Deposit Protection A–Z

Account documents are all the important documents relating to your bank account. They help you keep track of your account and your finances. These include:

• Bank account documents: You get these from the bank when you open an account. They contain all the important information you need about the account, such as account number, IBAN and the bank’s terms and conditions.
• Bank statements: These show you a summary of all the deposits and withdrawals you have made, as well as the account balance. You receive them regularly from your bank – either digitally or on paper.
• Contract documents: These include the bank’s general terms and conditions (Ts&Cs), which explain what rights and obligations you have as the account holder. The information sheet for depositors is also one of these documents.
• Login details: If you use online banking, your login details (e.g. username, password or PIN) are also part of your account documents. You should keep them somewhere safe.
• Further information: This includes information about your card (e.g. your credit card or bank card), fees and other services.

Account documents are important for keeping track of your bank transactions, resolving issues or providing proof of payment, if needed. It is a good idea to keep these documents in a safe place and protect them from unauthorised access.

The account holder is the person that opens the bank account and is allowed to access it. The account holder can pay in, withdraw and transfer money from the account.

An account can only have one account holder, who has sole control over the account. However, it is also possible for several people to own an account jointly, for example, when married couples both have one account. This is known as a joint account. In this case, the account holders share the responsibility for and rights to the account.

Assigned institutions are banks that come under the protection of the Compensation Scheme of German Banks (Entschädigungseinrichtung deutscher Banken, EdB).

If a bank no longer has enough money to pay out to its customer or to cover its debts it is insolvent – like a company going bankrupt.

For you as the customer, this means:
→ no access to your account
→ your savings may be at risk
→ uncertainty as to what has happened to your money.

In concrete terms, this means: The funds in your account (e.g. current account, instant access savings account or fixed-term deposit account) are protected by law up to 100,000 euros per person and per bank. If your bank becomes insolvent, deposit protection steps in and pays you your money back – automatically and usually within 7 working days, but only if your money is a secured deposit. Funds, shares and cryptocurrencies are not protected.

A branch or branch office of a bank can be at a location where the bank operates outside its country of origin. This allows the bank to offer its services in other countries or regions as well.

If a bank from an EU country becomes insolvent and this bank has a branch in Germany, the Compensation Scheme of German Banks (Entschädigungseinrichtung deutscher Banken, EdB) ensures that you, as a customer of this bank, get your money back.

This is done on the instructions of the deposit guarantee scheme of the bank’s home country. The deposit guarantee scheme of the home country provides the EdB with the necessary funds and all the important information so that compensation can be made quickly and easily.

If your bank gets into financial difficulties, you are entitled to claim against the bank to get your money back: This is a legally protected claim to your credit balance, i.e. the savings in your current account or instant access savings account.

You can only be compensated in the event of a bank becoming insolvent if you have a claim as a depositor. And this is precisely what deposit protection is for. It steps in when your claim against the bank can no longer be met because the bank is insolvent.

A compensation event is determined by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) when a credit institution is no longer able to pay back due deposits. If this happens, then depositors are compensated by the Deposit Protection Scheme, usually within seven working days, according to the Deposit Guarantee Act and without having to submit an application.

The coverage amount is the maximum amount of your money that is protected by law in the event of a bank failure. In the EU (European Union), deposits of up to 100,000 euros per person and bank are protected.

This means: Deposits up to this amount are protected per bank and per customer, regardless of how many accounts one person has at the same bank.

A creditor is a person, company or organisation which is owed money and entitled to have that money repaid.

The opposite of a creditor is a debtor – that’s the person who owes the money.

These are key activities performed by financial institutions that support the smooth functioning and stability of the economy. If these activities are disrupted, the effects can be severe for financial markets, businesses, and consumers. Typical examples include taking deposits, processing payments, and providing loans.

A CRR credit institution is a bank that is subject to the European rules of the Capital Requirements Regulation (CRR). In other words: It is a fully regulated bank that must meet certain capital requirements and is subject to supervision by national and European authorities.
Only CRR credit institutions are subject to statutory deposit protection in Germany under the Deposit Protection Act (EinSiG).

Demand deposits are funds you have on your account that you can withdraw or transfer at any time. These are usually on a current account. You can use them flexibly, but you will earn little or no interest.

The German Deposit Guarantee Act (Einlagensicherungsgesetz, [EinSiG]) implements all the rules of the EU’s Deposit Guarantee Scheme Directive in German law. It forms the basis of the tasks performed by the Compensation Scheme of German Banks (Entschädigungseinrichtung deutscher Banken, EdB).

Deposit protection protects the money you deposit in your account at the bank. For example, in your savings account, your current account or fixed-term deposit account.

If your bank becomes insolvent, deposit protection makes sure that you get your money back – up to 100,000 euros per person and bank.

You can rest assured, your savings haven’t simply disappeared, even if your bank runs into financial difficulties.

And the best thing is, you don’t have to do anything. Deposit protection is activated automatically.

Digital currency is money that is only available in electronic form. So, it is not cash, like coins and notes. You can use it on your computer, smartphone or another digital device to send and receive money or to pay for goods and services. Examples include cryptocurrencies, such as Bitcoin, but also digital versions of government money that can be issued by central banks, like the planned digital euro. Digital currencies are not protected by deposit protection.

IADI stands for the International Association of Deposit Insurers and is a global organisation whose members are the deposit protection schemes from more than 100 countries around the world – the Compensation Scheme of German Private Banks (Entschädigungseinrichtung deutscher Banken, EdB) is also a member. 

IADI was founded in 2002 and is based in Switzerland at the Bank for International Settlements (BIS) in Basel.

In addition to developing international standards for deposit insurance (Core Principles for Effective Deposit Insurance Systems), its objectives include promoting knowledge sharing among members and strengthening financial stability by improving protection for savers.

