Investing in a term deposit involves limited risk to the customer. As is common for other deposit products, term deposits are secured against insolvency of a credit institution by national deposit guarantee schemes. Based on regulations of the European Union, member states have set up national deposit guarantee schemes which cover up to EUR 100,000 per customer and bank, or the equivalent amount in the respective domestic currency.
If the term deposit exceeds the maximum amount covered by the deposit guarantee, the amount exceeding the deposit guarantee coverage is subject to an insolvency risk if the partner bank goes bankrupt.
There is no business risk because the payment of interest is not tied to any business growth as is the case for stocks.
Political risks, such as the restriction of free movement of capital, are limited within the European Union.
As long as you invest in a term deposit in the same currency (e.g. EUR), no foreign currency risk exists. For term deposits made in a foreign currency, there are some risks. It is in your own interest to note that losses can occur for deposits made in a foreign currency (foreign currency risks). These losses can usually be offset in your personal tax declaration.
Further risks may arise from different legal and tax systems, as well as when dealing in a different language.