Deposit Insurance: Security for your Savings Deposits
Savings accounts, current accounts, and fixed-term deposits are among the most popular investments in Europe due to their high level of security. This is thanks to deposit insurance, which guarantees the repayment of deposits in case of a bank’s insolvency. The amount of deposit insurance varies depending on the credit institution; in addition to the statutory protection of 100,000 euros, there are often voluntary protection systems.
On this page, learn exactly what deposit insurance means, how much it amounts to, and which countries are covered.
When Does Deposit Insurance Take Effect?
Deposit insurance takes effect when a bank or credit institution, such as a savings bank, becomes insolvent and can no longer repay customer deposits. This ensures that all investors recover their money and possible interest earnings at least up to the amount of the statutory deposit insurance. Investors can be private individuals as well as civil law partnerships, registered associations, foundations, and smaller companies.
What Deposit Insurance Systems Exist for Statutory Deposit Insurance?
- French deposit insurance system (Fonds de Garantie des Dépôts et de Résolution - FGDR)
- Italian deposit insurance system (Fondo Interbancario di Tutela dei Depositi - FITD)
- Recognized institutional protection schemes in various countries, including:
- Dutch deposit insurance system (Depositogarantiestelsel)
- Spanish deposit insurance system (Fondo de Garantía de Depósitos - FGD)
Is Institutional Protection also Deposit Insurance?
How High is the Deposit Insurance?
In Germany and the Eurozone, the statutory deposit insurance is 100,000 euros per customer and bank. In Sweden, deposits are insured up to 1,050,000 Swedish Krona, while Norway, although not in the EU, offers deposit insurance of 2 million Norwegian Krona. The actual coverage in euros may vary depending on the exchange rate. Currently, this corresponds to about 101,603 euros in Sweden and about 206,148 euros in Norway, which is double the EU-wide harmonized deposit insurance.
Some banks in Germany offer additional protection beyond the statutory deposit insurance by being members of voluntary protection systems. The amount of this additional coverage varies and can be found in the terms and conditions or inquired about directly with the bank.
Does Deposit Insurance Apply per Account or per Person?
Deposit insurance does not apply separately to each account, but per person and bank. If an investor has multiple accounts with one bank, the total balance of these accounts is added together and compensated up to the amount of the deposit insurance. However, with multiple banks, investors benefit from deposit insurance per bank.
What Does Voluntary Deposit Insurance Mean?
Banks can voluntarily provide additional protection for their customers’ deposits through deposit insurance funds of banking associations. This increases the compensation amount in case of insolvency. Each credit institution decides the amount of voluntary deposit insurance itself, with a limit of maximum 15 percent of the bank’s equity capital, which is to be reduced to 8.75 percent by 2025. However, there is no legal entitlement to compensation.
Various voluntary protection schemes exist in the EU:
- Deposit insurance fund of the French Banking Association (FGDR) for private banks
- Deposit insurance fund of the Spanish Banking Association (Fondo de Garantía de Depósitos - FGD) for public banks
- Fondo Interbancario di Tutela dei Depositi (FITD) in Italy for additional deposit protection
- Belgian deposit insurance system (Fonds de Garantie pour les services financiers) for voluntary protection by private banks
This is how Deposit Insurance Works in the European Union
Deposit protection in the EU is regulated by various compensation schemes. The voluntary deposit protection only applies when the statutory limit has been exhausted. Initially, compensation is paid from the “pool” of statutory protection schemes before resorting to voluntary protection schemes. The level of protection varies by country and bank and can usually be viewed on the bank’s website or in its terms and conditions.
Investors generally do not need to take action themselves to receive their compensation. In the event of a bank’s insolvency, all investors are informed, and the responsible compensation scheme handles the payout. This must occur within 7 working days after determining the compensation case. The claim for compensation expires only 5 years after becoming aware of the insolvency, as stipulated in the national laws on deposit protection.
Does German Deposit Protection also Apply to Securities?
Securities, such as stocks or bonds, as well as shares in funds and ETFs, are not deposits and therefore not covered by deposit protection. However, this regulation is usually not problematic, as the securities belong to the investors and are merely held in custody by the banks. In the event of a bank’s insolvency, securities and shares can normally be transferred to another credit institution without losses.
Would you like to invest in securities and benefit from attractive return opportunities? In addition to offers for savings accounts and fixed-term deposits at AGw, you can also invest in globally diversified and cost-efficient ETF portfolios.
Deposit Protection in Europe
The European Union has introduced uniform rules for deposit protection that harmonize savings deposits protection in the EU. In the Eurozone, protection applies up to 100,000 euros per customer and bank, while in Sweden, deposits are protected up to 1,050,000 Swedish Krona. Non-EU countries also offer deposit protection; Norway, for example, secures 2 million Norwegian Kroner, and in Switzerland, deposits are protected up to 100,000 Swiss Francs.
Each EU state is obliged to implement a national deposit protection system. This regulation is a legally anchored commitment to EU-wide protection of savers and stability in the Union. In the event of insolvency of a bank in another EU country where German customers have deposits, compensation is automatically provided through the German protection system, without the need for complicated processing. This is done on behalf of the foreign compensation scheme, without burdening AGw.
For savers, it can be worthwhile to look for savings accounts or fixed-term deposits in other EU countries, as these deposits are also subject to statutory deposit protection. This allows investors to benefit from higher interest rates compared to German banks.
Invest Money EU-wide with AGw
Savings accounts and fixed-term deposits are secure forms of investment not only in Germany but throughout the EU. This brings significant advantages, as the interest rates on money investments are often higher there than in Germany. All investment offers at AGw are subject to EU-wide harmonized deposit protection. The protection is provided in accordance with the provisions of the respective investment bank, which can be found at any time in the information sheet for investors. Additionally, AGw publishes the country rating of EU countries for better orientation for customers.