A comparative analysis of the US and EU retail banking markets - Wsbi

There has however been much effort at the EU level
to ensure that the many different actors present in
the EU banking sector are regulated in the same way.
Thus, a number of areas of banking have been
harmonised across Member States by EU Directives
which are applicable to all kinds of credit institutions,
irrespective of their legal form. Three examples are
the universal banking model, minimum amount of
own funds and deposit guarantee schemes 74 .
3.2.2.1.1 The “Universal Banking” model in Europe
A key feature of the 1989 Second Banking
Coordination Directive relates to the fact that the
activities in which credit institutions can engage in
are defined exhaustively 75 . The model promoted by
the Directive, and imposed throughout the EU, is the
“universal banking” model, as the Directive foresees
that credit institutions can engage in activities such as
“acceptance of deposits and other repayable funds”,
“lending”, “trading for own account or for account
of customers” or “safekeeping and administration
of securities”.
Before the adoption of the Directive, important
differences existed between Member States, as in
some countries strict limitations were imposed with
regards to authorised activities for banks, whereas in
other countries the model was already that of
universal banking. The Directive was thus a very
important milestone in terms of the creation of a
level playing field in the EU banking sector.
Noteworthy is also the fact that the activities defined
in the Directive apply to the institutions defined as
“credit institutions”, which includes institutions such
as banks, savings banks and cooperative banks.
Concretely, this means that whereas the legal
environment of individual Member States can
foresee specific features for the different categories
of credit institutions, the activities in which these
credit institutions can be engaged are the same and
are those defined by the Directive.
3.2.2.1.2 Minimum amount of own funds
Another key part of the Second Banking Co-ordination
Directive defines what is to count as capital for credit
institutions. In order for a national authority to grant
authorisation to prospective banks, the initial capital
must be no less than 5 million Euros and there is also
a provision intended to ensure that the component
authorities collect information on the identities of
shareholders or qualifying members. The competent
authorities shall refuse authorisation, taking into
account the need to ensure the sound and prudent
management of a credit institution, if they are
not satisfied as to the suitability of shareholders.
The directive lists a number of activities permissible
for a credit institution. Based on the universal banking
model the list contains a number of securities
activities in addition to traditional banking activities.
3.2.2.1.3 Deposit guarantees
Another example of bank harmonisation in Europe is
the requirement 76 that all credit institutions are either
member of a deposit guarantee scheme or that they
are covered by a protection scheme 77 , and that all
deposits must be at least covered up to 20,000 Euros
in the event of deposits being ‘unavailable’ 78 .
Member States may limit the guarantee provided to
a specified percentage of deposits. The percentage
guaranteed must, however, be equal to or exceed
90% of aggregate deposits until the amount to be
paid under the guarantee reaches the amount of
20,000 Euros. This limit applies to deposits placed
with the same credit institution irrespective of the
number of deposits.
Some Member States however – such as Germany,
the UK, Denmark, France and Italy – also have in
place additional voluntary protection schemes with
coverage levels which are significantly superior to the
minimum 20,000 Euros level, with Germany for
example requiring coverage of up to 100,000 Euros.
74 Note however that there is no EU-wide tax system as regards direct taxation since the EC-Treaty does not contain specific provisions to that regard. Direct and
indirect tax law is therefore only harmonised where required by the four freedoms enshrined in the Treaty.
75 Annex I to Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of
credit institutions.
76 Set in law by Article 3 sec. 1 of Directive 94/19/EC, as follows: “Each Member State shall ensure that within its territory one or more deposit-guarantee schemes
are introduced and officially recognised. Except in the circumstances envisaged in the second subparagraph and in paragraph 4, no credit institution authorised
in that Member State pursuant to Article 3 of Directive 77/780/EEC may take deposits unless it is a Member of such a scheme. A Member State may, however,
exempt a credit institution from the obligation to belong to a deposit-guarantee scheme where that credit institution belongs to a system which protects the
credit institution itself and in particular ensures its liquidity and solvency, thus guaranteeing protection for depositors at least equivalent to that provided by a
deposit-guarantee scheme, and which, in the opinion of the competent authorities, fulfils the following conditions…”
77 For example the savings banks in Germany have their own protection scheme in the form of deposit guarantee funds.
78 A deposit is regarded as being unavailable if it was due and payable and has not been available to a depositor for 21 days in succession, Article 1 Nr.3 of the
Directive 94/19/EC.
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