Austria: Unlimited Deposit Guarantee

After Germany and Ireland implemented unlimited deposit guarantees, Austrian officials passed a law on October 26, 2008, that removed deposit-insurance limits for individual depositors, fearing that Austrians would move their money to countries with higher deposit coverage. The government established the program using the country's existing, mandatory deposit-insurance system (DIS), which was private, ex post funded, and segmented into sectoral schemes that covered different kinds of financial institutions. During payouts, the schemes covered the first EUR 50,000 (USD 67,000) of guaranteed funds to a given depositor, and the government the government covered the rest. The government required all financial institutions that were members of a sectoral scheme to participate in the unlimited guarantee. It covered checking, savings, and time-deposit accounts held by Austrian citizens. During 2009, the unlimited deposit guarantee covered EUR 275.7 billion in deposits. It expired on December 21, 2009, when a new, EUR 100,000 deposit-guarantee level went into effect. No payouts occurred while the unlimited guarantee was in operation. During the unlimited-guarantee period, deposits grew in all but the smallest guaranteed accounts. The International Monetary Fund (IMF) later criticized Austria's deposit-guarantee system because it was private, fragmented, and ex-post-funded. After consolidation, there are now three deposit-guarantee schemes, all of which have begun to accumulate ex-ante deposit-insurance funds with member contributions.