Thursday, 9 June 2016

Poland may go to court for failing to implement the Deposit Guarantee Schemes Directive

On 26 May 2016 the EU Commission decided to refer Poland to the CJEU for failing to correctly implement the Directive 2014/49/EU on Deposit Guarantee Schemes. Poland still transposes the Directive, way beyond the envisaged deadline of 3 July 2015. The new Directive replaces the previous, Directive 94/19/EC on Deposit Guarantee Schemes (as amended in 2008).

In the aftermath of the financial crisis the Directive is of an enormous importance for maintaining or regaining consumer confidence in the financial system. It protects savers, bank depositors by making their savings/deposits safe in the event of a bank failure. Guarantees are provided by guarantee funds that are funded by the banks and are established to pay out the deposits held by consumers up to the amount of 100.000 Euros per bank.

Beyond this basic protection, that has already been provided by the 1994 Directive, the new Directive foresees extended coverage (larger payouts for a limited time in case of life events such as a sale of a house), quicker payouts, payouts in different currencies, better consumer information (e.g. consumers must be informed that deposits held under different brand names of the same bank are not covered separately), fairer calculations of deposits (interests will be taken into account, outstanding loans will not be deducted) etc. The coverage extends to deposits held by personal pensions schemes and occupational pension schemes of small and medium enterprises, and deposits held by local authorities with a small budget. Finally, the new Directive also makes changes in the way deposit guarantee schemes are funded by putting in place better and more stable financing requirements for banks (it should be noted though that the Directive puts in place financing arrangements for making sure that funds have enough resources to deal with any failure of small and medium sized banks, whereas large banks will be subject to the Directive 2014/59/EU on Bank Recovery and Resolution).

It is not however set in stone that Poland will go to court. The EU Commission can withdraw the case from the CJEU if Poland implements the Directive. Nevertheless, in the meantime, bank customers/consumers are not entirely unprotected. The basic protection provided by the old Directive is in place and the Bank Guarantee Fund is in operation. Consumers may only deprived of the benefits provided by the new Directive.

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