Protection of Small Depositors against Banks in Distress

1. Introduction
The Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions, to be implemented by EU Member State prior to 5 May 2004, states in recital (5): ‘The adoption of Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes, which introduced the principle of compulsory membership by credit institutions of a guarantee scheme in their home Member State, brings out even more clearly the need for mutual recognition of reorganisation measures and winding-up proceedings’. In this article I will describe the contents of the Directive on deposit-guarantee schemes (‘Directive 94/19’), which was adopted ten years ago.2
It should be noted in advance, that within the European Community the Directive on deposit-guarantee schemes is to be regarded as an early demonstration of a measure to harmoniously align the activities of credit institutions throughout the Community area.3 Directive 94/19 and the Winding-up Directive with regard to credit institutions (Directive 2001/24) mainly are a product of the same banking crisis, the collapse of Bank of Credit and Commerce International (BCCI) in 1991. In the beginning of the 90s the drafting work on the proposal for a Winding-up Directive came to a standstill, but the demise of BCCI in 1991 led to a new impulse in June 1993. The part in the proposal containing the draft-norms on deposit insurance was taken out and became the object of a separate Directive.4 The Directive 94/19 has a double aim, namely to promote this harmonised alignment through the elimination of all restrictions on the right of establishment and the freedom to provide services, while increasing the stability of the banking system and protection for savers. See the Directive’s first recital.5 Therefore ‘savers’ are protected in that they to a certain limit will not loose their money when this is deposited at a bank and the bank is unable to pay its debt to this depositor. In the context of the Directive 94/19 a ‘deposit’ shall mean ‘any credit balance which results from funds left in an account or from temporary situations deriving from normal banking transactions and which a credit institution must repay under the legal and contractual conditions applicable, and any debt evidenced by a certificate issued by a credit institution’, see art. 1 Directive 94/19. Hereunder we will take a closer look at this definition.

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