Deposits claims insurance information survey

Dear Clients,

On 1.1.2016 an Amendment to the Law on Banks comes into effect which, among other things, includes changes in deposit insurance (deposit claims insurance). We would like to inform you of the most important changes. This Amendment is directly related to enacting the Law on Recovery Processes and Crisis Management on the Financial Market and implementing European directives on deposit insurance. Deposit insurance in the Czech Republic will become the responsibility of the Financial Market Guarantee System (the “Guarantee System”) established under the Law regulating recovery processes and crisis management on the financial market. According to this Law the Guarantee System will be liable for managing the funds of the Deposit Insurance Fund and this Fund will no longer be a legal entity; also the existing provisions on administering and managing the Fund are cancelled.

Deposit (Claims) Insurance

All deposit claims are insured including interest on deposits denominated either in the Czech or a foreign currency, unless they are excluded from insurance by law. Deposit insurance depends on identifying the depositor pursuant to the Law on Banks and the law regulating measures against legalizing the proceeds of criminal activities and of course a credit balance on the deposit account.

The amount of compensation is not changing; it will still be EUR 100,000 per eligible person per bank. To calculate the compensation all insured deposit claims of an eligible person at a bank or bank branch of a non-member country are added together including his shares of accounts established for two or more co-owners on a specific date (co-owners shares are identical unless documents show otherwise).

Newly also deposits of local governments whose tax income pursuant to the Law on Budgetary Tax Allocation is lower than the equivalent of EUR 500 000 under certain terms and conditions can be insured.

Deposits at branches of foreign banks are included in the deposit insurance system of the home member country.

Uninsured deposits:

  1. are deposits of a bank, branch of a bank of another member country, a savings and credit cooperative, a securities broker or a foreign entity carrying out similar activities; however, this does not apply to deposits by these persons in favour of a third party who would otherwise be eligible for compensation under certain terms and conditions,
  2. are deposits of a financial institution or a foreign entity carrying out similar activities; this does not apply to deposits by a financial institution, a small-scale payment service provider, an electronic money institution and a small-scale electronic money issuer in favour of a third party who would otherwise be eligible for compensation under certain terms and conditions,
  3. are deposits of an insurance company, reinsurance company or a foreign entity carrying out similar activities,
  4. are deposits of a health insurance company or a foreign entity carrying out similar activities,
  5. are state deposits,
  6. are deposits of local governments whose tax income pursuant to the Law on Budgetary Tax Allocation is more than the equivalent of EUR 500,000 under certain terms and conditions
  7. are deposits that the bank is entitled to partly include in its capital as a subordinated debt
  8. are deposits that according to a final judgment come from an intentionally committed criminal offence, legalizing the proceeds of a crime, unless they are ´secured´ for the benefit of the victims of the crime

The Bank has new reporting duties

Now, the bank must comply with a new obligation by providing clients with information about the deposit insurance system through a list of information before concluding an account agreement. This particularly involves information about the limits of amounts payable to an eligible person, how compensation is paid from the deposit insurance system, making a deposit insurance system claim, exclusions from the deposit insurance system protection, etc.

The bank must also inform the client through account statements or other similar documents whether a deposit (deposit claim) is included in the deposit insurance system protection or not. The client will receive a list of information at least once a year during the contractual relationship.

Terms and conditions for payments from the Deposit Insurance Fund

The Guarantee System will also make changes to the terms and conditions for payments from the Deposit Insurance Fund. The terms and conditions as well as the deadlines for the start of payments from the Deposit Insurance Fund are amended and specified in detail. The basic compensation remains unchanged i.e. EUR 100,000 per eligible person per bank.

There is, however, a new option to provide compensation from the Deposit Insurance Fund over the limit of EUR 100 000 if the terms and conditions specified in the Law are met. The eligible person must be a private individual who has submitted a request for the payment of higher compensation and the documents supporting this claim within the prescribed period. The entitlement to higher compensation may arise if the specific date, which determines the date of payment from the Fund, occurs within three months after the amount is credited to the account and concurrently this amount is

  1. the purchase price received from the sale of real estate used for housing according to the Land Register records,
  2. a community property settlement in a divorce,
  3. an insured sum for an accident, illness, disability or death
  4. inheritance,
  5. a lump-sum payment from an additional pension insurance scheme with a state contribution or supplementary pension savings,
  6. severance pay paid on the termination of employment or termination of employment by agreement by which the employee is entitled to this payment under the Labour Code, reduced indemnification (if an insurance policy is terminated early), an extra bonus (paid to vitally important people when leaving a company), etc. in accordance with the relevant legislation
  7. an insured sum for an injury caused by a crime,
  8. compensation payment for harm caused by an offence or assignment of unjust enrichment obtained by crime,
  9. the payment of damages from a decision on detention, punishment or a protective measure providing financial aid to a crime victim

Detailed information on the payment terms and conditions of the Guarantee System will be available on the website of the deposit insurance system – www.garancnisystem.cz.

Deposit claims insurance information survey for clients