The Promptness of European Deposit Protection Schemes to Face Banking Failures

This paper aims to investigate the e±ciency of European Deposit Protection Schemes (DPS) in ensuring adequate financial protection to depositors both in stable and unstable situations. Using data provided by DPS just before the 2008 ¯nancial markets crisis, the analysis focuses on di®er- ent aspects of their functioning. The intervention procedures in force are compared, the amount of available funds are analyzed by means of three quantitative indicators to assess the fund adequacy and the fastness of consumers repayment is investigated using data on occurred interventions. It can be concluded that rather heterogeneous procedures are currently in place in the European Union member states, thus posing the question whether more harmonized rules are needed to enhance the effectiveness of the DPS role in the ¯nancial safety-net. While under stable market situations most of the European DPS would be capable to face a crisis, in case of a critical period, such as the one at the end of 2008, they could encounter problems to adequately ful¯ll their role of consumers protector. Concerning the fastness of repayments, more stringent rules might be advisable from a consumer's perspective. Key words: deposit insurance, safety-net, banking crises, financial regulationJRC.DG.G.9-Econometrics and applied statistic