Coverage level under deposit guarantee scheme reduced for overseas depositors

Previous coverage level
Amendments

On 1 January 2019 amendments to the Act on Financial Institutions and Financial Groups entered into force. Among other things, the amendments have reduced the coverage level available under the Norwegian deposit guarantee scheme from NKr2 million (approximately €210,000) to €100,000 for EU customers that have deposits in Norwegian banks which offer services in their country on a cross-border basis.

Previous coverage level

Prior to the amendments, the coverage level for depositors in Norway under the country's deposit guarantee scheme was Nkr2 million per depositor per member bank. This was significantly higher than the €100,000 target that was introduced by the EU Deposit Guarantee Schemes Directive (2009/14/EC) and maintained in the revised EU Deposit Guarantee Schemes Directive (2014/49/EU) in order to achieve a fully harmonised coverage level.

The coverage level under the Norwegian deposit guarantee scheme has been discussed by the Norwegian government and the EU commission for a number of years. The issue was sidelined for a period, as the incorporation of all new EU financial regulations and directives into the EEA Agreement was delayed by disagreements between the European Union and the European Economic Area over the powers of new EU regulatory bodies, such as the European Securities and Markets Authorisation and the European Banking Authority. This issue was resolved in 2017, but the revised EU Deposit Guarantee Schemes Directive has still not been incorporated into the EEA agreement due to the Norwegian authorities' reluctance to reduce the country's coverage level. The latest indications from the EU Commission are that discussions concerning a transition period are ongoing.

Amendments

Although the revised EU Deposit Guarantee Schemes Directive has not been incorporated into the EEA Agreement, the Norwegian government has chosen to amend the Act on Financial Institutions and Financial Groups to conform with the directive on all aspects, except the deposit coverage level. Amendments have also been made to prevent distortion of competition due to the different coverage level in Norway compared with the European Union.

The Act on Financial Institutions and Financial Groups already limited the coverage level for EU customers with deposits in Norwegian branches established in the European Union. However, this limitation has been expanded to include Norwegian banks which offer services on a cross-border basis. Norwegian banks which offer only online banking services on a cross-border basis to EU countries have, until now, been able to offer higher coverage levels compared with Norwegian banks that have established branches.

However, notably, the amended act reduces the coverage level only for deposits received through cross-border services to another EEA or EU member state. The question of whether services are being provided on a cross-border basis in Norway is decided based on a solicitation test. This implies that it should still be possible for depositors in the European Union to benefit from the higher coverage level under the Norwegian deposit guarantee scheme if:

• they use a bank that has not notified its intention to provide services in the depositor's country; and
• the deposit is based on a first approach by the customer to the Norwegian bank.

The Norwegian Banks' Guarantee Fund has stated that it expects banks to maintain records identifying customers that were acquired based on cross-border services.

For further information on this topic please contact Karl Rosén or Johan Christian Kongsli at Advokatfirmaet Grette AS by telephone (+47 22 34 00 00) or email (karo@grette.no or joko@grette.no). The Advokatfirmaet Grette AS website can be accessed at www.grette.no.