What is Deposit Guarantee Fund (FGD)?
The Deposit Guarantee Fund of the Cooperative Credit (hereinafter FGD or even Fund) is a private law consortium recognized by law. It operates as a protection system for savers in the event of a crisis of an associated Bank, in compliance with Legislative Decree no. 30 of 15th February 2016 (with which it was transposed into Italian order the Directive 2014/49 / EU, also called "DGSD", which introduced a harmonized European banking guarantee scheme) has been transposed into our legislation.
When does FGD intervene?
In the event of the end of the activity (formally referred to as "Administrative Liquidation" or, in short, the LCA) of a Cooperative Credit/Rural Bank (BCC/ CR), the Fund intervenes to pay out bank’s depositors according to some fundamental rules, summarized below.
Which deposits can be repaid and for what amount?
The deposit instruments eligible for reimbursement are, by way of example and not exhaustive, the following:
- current accounts;
- deposit accounts;
- savings deposits;
- certificates of deposit (provided they are not represented by securities issued in series);
- cashiers’ checks.
The maximum amount to be refunded is usually € 100,000 for each depositor, subject to certain specific cases, which will be discussed later, in which the reimbursement may also be higher.
By way of example, if a depositor has a budget of € 65,000 and his bank is subject to LCA, FGD will reimburse the entire amount. If, however, the overall availability is € 123,000, the FGD would reimburse € 100,000. This is because the amount of depositor's availability is higher than the maximum reimbursable limit (as mentioned, at € 100,000).
The reimbursement to each protected depositor is made by FGD in euro currency. If the account is denominated in a different currency from euro, the exchange rate used for conversion is that of the date on which the effects of the LCA provision are produced.
How does repayment work and how long does it take?
Repayment to each depositor is carried out by FGD from the seventh working day after the date on which the effects of the bank's LCA are produced. In order to obtain refund, the depositor does not have to submit any claim to FGD. The depositor can then go directly to any of the branches indicated by FGD, with communication made both through its own websites and the bank in LCA, as well as on the main national and local newspapers. In fact, FGD will identify for each customer of the defaulted bank the total amount to be reimbursed, on the whole of the relationships with the liquidated bank and make available the sums in favor of individual eligible depositors. Once you have gone to any of the bank branches indicated by FGD, the depositor may demand payment of the sums due to him: a) in cash (within the limit of 5,000 euro); b) by issuing a cashier check issued to the depositary; c) by bank transfer on current account at another bank.
The right to reimbursement for a protected depositor expires 5 years after the date on which the effects of the bank's LCA are produced.
The reimbursement to each protected depositor is managed by the FGD in euro. If the account is denominated in a currency other than the euro, the exchange rate used for conversion is that of the date on which the effects of the LCA provision are produced.
Which instruments and subjects are excluded from repayment?
Excluded by repayment:
- depositi effettuati in nome e per conto di banche, imprese di investimento, imprese di assicurazione e riassicurazione, fondi comuni di investimento (OICR), fondi pensione ed enti pubblici;
- deposits made in the name and on behalf of banks, investment firms, insurance and reinsurance firms, mutual funds (UCITS), pension funds and public entity;
- deposits resulting from transactions in connection with a final sentence for the offenses provided for in artt. 648-bis (Recycling) and 648-ter (Use of Money, Goods or Benefits of Illicit Injury) of the Criminal Code;
- deposits whose holders are not identified under the anti-money laundering and anti-terrorism prevention regulations at the time the LCA proceedings affect the bank are initiated;
- shares (i.e., equity investments or quotas);
- subordinated bonds;
- ordinary bonds (note that the customers of each BCC adhering voluntarily to the Bond Guarantee Fund, or even briefly FGO, can check on the website of the latter on the forms and methods of protection from the insured);
- covered bonds, which are already protected by their own specific warranties;
- receivables deriving from acceptances, promissory notes, exchange rates and securities transactions (note, however, that in the specific case of "repurchase agreements", the customer is still guaranteed by the equivalent of the underlying security for the transaction, which corresponds to the proceeds from the possible sale of the title on the market).
In what cases can the reimbursement exceed 100.000 €?
The limit of € 100,000 does not apply in the 9 months following their credit or at the time they are made available -to deposits of natural persons with amounts due from:
- transactions relating to the transfer of property;
- divorce, retirement, termination of employment, disability or death;
- the payment of insurance benefits, compensation or indemnities in connection with damages for facts considered by law as offenses against the person or for unjust imprisonment.
These particular cases identify so-called "high-term temporary balances", namely the amounts due from transactions made by natural persons with a specific protection beyond € 100,000 for a period of 9 months after their credit or availability, above recalled. It is, in practice, special events in the life or work of a depositor. This means that a significant amount (even more than 100,000 euros) that, for example, transit through a current account, such as the sale of an immovable property or the credit of end of service payment due to the end of the employment relationship, is protected during the 9 months following its credit at the bank.
In such cases, FGD's repayment, even in excess of € 100,000, is deferred over time and is made - this time at the customer's request and subject to FGD requirements - within 6 months of the date on which the effects of the bank's LCA are produced.
