Bank deposits enjoy even better protection as of the beginning of 2011

Prague, 2 December 2010 – The events of 2010 significantly changed the face of the system of European deposit insurance. With the emphasis put on increasing the credibility of the European banking system, growing importance is given to protecting the deposits of the clients of banking institutions and the availability of deposits when a bank goes bankrupt. The Deposit Insurance Fund (DIF), and all of the institutions concerned, worked hard during the year to reconstruct the deposit insurance system. Thanks to the efforts put in, the Czech Republic is now among the best-prepared countries.

2010 was one of the busiest years in the Fund’s 15-year history. This year’s major events included the approval of the amendment to the Act on Banks and another proposal of the European Commission, which should lead to a new directive governing the activities of national deposit insurance systems.

Events of 2010

January Prague conference of the DIF in cooperation with the International Association of Deposit Insurers
February Appointment of 3 payment banks; the European Commission publishes its proposals for further changes in the deposit insurance system
March The DIF completed a tender for the information system supplier (Software 602); The Chamber of Deputies approved the amended Act on Banks
April 15^th anniversary of the opening of the DIF office; the Senate approved the amended Act on Banks
May The Deposit Insurance Fund got another CZK 1.2 billion from the bankrupt Union banka; the International Association of Deposit Insurers (IADI) called a week of deposit insurers, on the theme: “Coping with the demands of a shortened deposit compensation payment period”
June Conclusion of an audit of DIF’s finances for 2009
July The EU Council discuses further changes in the European deposit insurance system
August The DIF responds to the European Commission’s proposal concerning the shortening of the period for the commencement of paying compensation, etc.
September The DIF took over the Povynal information system for keeping track of deposit compensation payment; DIF hosts an expert group of the IMF, the International Association of Deposit Insurers (IADI) and the European Forum of Deposit Insurers
October The DIF received software for encrypting data provided for deposit compensation payment
November Proposal of a Ministry of Finance regulation on the form, structure, and manner of keeping and providing the information that a bank and a branch of a foreign bank is obliged to keep and provide to the Deposit Insurance Fund, in the drafting of which the Fund cooperated with the MF, sent to an inter-ministerial comment procedure
December New web presentation launched

Bank Clients Can Again Rest a Little More Easily

The amendment of the Act on Banks is introducing several fundamental changes in the protection of the deposits of the clients of domestic banks and savings banks. As of 31 December 2010, the maximum limit to which deposits in banks are insured will grow again. Compared to this year’s EUR 50,000, the Deposit Insurance Fund will newly guarantee the return of deposits to up to EUR 100,000, or, more precisely, its equivalent in Czech crowns, which roughly corresponds to CZK 2,450,000 per client per bank.

Whereas the increase of insurance protection will particularly please those clients who have higher balances in their bank accounts (approximately 95% of clients will have their deposits insured in full), for most clients, the important news is that in the event of the bankruptcy of their bank, they will have their money much faster – by the 20^th business day after the day on which the CNB declares their bank insolvent.

This year, the Deposit Insurance Fund successfully completed, in relation to the changes referred to above, the first stage of the implementation of a new information system that will accelerate and improve communication, both with a bank that is unable to meet its commitments and the three banks (Česká spořitelna, Komerční banka, and GE Money Bank) whose branches would act as the disbursement points if so required. The basic parameter of the system is to enable the problem-free commencement of the disbursement by the 20^th day after the bankruptcy of the bank.

	Before 30 Dec. 2010	After 31 Dec. 2010
Insurance coverage limit per person per bank	50,000 euros	100,000 euros
Deadline for starting deposit compensation disbursement	3 months	20 business days

The European Commission wants to take deposit protection even further

The European Commission analysed the impact of the financial crisis on the European banking sector, and the result is to be a yet greater harmonisation of the deposit insurance systems in the EU and the faster disbursement of deposit compensation. If the Commission’s proposals successfully pass though the legislative process, they will bring clients, above all: a further shortening of the period for disbursing deposit compensation to 7 and 21 days, respectively; the disbursement of funds from a bankrupt foreign bank in the Czech Republic (thus far, clients must, in the case of the bankruptcy of a foreign bank, make a claim for the payment of compensation in the country of the registered seat of the parent company); and better information for clients about deposit insurance through standardised information provided to clients by their bank.

The Deposit Insurance Fund is not opposed to the new rules governing the European deposit insurance system, but always tries to set the proposed changes in a real economic framework, to analyse its benefits, as well as its costs. “In cooperation with other national deposit insurers, we try to intervene in the approval process of new European legislation, promoting the highest possible efficiency of the solutions proposed. An example may be the proposal for shortening the period for the disbursement of deposit compensations, which we consider rash, and we have therefore recommended to the European Commission that its postpone such thoughts until the existing systems have been properly tested by practice and time,” says Josef Tauber, Chairman of the Deposit Insurance Fund Board of Directors. “One thing is, however, clear already. 2011 will be rich in events concerning the deposit insurance system and the Deposit Insurance Fund will respond to those changes,” added Josef Tauber.

Published: 2.12.2010

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