Is the deposit guarantee a state guarantee?

[RedOnion]

Then what is the point of the DSG in the case of a big bank like AIB?

By the way the Dutch one specifically says money under 100k is guaranteed - poor choice of words ?

You asked about Bunq originally. Bunq is TINY in the context of banking. The Dutch DGS has enough cash to cover all of their covered deposits if needed. AIB has 20 times as much customer deposits as Bunq - if Bunq failed, the other Dutch banks would be asked to stump up what would be effectively loose change for a couple of years to rebuild the DGS fund.

In the context of AIB, the DGS fund is not really important at all; its a final backstop after everything else has failed, which would never be allowed to happen. The entire regulatory system across Europe is designed so that a DGS should never be triggered for a systemically important bank. Brendan has copied a post to the first post on this thread that explains how bail-in works. What is important is that 100k of your deposit balance is "covered", and therefore can't be touched until everything else has been burned. That's why DGS funds only need 1% to 2% of their covered deposits to be funded - by design it will only be used by the smallest of credit institutions.

Although not in the EU, what happened with Credit Suisse is an indication of the powers and approach of regulators if there's a sniff of a problem at a bank the size of AIB.

In Ireland the DGS has been called on 5 times for credit unions. DGSs have been called on several times across Europe, especially last year as a number of small banks with Russian connections failed following sanctions being imposed.

 

[Sarenco]

That's when the obligation on the Member States to ensure the fund is adequately funded

Nope, there's no such obligation.

What the EBA actually said was -

"Member States are obliged to ensure that DGSs have adequate alternative funding means in place to ensure that they can meet their liabilities to repay or protect depositors. In practice, this may, for instance, entail that the Member State provides a temporary State-funded backstop for its DGS."

So, Member States "may" provide a temporary State-funded backstop. Not "will" provide a backstop. Or "shall" provide a backstop.

"May".

I "may" pay you if John doesn't.

Not very reassuring, is it?

 

[askabouttax]

Nope, there's no such obligation.

What the EBA actually said was -

"Member States are obliged to ensure that DGSs have adequate alternative funding means in place to ensure that they can meet their liabilities to repay or protect depositors. In practice, this may, for instance, entail that the Member State provides a temporary State-funded backstop for its DGS."

So, Member States "may" provide a temporary State-funded backstop. Not "will" provide a backstop. Or "shall" provide a backstop.

"May".

I "may" pay you if John doesn't.

Not very reassuring, is it?

Again! Once the Central Bank makes the initial funding decision, this changes from "may" to "shall", in terms of the State having to pony up the funds.

 

[coolaboola12]

You asked about Bunq originally. Bunq is TINY in the context of banking. The Dutch DGS has enough cash to cover all of their covered deposits if needed. AIB has 20 times as much customer deposits as Bunq - if Bunq failed, the other Dutch banks would be asked to stump up what would be effectively loose change for a couple of years to rebuild the DGS fund.

In the context of AIB, the DGS fund is not really important at all; its a final backstop after everything else has failed, which would never be allowed to happen. The entire regulatory system across Europe is designed so that a DGS should never be triggered for a systemically important bank. Brendan has copied a post to the first post on this thread that explains how bail-in works. What is important is that 100k of your deposit balance is "covered", and therefore can't be touched until everything else has been burned. That's why DGS funds only need 1% to 2% of their covered deposits to be funded - by design it will only be used by the smallest of credit institutions.

Although not in the EU, what happened with Credit Suisse is an indication of the powers and approach of regulators if there's a sniff of a problem at a bank the size of AIB.

In Ireland the DGS has been called on 5 times for credit unions. DGSs have been called on several times across Europe, especially last year as a number of small banks with Russian connections failed following sanctions being imposed.

Thanks

 

[askabouttax]

You asked about Bunq originally. Bunq is TINY in the context of banking. The Dutch DGS has enough cash to cover all of their covered deposits if needed. AIB has 20 times as much customer deposits as Bunq - if Bunq failed, the other Dutch banks would be asked to stump up what would be effectively loose change for a couple of years to rebuild the DGS fund.

In the context of AIB, the DGS fund is not really important at all; its a final backstop after everything else has failed, which would never be allowed to happen. The entire regulatory system across Europe is designed so that a DGS should never be triggered for a systemically important bank. Brendan has copied a post to the first post on this thread that explains how bail-in works. What is important is that 100k of your deposit balance is "covered", and therefore can't be touched until everything else has been burned. That's why DGS funds only need 1% to 2% of their covered deposits to be funded - by design it will only be used by the smallest of credit institutions.

Although not in the EU, what happened with Credit Suisse is an indication of the powers and approach of regulators if there's a sniff of a problem at a bank the size of AIB.

In Ireland the DGS has been called on 5 times for credit unions. DGSs have been called on several times across Europe, especially last year as a number of small banks with Russian connections failed following sanctions being imposed.

Agreed. Which makes the current debate more of a hypothetical one really.