Economic experts have been warning for some time about a reality affecting the Spanish banking system. The deposit guarantee fund, which is supposed to protect our savings in the event of a bank failure, could be insufficient. How can we secure our finances?

In theory, a deposit guarantee fund (DGF) protects the savings we have in the country’s banks by imposing a fixed term of up to a maximum of 100,000 euros per individual or legal entity. In this way, if a bank were to fail and could not meet its obligations to its customers, the country’s DGF would be responsible for compensating account holders for their savings up to a maximum of 100,000 euros. Even so, if you had more than 100,000 euros in a single current account, the DGF would not cover the difference.

This is the theory, but in practice, economic experts warn that this DGF, in Spain, has a black hole that would prevent it from covering losses. At this point, it is necessary to ask how the DGF gets its resources. All the banks that are registered in the State Register of Banks and State Banks, and which have access to financing from the Bank of Spain, have to make contributions to the DGF. Thus, as recommended by the European Central Bank, the DGF’s resources should be at least 1% of the total deposits contracted by the country’s banks.

Therefore, according to the calculations made by experts, Spain’s DGF should have between 5,500 and 8,250 million euros at its disposal. Even so, prestigious economists such as Santiago Niño Becerra consider that this figure falls short in the event that some of the main banking operators of the Spanish State go bankrupt. And, as if that were not enough, they warn that the DGF does not even have these 8,250 million, because it is still recovering from the contributions it had to make during the bank bailout due to the economic crisis of 2008. If the DGF’s figures are negative, they warn, it is necessary to take a cautious approach. This is why banks have complimentary insurance: where the DGF does not reach, insurance must reach.

EMIs, a safe bet

For this reason, experts recommend opening current accounts in banks that have insured customer deposits through Electronic Money Institutions (EMI), as 11Onze does. EMIs are regulated companies that are authorized to issue electronic money as a digital equivalent to cash. EMI licenses are issued by the Central Banks of each country, and in order to operate in the European Union they are required to have a very high capital.

EMIs, unlike traditional banks, are not allowed to sell unsound banking products, promote investment products or recommend credit-risky transactions to customers. This last condition is possibly the most important, because when a client deposits his money in a traditional bank, he is taking a risk. This is because banks are allowed to use customer deposits for lending. EMIs, on the other hand, are not authorized to do so and, therefore, offer zero risk and ensure that your savings are 100% safe.

In addition, these EMIs are required to insure 100% of the deposits received with insurance policies, regardless of the amount. In addition, the money cannot be deposited in just any bank: it has to be a bank of recognized solvency and classified among the Globally Systemic Important Banks (GSIB). Finally, customer deposits insured by an EMI are not part of the balance sheet of the EMI itself and are, therefore, off the balance sheet in case of bankruptcy of the EMI, i.e. they are still protected by the insurance, which guarantees full recovery of the savings.

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