BRUSSELS // Bank deposits in the European Union should be guaranteed up to a minimum of ?50,000 euros (Dh250,000), rising to ?100,000 by the end of 2009, the European Commission proposed today in a bid to reassure investors. The reform was sparked by a string of bank rescues such as Northern Rock in Britain where there were long queues of depositors worried they would not get their money back. Germany and Ireland also rushed to issue blanket guarantees to depositors amid the worst financial market turmoil in 80 years.
EU governments have already agreed in principle to raise the minimum guarantee required under the bloc's rules to ?50,000 from ?20,000. Many will up it straight away to ?100,000 to soothe depositors facing the worst financial turmoil since the 1930s. "Increasing the minimum protection will strengthen Europeans' confidence in the safety of their deposits," the EU Internal Market Commissioner Charlie McCreevy said in a statement. The maximum amount of time for payouts if a bank fails would be three days compared with three to nine months at present.
EU finance ministers and the European Parliament, which has the final say, are committed to a speedy adoption of the measures. Mr McCreevy's spokesman told a news briefing that once adopted, it would be applied retroactively from Oct 15, 2008 so the ?100,000 guarantee would come into force by the end of 2009. The Commission said lifting the minimum guarantee to ?50,000 would cover 80 per cent of deposits, rising to 90 per cent with a guarantee of ?100,000.
The EU executive also proposes scrapping so-called co-insurance, a provision in the existing rules where a country has the option of deciding that a guarantee only covers 90 per cent of savings. EU leaders will meet in Brussels just days after stumping up ?2.2 trillion to rescue European banks and jolt frozen money markets - at the heart worst financial crisis since the Great Depression - into life. *Reuters
