EBA recommends maintaining protection of depositors in case of a no-deal Brexit

The European Banking Authority (EBA) published today an Opinion relating to deposit protection issues stemming from the withdrawal of the UK from the EU. In this Opinion, the EBA calls on the Deposit Guarantee Schemes Designated Authorities (DGSDAs) to ensure that depositors in the branches of the UK credit institutions in the EU are adequately protected by the EU deposit guarantee schemes (DGSs), in case of a withdrawal of the UK from the EU with no ratified agreement in place. 

The withdrawal of the UK from the EU is not likely to have an impact on the protection of deposits in the vast majority of credit institutions operating in the EU. It may affect branches of UK credit institutions in the EU depending on the decisions taken by the UK authorities on the potential exclusion of such branches from the scope of the UK depositor protection scheme, after the UK's withdrawal from the EU.

In its Opinion addressed only to the DGSDAs, the EBA is of the view that the EU DGSDAs need to take active steps to ensure that deposits in such branches operating in the EU continue to be adequately protected after the UK's withdrawal from the EU. In a bid to ensure that covered deposits are protected, the EBA recommends that those branches become members of local EU DGSs.

The EBA also explains when, how and by whom depositors should be informed about any potential changes to the protection of their deposits. The EBA also recalls applicable provisions in relation to potential transfers of some DGS funds between the UK and the EU DGSs, which does not have a direct impact on the level of protection offered to depositors.

Finally, the Opinion highlights to the DGSDAs potential issues stemming from depositors in branches of EU credit institutions operating in the UK potentially being covered by both the UK and the EU DGSs.

Legal basis and next steps

The competence of the European Banking Authority (EBA) to deliver an opinion is based on Article 29(1)(a) of Regulation (EU) No 1093/2010 (the EBA Regulation), and part of the EBA's objective is to promote a consistent approach in the area of deposit guarantees to ensure a level playing field and the equal treatment of depositors across the European Union (EU).

Where depositors or credit institutions have any questions in light of the Opinion issued by the EBA, they should contact their local DGS and or the DGSDAs to discuss and to seek guidance, where necessary.