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UK Bank Branches In EU Should Ensure Protection Of Deposits, Urges EU Banks Watchdog


03/01/2019


UK Bank Branches In EU Should Ensure Protection Of Deposits, Urges EU Banks Watchdog
In the eventually of Britain leaving the European Union without a deal on trade, the branches of British banks which are placed in the rest of the EU need to offer deposit account protection for customers of such branches. This has been urged by the EU banking watchdog.
 
According to the EU law, national deposit guarantee schemes is used to protect deposits in banks so that id there is a bankruptcy with, deposits of consumers with the bank of up to 100,000 euros would remain safe and would not lost but remain insured. However this system is not applicable for banks that are outside of the EU. Therefore is there is a no deal Brexit, the branches of British banks in the rest of Europe would not be protected.
 
The call on the schemes in EU states to make sure that deposits of customers in the branches of British banks in the EU are given adequate protection of there is a no deal Brexit when the UK crashes out of the RU on March 29, was given by the European Banking Authority, which itself has had to move out of London to set up base in Paris due to Brexit.
 
“The withdrawal of the UK from the EU is not likely to have an impact on the protection of deposits in the vast majority of credit institutions operating in the EU,” EBA said in an “opinion” published on Friday.
 
“It may affect branches of UK credit institutions in the EU depending on the decisions taken by the UK authorities on the potential exclusion of such branches from the scope of the UK depositor protection scheme, after the UK’s withdrawal from the EU.”
 
In case of “unprecedented” situations, it would need to take action, said the EBA, because there is no direction available in the EU law on deposit protection with respect to how to treat cross-border payouts with regards to such accounts existing in a non-EU branch.
 
It is worth mentioning that according to a proposal by the Bank of England in October last year,  Britain’s deposit protection scheme cannot be used to ensure protection of deposits of customers in the EU branches of UK banks in case of  a no deal Brexit., .
 
The EBA said that no definitive statement is has been made so far by the BoE.
 
Analysts are of the opinion and that of the EBA, based on the comments made by the BoE, that the attitude Britain clearly indicates that it would take an approach where there would be no protection for the customers of the UK banks in the EU under the British law unless the banks themselves joined the local deposit guarantee scheme.
 
(Source:www.reuters.com)