An institutional protection scheme (IPS) is an arrangement defined under

European Union law European Union law is a system of Supranational union, supranational Law, laws operating within the 27 member states of the European Union (EU). It has grown over time since the 1952 founding of the European Coal and Steel Community, to promote ...

since 2013 by the Capital Requirements Regulation, involving a form of mutual liability among several banks and financial institutions, under which each participating entity is protected from

insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...

by the financial resources of the other participants. Institutional protection schemes have been described as "virtual groups" of banks. They are particularly prominent in

Austria Austria, formally the Republic of Austria, is a landlocked country in Central Europe, lying in the Eastern Alps. It is a federation of nine Federal states of Austria, states, of which the capital Vienna is the List of largest cities in Aust ...

and

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

, and also exist in

Italy Italy, officially the Italian Republic, is a country in Southern Europe, Southern and Western Europe, Western Europe. It consists of Italian Peninsula, a peninsula that extends into the Mediterranean Sea, with the Alps on its northern land b ...

Poland Poland, officially the Republic of Poland, is a country in Central Europe. It extends from the Baltic Sea in the north to the Sudetes and Carpathian Mountains in the south, bordered by Lithuania and Russia to the northeast, Belarus and Ukrai ...

and

Spain Spain, or the Kingdom of Spain, is a country in Southern Europe, Southern and Western Europe with territories in North Africa. Featuring the Punta de Tarifa, southernmost point of continental Europe, it is the largest country in Southern Eur ...

Overview

The regulatory definition of an IPS under EU law is set out in article 113(7) of the EU Capital Requirements Regulation, first enacted in 2013. That text stipulates in particular that an IPS is a "contractual or statutory liability arrangement which protects those institutions hich form itand in particular ensures their liquidity and solvency to avoid bankruptcy where necessary". It details a number of criteria for IPS designation, including that the IPS "shall be based on a broad membership of credit institutions of a predominantly homogeneous business profile", even though it does not specifically define these concepts. National authorities are in charge of IPS designations. In the

banking union The European banking union refers to the transfer of responsibility for banking policy from the member state-level to the union-wide level in several EU member states, initiated in 2012 as a response to the 2009 Eurozone crisis. The motivation f ...

, such designation is operated under guidelines published by the

European Central Bank The European Central Bank (ECB) is the central component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's Big Four (banking)#International ...

, and ECB Banking Supervision is directly involved in the supervision of IPSs to the extent that the latter include any significant institutions as defined in the

European Banking Supervision European Banking Supervision, also known as the Single Supervisory Mechanism (SSM), is the policy framework for the prudential supervision of banks in the euro area. It is centered on the European Central Bank (ECB), whose supervisory arm is re ...

framework. IPSs interact with deposit guarantee schemes. Article 4(2) of the Deposit Guarantee Directive 2014 states: "An IPS may be officially recognised as a DGS". Article 13(1) of the same text specifies that "Member States may decide that members of an IPS pay lower contributions to the DGS." Recital 12 further clarifies that where an IPS "is separate from a DGS, its additional safeguard role should be taken into account when determining the contributions of its members to the DGS." Having the two roles embedded in a single entity, however, may weaken the deposit insurance function.

Examples

The main European IPSs are those of: * the

Sparkassen-Finanzgruppe The ''Sparkassen-Finanzgruppe'' ("Savings Banks Financial Group") is a network of public banks that together form the largest financial services group in Germany and Europe by assets. Its name refers to local government-controlled savings banks ...

* the

German Cooperative Financial Group The German Cooperative Financial Group (, sometimes referred to in English as "Volksbanken Raiffeisenbanken Cooperative Financial Network") is a major cooperative banking network in Germany that includes local banks named Volksbanken ("people's ...

* the Raiffeisen Banking Group in

* the

Sparkassengruppe Österreich The ''Sparkassengruppe Österreich'' () brings together all savings banks () in Austria. Tracing its origins to 1819, it serves around 4 million customers in 797 branches with more than 15,500 employees, with a customer share in Austria around 31 ...

, also in Austria * the Raiffeisen Südtirol IPS Genossenschaft in

The German Cooperative Financial Group refers to 1934 as the starting point of its mutual support arrangements that were later formally recognized as IPS. The Sparkassen-Finanzgruppe organized its mutual support arrangements in 1975, in response to the Bundesverband deutscher Banken's establishment of its deposit insurance scheme, the ''Einlagensicherungsfonds''. The Austrian Raiffeisen Banking Group followed suit in 1999, and the savings banks (Sparkassengruppe Österreich) in 2001.

Notes

Banking in Europe {{bank-stub

Overview

Examples

See also

Notes