In a move that may wrinkle some noses, the European Central Bank (ECB) has announced that they will no longer be offering protection for covered deposits and that withdrawals will be limited when a bank is on the verge of failure. According to the posting:
“Covered deposits and claims under investor compensation schemes should be replaced by limited discretionary exemptions to be granted by the competent authority in order to retain a degree of flexibility.”
Currently deposits of €100,000, which are protected in the event of a bail-in would no longer receive that protection. However, this issue is not the most substantial. The report also suggests that banks would be able to limit depositors’ access to their own funds. According to the report:
“…during a transitional period, depositors should have access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request.”
Based on this stipulation, depositors would have access to only a small amount of their funds (dependent on the say of regulators) for as many as five days during a time of financial concern.
These sorts of moves by central banks only highlight the reasons why decentralized currencies like Bitcoin are gaining substantial followings in Europe and other regions where the economy is tightening and access to funds is drying up. Immediate full access is simple with cryptocurrency since users hold the funds directly without centralized controls.
Update: a link to the opinion issued by the ECB has been added to the story.