How Deposit Guarantee Schemes Work in the EU

Under the EU Deposit Guarantee Schemes Directive (2014/49/EU), every licensed credit institution in the EU is required to be a member of a national DGS. The DGS guarantees eligible deposits — current, savings and fixed-term accounts of natural persons and most SMEs — up to €100,000 per depositor per bank.

Excluded from coverage: deposits of financial institutions, government entities above SME size, pension funds, and structured or investment products marketed as deposits. Money market funds, share balances at a broker and e-money balances are protected by different (or, for e-money, no formal) regimes.

Coverage applies per depositor per licensed institution. Two accounts at the same bank share one €100,000 ceiling; two accounts at legally separate banks each get their own €100,000. Joint accounts are counted per depositor.

When a national resolution authority (in the euro area, coordinated by the Single Resolution Board) determines that a bank is failing or likely to fail and that no private-sector solution exists, it triggers either resolution or insolvency. In the insolvency path, the DGS is activated and begins the payout process.

The DGS receives the bank's covered-deposit register, verifies eligibility (per-depositor cap, joint-account splits, temporary high balances), and pays into a nominated account of each depositor. The DGSD target is 7 working days from the trigger, tightened progressively from a previous 20-day target.

In the Greensill Bank case (Germany, March 2021), the German DGS paid the majority of covered depositors within the target window. Larger and more complex claims — trusts, corporates, high-balance individuals — took longer as expected.

Above the €100,000 line, deposits are unsecured claims. In practice, most EU bank failures since 2015 have been resolved rather than liquidated — the SRB writes down equity, AT1 CoCos and eligible senior debt (bail-in) and transfers the operating bank to a new owner, so depositors are usually made whole above the DGS line too.

The exception is a small or specialist bank where resolution is not economical and full insolvency is chosen. In that case, uninsured claims above €100,000 rank pari passu with other unsecured creditors and can suffer material losses.

The right defence against this tail risk is straightforward: hold no more than €100,000 per licensed bank. A deposit ladder across three or four EU banks captures both the highest available rates and full DGS coverage on €300–400k.