The European Banking Authority (EBA) published on 1 March an Opinion, on deposit protection issues that relate to the withdrawal of the UK from the EU, based on Article 29(1)(a) of Regulation (EU) No 1093/2010 (the EBA Regulation). This is an initiative of EBA so as to promote a consistent approach in the area of deposit guarantees across the European Union (EU).
The EBA calls on the Deposit Guarantee Schemes Designated Authorities (DGSDAs) to ensure that the mechanisms of EU deposit guarantee schemes (DGSs) provide adequate protection to depositors in the branches of the UK credit institutions in the EU, in the case of a no-deal Brexit. EBA deems that it is not likely for most credit institutions operating in the EU to experience an impact on the protection of deposits for the reason of the withdrawal of the UK from the EU. However, there is the possibility that UK credit institutions in the EU may be affected in case that UK authorities decide to exclude such branches from the scope of the UK depositor protection scheme, after the UK’s withdrawal from the EU.
EBA states in its opinion that the EU DGSDAs need to be pro-active so as to ensure that deposits in such branches operating in the EU continue to be adequately protected after the UK’s withdrawal from the Union. The Authority also recommends that those branches become members of local EU DGSs and provides directions on how and by whom depositors should receive information about any potential changes concerning their deposits’ protection. Finally, the Opinion draws the attention of DGSDAs to potential issues in relation to depositors in branches of EU credit institutions operating in the UK potentially being covered by both the UK and the EU DGSs.
There are no branches of UK banks operating in Cyprus, at the moment. Therefore, Cyprus, is not expected to face any turbulence on this issue as a result of Brexit and its DGS is expected to continue its normal operation and remain intact. However, the importance of EBA’s Opinion is not underestimated, as it provides significant insight on the EBA’s approach to Brexit and this particular matter.