A Guide to Financial Regulation for Fintech Entrepreneurs

SHEET 8Deposit Guarantee Scheme Directive

Deposit Guarantee Scheme Directive—The directive establishing uniform Deposit Guarantee Schemes in the EU

Summary

This directive establishes common standards for deposit guarantee schemes within the EU. In particular, it defines which deposits are covered and which are not, what the coverage levels are, and operational details like the timeframe within which customers have to be reimbursed.

It also establishes the requirement that deposit‐taking institutions must join a DGS, and it deals with the applicable split of contributions to be made to that scheme.

Relevance for Fintech Companies

This directive is potentially important for all entities holding customer deposits. It will probably not apply to a large number of Fintech companies—taking deposits in many cases also implies being regulated as a bank, eg under the Basel 3/CRD regulations which can be tedious—but for some business models it is important to understand the exact nature of the exceptions, and to ensure that the company stays within the relevant parameters.

Also, companies must understand that funds that are not subject to deposit protection can be very fickle and disappear at the first sign of trouble, so regulators might want companies to be either be prepared for that, or to ensure that their funds are held in segregated accounts with a third party where they are bankruptcy‐remote with respect to the Fintech company in question, and ideally protected by a deposit ...