Brexit Prompts EU Watchdog To Urge Protection Of Consumer Deposits

Ahead of the U.K.’s potential departure from the European Union, the bloc’s banking watchdog is imploring member states to protect the deposits of customers. While national deposit schemes cover bank deposits up to 100,000 euros, that protection does not cover branches of banks from not in the bloc, Reuters reported.

The European Banking Authority said that member states of the E.U. should make sure that deposits in bloc branches of U.K. banks are protected. While the watchdog noted that the move would probably not impact deposit protection for most credit institutions, it said that it could “affect branches of U.K. credit institutions in the EU.” That could depend “on the decisions taken by the U.K. authorities on the potential exclusion of such branches from the scope of the U.K. depositor protection scheme after the U.K.’s withdrawal from the EU.”

In October, the Bank of England (BoE) had reportedly put forward the idea that British bank branches in the E.U. would not fall under the deposit protection scheme. With such an approach, clients of those banks wouldn’t have protection if the banks don’t become a part of local deposit guarantee plans. It was reported that EBA, which is based in the U.K., was to have a new office in Paris due to Brexit.

The news comes as it was reported that the EBA told European banks in December to prepare for the possible sudden withdrawal of the U.K. from the European Union. The EBA is concerned about the preparation of smaller institutions for the potential Britain departure — not only about financial stability.

The London-headquartered organization told banks to educate their customers on how the Brexit situation would affect them as well as prepare contingency plans. One regulator said, according to reports, “The EBA is … calling on all financial institutions affected …. to engage with their customers and provide adequate information on the risks and mitigating measures being taken.”