The proposal directive establishing a framework for the recovery and resolution of credit institutions and investment firms is expected to be approved by the end of this year. It addresses the functioning of the Resolution Fund and the Deposit Guarantee Scheme (hereinafter DGS), giving the skill to designate the resolution authority or authorities to each Member State. It also provides the option for Member States to decide whether or not to use the DGS as a funding mechanism for resolution actions. 

Having said the above, it is worth explaining how the DGS works in the event of a bank rescue or resolution. Directive 2009/14/EC amending Directive 94/19/EC established in section 1 that the coverage of the aggregate deposits of each depositor should be EUR 50,000 in the event of deposits becoming unavailable. In addition, paragraph 1a stipulated that Member States, by 31 December 2010 at the latest, would have to guarantee EUR 100,000 in the event of deposits becoming unavailable. The current proposal directive continues to set a guarantee for unavailable deposits in the amount of EUR 100,000 for all Member States. The novelty of this directive is the process of allocating losses arising from the rescue or resolution of the bank and the elimination of the implicit certainty of state financial aid that has existed until now in these situations. 

credit credit Regarding our legislation, it is necessary to comment that the Royal Decree-Law 16/2011 established the guarantee of 100,000 for deposits, covering additionally, independently of the previous guarantee, investors who have entrusted the entity with securities or financial instruments, the maximum amount of 100,000 euros, regardless of the issue and class of securities.

Therefore, from the above, you may wonder if the coverage of your deposits acts at an aggregate level for all the accounts you have in different banks that enter into rescue or resolution process, or at an aggregate level for each of the banks. On the Commission's website, among the answers to frequently asked questions related to the DGS, we are informed that the coverage is 100,000 for all deposits held at the same bank. Therefore, the level of deposits excluded ex-ante is 100,000 euros for all banks that are immersed in a rescue or resolution process. In addition, it should be noted that article 98a of proposal obliges Member States to give unsecured deposits of individuals, SMEs and microenterprises priority over unsecured liabilities and non-preferred creditors. Therefore, unsecured deposits would absorb losses after unsecured claims, non-preferred claims and deposits of large companies. We have to bear in mind that if the DGS does not have sufficient funds to reimburse depositors, it will have to immediately raise the necessary amount from its members, which is really complicated in a systemic crisis in a country and with a national DGS. association It is interesting to recall the case of Iceland which, as a member of the European Economic area is subject to the Court of Justice of the European Free Trade Association (EFTA Court). The EFTA Court, in the case of the Icelandic systemic banking crisis, interpreted that the directive was designed for individual bank failures and not for a systemic status . Therefore, it was a normal consequence of the systemic crisis that the DGS would fail, leaving depositors unprotected. However, the interpretation of the case by the Court of Justice of the European Union could be different, since this has happened in other situations, although they are not related to what we are analyzing here.

On the other hand, let us recall the Cypriot case, after tough negotiations with the Eurogroup and after having announced that deposits of less than 100,000 euros were not guaranteed, on March 29, 2013, the Central Bank of Cyprus and the Cypriot Government restructured the two largest banks in the country, Laiki Bank and Bank of Cyprus, transferring deposits from the former to the latter and finally guaranteeing deposits up to 100,000 euros.

Finally, please note that in the event that the proposal directive is implemented, it is expected that the likelihood of a banking system crisis and the taxpayer's exhibition to bear those losses will be lower.