Norwegian bank customers look set to lose the relatively generous deposit insurance they’ve enjoyed for years. Finance ministers in the European Union (EU) agreed Thursday to set a standard deposit guarantee at EUR 100,000 and expect it to apply to all banks within the EU and the European Economic Area of which Norway is a part.
The new standard EU deposit insurance maximum equates to around NOK 840,000. Norwegians’ bank deposits, by contrast, are insured for up to NOK 2 million, per customer per bank, meaning that if the EU rules are applied as expected to Norway, all deposits over NOK 840,000 in any given bank will become the equivalent of risk capital.
Finance Minister Siv Jensen has been lobbying hard to win an exception for Norway, and traveled to Strasbourg last week to try to persuade EU officials into letting Norway continue to guarantee and insure deposits at their current, higher level. Jensen is under pressure from both government colleagues and opposition politicians in Parliament to succeed, but it’s not easy to win such exceptions. Since Norway has never joined the EU, it’s not represented at the negotiating table on such issues, but still must abide by EU directives because of its economic cooperation agreement with the EU that grants Norway access to EU markets.
Labour Party politicians have accused Jensen of caving in too easily on the deposit insurance issue, while she responds that the former Labour-led government could have done more active lobbying on Norway’s behalf last winter, when the negotiations on the deposit insurance levels were most intense.
It’s all tied to the proposed EU banking union that was up for approval this week, as a direct consequence of the debt and euro crises. The idea is to build up national crisis funds that can be tapped if banks run into trouble again. Depositors throughout Europe, it’s thought, should have standard protection, much like how the Federal Deposit Insurance Corp (FDIC) in the US insures bank deposits up to USD 100,000 across state lines.
Norway’s much higher level of deposit protection will likely be cut to the EU level, but Jensen will now try to extend such implementation for as long as possible.