Is Your Money at the Bank Really Protected by the FGDR?

In the current economic turmoil, opportunities for laughter are few and far between, but here's the joke of the day: "Your money is protected", the French deposit insurance and resolution fund (Fonds de Garantie des Dépôts et de Résolution - FGDR) confidently proclaimed on Tuesday, April 23. It proudly displays a total of...7.4 billion euros by the end of 2023. 

Let’s read the FGDR’s press release: "In 2023, we have reached the target level of resources set by the European Union and have resources for deposit guarantees of 0.5% of all covered deposits", declared Thierry Dissaux. As the Chairman of the FGDR's Executive Board acknowledges, these 7.4 billion euros represent just 0.5% of the total amount covered, estimated at 1.472 trillion euros, i.e. deposits, bankbooks and securities portfolios (shares, bonds, FCPs, SICAVs). Quite simply ridiculous.

The fact that shares and bonds are included in this guarantee is worrying in itself: they are normally held in one's own name, the bank being merely an intermediary. This means that a bank in difficulty, in addition to the bankbooks it manages and which appear on its balance sheet, could get its hands on your share portfolio! This is theft, pure and simple.

With regard to life insurance, another mechanism comes into play in the event of a crisis, namely the Sapin 2 law, which authorizes the blocking of withdrawals. The FGDR, on the other hand, acts within the framework of the European BRRD (Bank Recovery and Resolution Directive) which allows banks in a situation of bankruptcy to dip into their clients' accounts amounts in excess of 100,000 euros. The FGDR protects accounts below 100,000 euros. Unfortunately, this protection proves illusory, as almost all accounts exceed this threshold. As a result, the 7.4 billion euros are a drop in the bucket compared with the commitments to be met in the event of a banking crisis.

The press release makes this astounding assertion: "It is the concentration of the banking system in France, around six major institutions (BNP Paribas, Crédit Agricole, Société Générale, BPCE, Crédit Mutuel and Banque Postale), which makes it possible to apply this rather low coverage ratio." We would tend to think just the opposite! If the banking landscape were very fragmented, the FGDR could at least help the clients of small or medium-sized banks that went bankrupt. Whereas in the current situation, a single banking network in difficulty far exceeds its bailout capacity!

In short, don't rely on the FGDR, and be aware that the money deposited with the bank is no longer yours. Your bank statement is simply a commitment from the bank to you, a commitment it may not be able to keep in a crisis situation. The "guarantee" has to be provided by you, with physical gold, crypto-currencies, real estate, depending on your wealth choices. But it's crucial to understand that putting everything in the bank is risky...