Deposit protection is most of all a domestic matter. This means that local interest prevails over international coverage levels. Jurisdictions whose financial industry is out of balance because of the inflow of foreign capital in comparison to the size of the domestic economy have different needs than financially balanced countries. As a result, international depositor protection is distinct and maximum coverage levels of such insurances depend on several factors.
Payment systems are needed to support micro economic affairs. If one of the members of a payment system fails, the chain may be disrupted with negative effects to the real economy. Bank deposit protection aims to provide liquidity to cover insured deposits of retail depositors, small business owners and other creditors and avoid such disruption. The second determinant of deposit insurance is the overall confidence in the financial system to remain in a position to attract investors. It is alleged that instable jurisdictions with a weak banking system pay a higher price on the capital markets and experience difficulties to attract foreign direct investment.
A combination of the protection of the value of a local currency, the public interest doctrine and the economic position of a country determines the approach towards bank deposit protection. Based on these criteria different Deposit Guarantee Schemes (DGS) exist with distinct outcomes and coverage levels. Whilst ensuring the outcome of financial stability, the local DGS outlines the framework and applicability for deposit insurance on its website. Licensed financial institutions are responsible for the information provision of a DGS to their account holders. This includes information on claim eligibility and maximum coverage levels.
Harmonization of (international) depositor protection is recommended for countries that follow similar legal and financial systems are participate in an internal market. The latter is to ensure that the absence of trade barriers and the requirements of equal treatment for all people and companies in a single market are warranted. Account holders must assure themselves of the procedures involved to avoid misconceptions and as a result failure to qualify for deposit insurance.
As for the maximum coverage levels of international depositor schemes some general terms apply. Member states of the European Economic Area (EEA) hold an identical DGS coverage level of 100.000 euro for eligible creditors. The FDIC in the USA provides bank account holders with 250.000 USD, whilst the UK and its FSCS accounts for 85.000 GBP. The Financial Claims Service of Australia 250.000 AUD per eligible account holder. Individual schemes and further details per scheme are discussed under the jurisdictions tab on this website. An additional point of interest is that several local deposit protection schemes in the European Union allow for deviation of the maximum covered amounts by the application of temporary high balances and the implementation of voluntary deposit guarantee schemes alongside the mandatory scheme.