Are there other cases where repayment times extend beyond 7 working days?
If a protected depositor is subjected to criminal proceedings, or to measures of prevention, or to seizures related to the recycling of proceeds of illicit activity, FGD may suspend the repayment to the depositor (up to the legal transfer of judgment of acquittal).
FGD may also delay repayment to depositors who are entitled to it in the following cases:
there is uncertainty as to the right of the depositary to receive reimbursement or the deposit is the subject of a judicial or extrajudicial dispute whose definition affects this right or the amount of the repayment (e.g., in the case of a loan granted to the depositary for which the bank may legitimately request immediate return);
the deposit is subject to restrictive measures (imposed by a State or an international organization);
no transactions were made on the deposit within 24 months prior to the date on which the bank's LCA effects (so-called "dormant account") are produced.
In particular, with regard to "dormant accounts", FGD may repay the depositary holder within six months of the date on which the effects of the LCA of the bank are produced. FGD is not required to make any reimbursement to the dormant account holder if the value of the deposit in question is lower than the administrative costs the FGD itself would have to incur to repay it. However, the amount below which the "sleeping account" is not repaid is set at € 100. However, if the "dormant" account holder has other repayable amount at the LCA bank, the amount of the however cumulated for the calculation of the overall limit.
How is the calculation of the total limit of 100,000 euros per depositor?
The 100,000 euro limit is calculated for each depositor, per single bank. In the event that a depositor holds two or more forms of deposit eligible for repayment at the bank subject to LCA, all deposits in question are added to determine the level of protection applied to the single depositor.
Example: If a depositor holds at the same bank a deposit account of € 90,000 and a current account of € 20,000, he will be refunded only € 100,000.
In the case of joint currencies, each co-owner depositor applies the security limit of € 100,000, dividing (for the purposes of calculating the limit) the amount of the deposit on the basis of the quotas attributable to each of them, sum up, for each of the holders, any other individual deposits from the same held in the same bank; below are some examples:
Example 1 - Two-person account, with a balance of 100,000 euros, in case of bank liquidation, each co-owner will be reimbursed 50,000 euros.
Example 2 - Two-person account, with a balance of 300,000 euros, in case of bank liquidation, each co-owner will be reimbursed 100,000 euros.
Example 3 - Customer A has 2 accounts at a bank, a personal account with a balance of 80,000 euros and jointly account with his spouse (customer B) with a balance of 120,000 euros. Customer A will receive a credit of 140,000 euros (80,000 + 60,000), while customer B will have a credit of 60,000 euros. In case of bankruptcy of the Bank, customer A will be reimbursed for 100,000 euros and customer B for 60,000 euros.
For the purposes of calculating the protection threshold of € 100,000 to be applied to each protected depositor:
deposits held by two or more entities as participants in an entity without legal personality are treated as if they were held by a single depositor;
account is taken of the settlement of any debts of the depositor towards the bank subject to LCA (if such debts are due, by law or by contractual agreement, on the date on which the effects of the related liquidation measure are produced).
In the event that a depositor is also a holder of the same bank for the assets of his own enterprise, they accumulate for the purposes of calculating the maximum protection limit of € 100,000.
Cashier’s checks are eligible for reimbursement, regardless of who the bearer is, who must turn to the liquidator and thus obtain a refund from FGD up to € 100,000.
What information is eligible to receive the depositor?
The bank provides free of charge to all customers a document containing the general information needed to identify the relevant security system and exclusion information about its protection.
The depositor is entitled to receive the "Standard Form for Information to be provided to Depositors", as set out in Annex 1 to Directive 2014/19 / EU, which must be delivered to him by the bank, correctly filled out, in good time before the contract is concluded or is bound by an offer. This form contains the main information, useful to the depositor, in order to know the security limits applied to deposits, the methods of redemption and the contact / details for any inquiries.
In periodic reporting to customers about deposit contracts (statement / periodic statement) each bank confirms that the deposit is eligible for reimbursement and, at least once a year, provides the depositor with an updated version of the called form.
In the event of a merger of its own bank with another operating on the market (or similar transactions), if a depositor holds one or more deposits eligible for repayment also with the other bank involved in the merger, all the deposits in question are added to determine the level of protection. Therefore, in the case of merger between bank A and bank B, if a depositor holds a bank account with a balance of 70,000 euros at bank A and a deposit account of 50,000 euros at bank B, the depositor will claim a credit of 120,000 euros; therefore, as a result of the merger, the depositor's credit would exceed the maximum limit of 100,000 euros and, in the event of subsequent bank liquidation, the customer would be reimbursed only up to that amount. In such a case, without prejudice to the ability of the depositor to reconcile with the bank the allocation of its savings according to the existing opportunities and in a manner consistent with its risk profile, the depositor shall be granted a period of three months from the effective date of the merger to withdraw or transfer any portion of its deposits that have become over 100,000 euros as a result of the merger, to another credit institution without incurring any penalty and retaining the right to all interests and benefits accrued.
For further information, please download the documents in the "References" section.