Austrian Bank Deposit Guarantee Schemes

Alongside the internal measures to safeguard the stability of individual financial institutions, significant importance is given to consumer protection and bank deposit insurance. It is alleged that stress and panic can be mitigated when creditors and investors remain confident that their account balance is secure. Resolution planning then does not have to be rushed and distinct options to limit damages to a domestic financial system and its stakeholders can be considered.

Bank deposit insurance ensures the stability of a local financial system by avoiding a run on the liquidity of the bank. This objective is achieved by securing bank deposits up to a maximum level and guaranteeing prompt repayment of secured account balances after the closure of a supervised financial institution. Even though this type of deposit protection serves a purpose, it may also encourage moral hazard, excessive risk taking by financial advisers and indifference by customers. As a result, deposit protection is capped and established in advance.

The banking system in Austria is robust and hosts several full-service financial firms, universal banks, investment firms and credit institutions. Contrary to many other jurisdictions, no regulatory distinction exists in Austria between investment banks and commercial banks. The sector is therefore regulated and monitored by one single and integrated supervisor, the Financial Market Authority (FMA). The independent and autonomous FMA closely cooperates with the Federal Ministry of Finance (BMF) and the Oesterreichische Nationalbank (OeNB) to maintain domestic financial stability.

Austrian bank deposit guarantee schemes are defined and discussed in the Banking Act (Bankwesengesetz – BWG) and the Deposit Guarantee Schemes and Investor Compensation Act (Einlagensicherungs- und Anlegerentschadigungsgesetz – ESAEG). The frameworks follow the EU directives on deposit guarantee schemes and investor compensation schemes that allow member states to freely enact such schemes into national law for as long as the end-result of deposit protection is warranted. In order to accomplish this goal, Austria has identified three independent deposit guarantee schemes. These are Einlagensicherung AUSTRIA Ges.m.b.H., Österreichische Raiffeisen-Sicherungseinrichtung eGen, and Sparkassen-Haftungs GmbH.

Deposit insurance in Austria is outsourced to the private sector and includes heavily regulated uniform deposit guarantee schemes, contractual deposit guarantee schemes, and recognized institutional protection schemes. The objective of the schemes is to ensure the immediate calculation of eligible bank account deposits and after verification and approval the prompt repayment of said covered deposits.

DGS repayment can be made after a payout event occurs for credit balances held in transactional accounts, savings books and savings accounts, securities clearing accounts (not portfolios) and savings and loan contracts. A payout event is defined by the financial position of a supervised credit institution where it is unable to repay deposits that are due, insolvency procedures are initiated against the bank, where supervised management is imposed, or where an official payment stop is imposed. An announcement of a payout event is done by the FMA and published in the Official Gazette of the Wiener Zeitung.

Not all bank deposits qualify for deposit insurance and thus DGS repayment. Above all, bank deposit insurance covers bank deposits and not investment portfolios or other financial assets. The coverage of the schemes in Austria do not exceed 100.000 Euro per customer and member institution unless there are justifications to deviate from this norm and raise the protection up to 500.000 Euro. Exclusions from deposit protection in Austria include accounts where no transactions were made within the last 24 months prior to the payout event, and where the deposit value is lower than the administrative costs of the DGS claim procedure. Furthermore, claims are suspended when they are contestable, subject to legal disputes, there are restricted measures imposed on the deposit or account holder, further verification of the claim is needed to determine its eligibility. After its approval, a DGS payment is made within 7 to 10 working days to the bank account of the account holder in any EU member state or EEA country. To file your claim, please visit this page on Deposit Protection in Austria.