Deposit Guarantee Scheme Directive EU 2014/49/EU

A new EU Directive on Deposit Guarantee Schemes (2014/49/EU) has been introduced. The EU Directive is aimed at harmonisation and simplification of protected deposits, a faster pay-out and improved financing of DGS schemes. In addition, new depositor information requirements have been introduced in order to ensure that depositors are aware of the key aspects of protection of their deposits by the DGS.

Click here for links to:

• EU Directive 2014/49/EU
• European Union (Deposit Guarantee Schemes) Regulations 2015 (S.I. No. 516 of 2015)
• Financial Services (Deposit Guarantee Scheme) Act 2009, as amended

Key Areas of the Directive for Depositors

Below is a summary of main changes arising from the Directive:

Eligibility Criteria

• The updated definition of a deposit may impact on the eligibility of some structured deposits/tracker bonds. The deposit element of a structured deposit is covered by the Deposit Guarantee Scheme ( DGS) if the deposit is repayable at par.
• The previous DGS exclusion for medium and large sized companies has been removed
• The previous DGS exclusion for ‘Connected Person’ (depositors related to senior management of credit institutions) has been removed

Temporary High Balances

The directive allows for coverage of ‘temporary high balances’.  This feature allows for the payment of compensation in excess of €100,000 in the case of qualifying deposits.  For a deposit to qualify as a Temporary High Balance it must stem from at least one of the following:

• deposits resulting from real estate transactions relating to private residential properties, to include, monies deposited in preparation for the purchase of a private residential property by the depositor, monies which represent the proceeds of sale of a private residential property of the depositor, or monies which represent the proceeds of an equity release by the depositor in a private residential property
• deposits that serve social purposes laid down in national law and are linked to particular life events of a depositor such as marriage, civil partnership, divorce, retirement, dismissal, redundancy invalidity or death
• deposits that serve purposes laid down in national law and are based on the payment of insurance benefits or compensation for criminal injuries or wrongful conviction

Qualifying deposits are protected for up to 6 months after the deposit has been credited to an account.

Payment Compensation Deadlines

The Directive reduces the deadline for the payment of compensation from 20 working days to 7 working days over a phased basis.

Depositor Information

The new directive sets out a requirement for credit institutions to provide depositors with a ‘Depositor Information Sheet’ when opening an account and on an annual basis thereafter.
The new directive also sets out a requirement for credit institutions to advise depositors of their DGS eligibility status on account statements.