An increase in the current deposit coverage level of EUR 100,000 would have limited impact on financial stability and depositor protection, an EBA simulation shows

The European Banking Authority (EBA) today published a Report on the deposit coverage level and coverage of public authorities’ deposits, in response to a call for advice by the European Commission. The quantitative analysis and simulation show that a potential change to the current coverage level of EUR 100,000 would have positive but limited impact on financial stability and depositor protection. On the other hand, it would be costly and have a somewhat negative impact on moral hazard. The analysis also shows that the extension of coverage to public authorities’ deposits would have limited impact on the industry, mainly because there are relatively few public authorities in comparison to the overall number of depositors across the EU. 

The EBA’s response provides a quantitative analysis of the current EU deposit coverage of EUR 100,000. The analysis shows that currently under the EUR 100,000 coverage across the European Economic Area (EEA), 96% of depositors are fully covered, meaning that, in case of bank failure, they would be paid back the full amount of their respective deposit. The 4% of depositors that are not fully covered are mostly companies, and, despite being few in number, they hold more than half of deposits held in the EEA. 

The analysis also shows that, since the first assessment done by the European Commission in 2010, the proportion of fully covered depositors has not changed much, even though the amount of deposits has, overall, increased. This follows from the observation that the coverage level of EUR 100,000 continues to be well above the amount an average depositor holds, despite the inflation that occurred over the said period. 

The analysis then simulates the impact of a potential increase of coverage level to EUR 150,000 and EUR 250,000. It also simulates a EUR 1,000,000 coverage only for companies. The Report shows that a potential increase of the coverage level would have no impact on the vast majority of depositors, as they are already fully covered anyway.

The EBA also assessed the impact of a potential extension of coverage to include public authorities’ deposits and concluded that its previous recommendation dating back to 2019 to extend such coverage still holds. The analysis shows that such an extension would have limited impact on the industry, mainly because there are relatively few public authorities in comparison to the overall number of depositors across the EU.

Legal basis and background 

On 18 April 2023, the European Commission (EC) adopted and published a proposal for the review of the existing EU bank crisis management and deposit insurance (CMDI) framework . To inform the review, on 23 June 2023 the EC sent to the EBA a request for data on deposits. 

In accordance with Article 16a(4) of the EBA Founding Regulation, the EBA may, upon request from, inter alia, the EU Commission provide technical advice in the areas set out in the legislative acts referred to in Article 1(2) of the EBA Founding Regulation, including the Deposit Guarantee Schemes Directive (DGSD).