Abandoning Foreign Depositors in a Bank Failure? The EFTA Court Judgment in EFTA Surveillance Authority v. Iceland, 2 J. Marshall Global Mkt. L.J. 1 (2013)

Authors

Valia Babis

Abstract

Deposit insurance is a key issue in bank regulation. A mismatch exists, especially in the European Economic Area, between the freedom of banks to operate across borders and the fact that deposit insurance operates on a national basis. EFTA Surveillance Authority v. Iceland examines the protection of overseas depositors in the event of a cross-border bank failure. In EFTA Surveillance Authority, the court examined a state’s responsibility to ensure compensation to depositors and possible discrimination against foreign depositors. This Article reviews the paradoxical holding by the court in light of the facts and circumstances of the case. Further, the Article discusses the concerns raised in EFTA Surveillance Authority regarding the degree to which EFTA states can adopt national economic policy arguments to differentiate between domestic and foreign depositors.