Cost Impact of Changing the Funding Mechanisms for Deposit-Guarantee

Abstract

Directive 94/19/EC on Deposit Guarantee Schemes (DGS) requires EU Member States to have DGS in place, which protect depositors to a certain extent in cases of default. The Directive leaves many structural aspects of DGS to the discretion of MS, including the way DGS are financed. As a result, the DGS funding mechanisms are very heterogeneous among MS. Some MS finance their scheme by means of regular contributions, whereas others levy contributions only in the event of a crisis. In between, there are a wide variety of schemes which collect both ex-ante contributions and ex-post levies. This study aims at investigating the effects of harmonising the mechanisms for funding DGS across the EU with the aid of a scenario analysis which applies three different ex-ante scenarios across the EU MS.