The European Union has unveiled new rules to protect investors who lose their money in fraudulent investment schemes and account holders whose banks collapse. The European Commission's draft rules are aimed at restoring consumer confidence in the wake of fraud scandals and the financial crisis which forced governments to bail out banks. 'We do not want to wait for new Madoff scandals to better protect investors in Europe,' said European financial services commissioner Michel Barnier, referring to Bernard Madoff, the Wall Street fraudster jailed for running a giant pyramid scheme.
The commission proposed to raise the minimum level of compensation for investors who lose their money due to 'fraud, administrative malpractice or operational errors' from €20,000 to €50,000. In the case of a bank collapse, account holders would get their money back faster, within seven days, and a higher safety net of up to €100,000 under national deposit guarantee schemes. The new rule would bring more standardisation to national rules, and would mean that 95% of European account holders would get their savings back if their bank fails, the commission said.
During the 2008-2009 financial crisis, the EU moved urgently to raise the coverage ceiling for account holders to €50,000 from €20,000. The commission proposes to double that amount from next year. The European Commission wants to harmonise bank deposit guarantee schemes in Europe because there are 40 different programmes across the 27-nation EU.