EU law impact on deposit protection in the financial crisis: Icesave

Publishers Abstract:
Case E-16/11, EFTA Surveillance Authority v. Iceland (Icesave), Judgment of the EFTA Court of Jan 28, 2013, nyr. is presented. In Icesave, the European Free Trade Association Court (EFTA Court) issued the first judgment' with regard to deposit protection during the financial crisis.

The EFTA Surveillance Authority (ESA), as the applicant in this infringement procedure, took the view that Iceland was in breach of its obligation under the Directive 94/19/EC, by not compensating deposit-holders of Dutch and British branches of Landsbanki, a credit institution with its head office in Reykjavik, Iceland, which was unable to repay deposits. The EFTA Court dismissed the ESA's application. It concluded that the EEA States, under Directive 94/19/EC, had to introduce and officially recognize Deposit Guarantee Schemes and to fulfil current supervisory tasks in order to ensure the proper functioning of those schemes. The ruling sheds some light on the mechanics of deposit protection in times of financial crisis and may therefore set a landmark decision for further rulings to come.