The information sheet for depositors is an important document that your bank makes available to you and updates regularly. It helps you better understand how your savings are protected and what happens in an emergency.

Insolvency means that a person or business no longer has enough money to pay its bills and debts.

You are an investor if you purchase financial or tangible assets in order to generate a return. Examples of such assets include shares, bonds, real estate, investment funds or cryptocurrencies. Important to note: Different investments carry different levels of risk. As an investor, you are typically the one who assumes this risk.

Investor compensation is a statutory protection scheme that protects investors against losses that may arise if an institution has embezzled or misappropriated securities or funds and is no longer able to repay them. In this case, investor compensation ensures that investors recover at least part of their investment.

In the event of a loss, statutory investor compensation covers 90 percent of claims resulting from securities transactions, up to a maximum amount of 20,000 euros.

A joint account belongs to two or more people and is managed jointly, e.g. by couples, residents of a shared flat or business partners.

All those registered as joint account holders can:
 → pay in money,
 → withdraw money,
 → make bank transfers.

When it comes to deposit protection, there are special rules for joint accounts:

Up to 100,000 euros per person and bank are protected by law.
For two people, that’s up to 200,000 euros. The amount is automatically divided equally among the account holders, where no other agreements have been made.

But: if you have other accounts at the same bank in addition to the joint account (for example, your own instant access savings account), all balances are added together.
Protection of 100,000 euros applies per person and bank – not per account.

The least-cost test is a concept used to decide which measures for resolving a bank crisis are the most cost-effective or cause the least financial expense for the general public or taxpayers.

LSIs are usually small, regional banks. They play an important role in their region, but they are not significant for the stability of the entire financial system. This is why they are supervised by the national supervisory authorities (Federal Financial Supervisory Authority Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin in Germany) and not the European Central Bank, which monitors what are known as Significant Institutions (SIs).

A moral hazard occurs when someone takes more risks because they know that the costs of any compensation claims will be covered by someone else, such as an insurance firm. This can lead to that person being less cautious because they do not have to worry about the consequences as much.

A moratorium means that a bank is not allowed to make any payments or do business for a brief period. The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) may impose a moratorium if a bank gets into financial difficulties. The moratorium is intended to give the bank time to solve its problems and to ensure the situation is resolved properly and that you, as the depositor, are ultimately protected.

Every country in the European Union (EU) must have a deposit guarantee scheme by law.
This ensures that bank customers in all EU-countries are protected.

When a bank becomes insolvent and can no longer pay out their depositors’ money, the relevant national deposit guarantee scheme steps in.
It ensures that depositors get back up to 100,000 euros per person and bank – no matter where their bank is in the EU (European Union).

You normally get interest on money you deposit at a bank.
With negative interest, the situation is different. It means you have to pay money to leave your money on the account.

Negative interest can occur when interest rates overall are very low – for example, because the European Central Bank sets low or negative interest rates.
In this case it costs the banks themselves money to hold deposits. Some banks then pass on these costs to their customers.

In insolvency proceedings, the quota shows how much money creditors (e.g. customers, suppliers and banks) get back from their original claim. This amount is given as a percentage.

If the quota is, for example, 20 %, this means: For every euro someone is due to get from the insolvent bank, only 20 cents are paid out. The remaining 80 cents is lost because there is not enough money or assets available to fully pay off all the debt.

The distribution quota describes how the available money or assets are distributed amongst the creditors. Often, this happens according to certain rules:

• Equal distribution: All creditors receive the same percentage of their claim back.
• Senior creditor: Some creditors, such as the government, can be paid first. If enough funds are available, these creditors receive their full claim. 

After that the rest is distributed among the remaining creditors. It can happen that once payments have been made to senior creditors, there is no longer enough money remaining. In this case, the senior creditors receive only part of their claim or nothing at all.

A rating is an assessment of the creditworthiness of a business, bank, country or financial product. It shows how likely is it that debts or financial obligations can be paid back on time.

The Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz, SAG) regulates how banks that get into financial difficulties can recover or be resolved.

The SAG transposes the requirements of the Bank Recovery and Resolution Directive (BRRD) into German law and ensures that banking crises in Germany and the EU are resolved according to the same principles – with the aim of relieving the burden on taxpayers and strengthening trust in the financial system.

In deposit protection, risk-based contributions mean that banks have to pay different amounts depending on how risky their business model or financial situation is.

Risk-based contributions ensure that banks that pose the biggest risk to the deposit guarantee scheme, pay a larger amount towards financing it.

Significant institutions (SI) include banks that are considered particularly important for the stability of national or international financial markets (systemically important) due to their size, significance for the economy or international interdependence. If they were to fail, it could destabilise the financial system which is why they are subject to supervision by the Single Supervisory Mechanism managed by the European Central Bank and must meet higher capital requirements and comply with special resolution plans.

A systemic risk means that a problem at an individual bank can become so big that it affects the entire financial system.

The target level is the total amount of financial reserves a deposit guarantee scheme, such as the Compensation Scheme of German Private Banks (Entschädigungseinrichtung deutscher Banken GmbH), must retain in order to quickly and reliably protect customers’ deposits in the event of a bank becoming insolvent. These funds are built up through regular contributions from the assigned institutions.

According to EU law, by 2024, deposit guarantee schemes had to have achieved a target level of at least 0.8 % of covered deposits. 

Term is a period of time you invest your money with a bank. In a fixed-term deposit account, you deposit your money for a specific period of time – for example, one year. You are not able to access the money during this period. At the end of the term, you get your money back – often with interest.

Too-big-to-fail describes banks that are so big and so interconnected within the financial system that if they were to fail, it would have consequences for the entire economy.