Spain Approves Bank Deposit Guarantees Up to €100,000

Photo credit: Chattanooga Times

Today it has been confirmed that Spain will guarantee all bank deposits up to €100,000. Until today the minimum amount guaranteed by law throughout Europe was €20,000 in case a bank filed for bankruptcy.

In practice, UE members have the freedom to raise the yardstick as they see fit. Such has been the case of the United Kingdom which has raised this week the minimum amount protected from 33,000 to 50,000 GBP in retaliation to Ireland’s unilateral decision of protecting the full amount of their depositors funds. This has created liquidity problems to UK banks which have witnessed massive withdrawals of funds seeking the save haven of Irish banks. Following Ireland’s decision last week, Germany also guaranteed the full amount of private individual’s bank deposits on Monday the 6th October. Many other European countries have followed Germany’s example this week.

In view of the unilateral increases of Ireland and the United Kingdom, the European Union’s Finance Ministers (Ecofin) gathered and decided today to raise the minimum amount protected from €20,000 up to €50,000. All European countries will now be forced to guarantee at least the said amount having the liberty to raise it. Spain only protected €20,000 until early this morning.

Spain’s president, Mr Zapatero, held an urgent meeting yesterday in Madrid with Spain’s six most prominent banks and savings banks promising to raise the minimum protected amount above the UE’s new threshold of €50,000 without specifying any concrete amount.

We welcome these measures, as they should help reduce the sense of panic and bring back confidence in the banking system.

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