increase, before the bank meets the conditions for failing or likely to fail with the objective to preserve its financial soundness. Alternative measures are DGS interventions supporting the transfer of deposits and assets of the failing bank to another bank“;
– set out a set of preventive measures and conditions to ensure that DGS funds are used by institutions for their intended purpose; and
– require branches of third country institutions operating in the EU to join local DGS; and
– require EBA to develop regulatory technical standards as regards a new information sheet that must be used by institutions to provide information on DGS‘ to their clients.
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As these are only the key amendments that would be made to the Deposit Guarantee Schemes Directive (DGSD, please refer to the original draft for more detailed, comprehensive information.