Deposit protection

What it means

Deposit protection is statutory compensation for bank deposits, paid by the Deposit Protection Fund if a bank fails. Deposits are protected up to 100,000 euros per depositor per bank, regardless of how many accounts the depositor holds there. The system is harmonised across the EU.

Protection covers current accounts, savings accounts, term deposits and passbooks, for companies as well as individuals. It does not cover investments in shares, bonds or mutual funds, where the investor bears the risk.

The system is funded by banks' contributions to the fund. If a bank fails, the fund pays compensation quickly, usually within a few working days, without the depositor having to file a complicated claim. Higher protection may apply in certain situations, such as a temporarily high balance after selling a home.

How it works in practice

A company holding large sums should know that amounts above 100,000 euros in one bank are not protected. Spreading reserves across several banks reduces risk. For large sums, reserves are sometimes also placed in government securities, which carry a different kind of risk.

With neobanks, check whether the provider is a licensed bank covered by deposit protection or a payment institution, where money is not covered by the fund but only safeguarded separately. For foreign banks, protection is provided by the scheme of their home country.

Investment services have a separate scheme protecting clients of investment firms if a firm fails. It covers only assets that cannot be returned, not losses from falling investment values, and has its own limits.

What to watch out for

Deposit protection deals with bank failure, not fraud or the depositor's own mistakes. If a company sends money to a fraudulent account or someone misuses its online banking, the fund does not cover it. Security measures and insurance protect against such risks.

All of a depositor's deposits at the bank, including interest, count towards the limit. If a bank operates several brands under one licence, the limit applies jointly. When spreading money across banks, check that they really are separate banks with their own licences.