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Deposit protection schemes in the G-10 countries
I. Coverage of schemes
(a) Types of financial institutions
| Belgium: | All credit institutions governed by Belgian law and Belgian branches of non-EU incorporated banks. |
| Canada: | All banks, trust and loan companies (both federally and provincially-incorporated) are required to apply for membership. These applications must be submitted to and approved by the CDIC Board of Directors. In addition, provincially-incorporated institutions must receive authorisation by their province of incorporation and agree not to exercise powers substantially different from those exercisable by a federal trust or loan company. |
| France: | All credit institutions that accept deposits. One scheme covers banks which are affiliated to the Professional Association "Association Française des Banques" (AFB). Mutual and cooperative banks and savings banks have a mechanism of mutual help designed to guarantee the liquidity and solvency of each of the affiliated institutions and, accordingly, deemed to be equivalent to a guarantee scheme. |
| Germany: | With very few exceptions, all banks that accept deposits. Separate schemes exist to cover the commercial banks (private Kreditbanken), savings banks (Sparkassen), central giro institutions (Girozentralen) and credit co-operatives (Kreditgenossenschaften) with their central institutions. |
| Italy: | All credit institutions incorporated under Italian law are required to participate in an Italian deposit protection scheme. Two such schemes are currently in operation; one of them is specifically designed for mutual banks (banche di credito cooperativo). Both schemes cover deposits of Italian and EU branches compulsorily and depositors of non-EU branches possibly. Italian branches of EU incorporated banks may participate in an Italian scheme if they want to "top-up" the protection offered by their home country systems. Italian branches of non-EU incorporated banks participate in an Italian scheme unless their home country systems are equivalent to Italian ones. |
| Japan: | One scheme covers commercial banks, shinkin banks, credit cooperatives and labour credit associations. A second scheme covers agricultural and fishery co-operatives. |
| Luxembourg | All credit institutions incorporated under Luxembourg law and Luxembourg branches of non-EU incorporated banks are legally bound to participate in the deposit protection scheme. |
| Netherlands: | - The credit institutions which are established and have been registered in the Netherlands;
- The branches of credit institutions from third countries which are under an obligation to participate in the scheme if no scheme is available in the home state providing equivalent cover to the creditors in the branch;
- The branches of credit institutions from other Member States which have joined the Dutch scheme in order to supplement their cover.
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| Sweden: | All banks and investment firms authorised to receive deposits. |
| Switzerland: | All banks which accept deposit, salary, time or savings accounts or which issue medium or short-term deposit certificates; and mutual credit co-operatives and credit co-operatives whose members have a contingent liability to pay a further call of capital. |
| United Kingdom: | - Banks authorised under the Banking Act of 1987 incorporated in the UK including their branches in the European Economic Area;
- Certain banks incorporated in other EEA States who have joined the UK scheme to supplement the cover available from the scheme operating in their own home country in respect of deposits taken by their UK offices;
- Banks incorporated outside the EEA in respect of deposits taken by their UK offices unless they have been granted permission not to participate in the UK scheme (only available where deposits with their UK offices are covered by a home state scheme at least to the same level and scope of the UK scheme).
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| United States: | The Federal Deposit Insurance Corporation (FDIC) insures federal as well as state-chartered banks and savings associations. The National Credit Union Administration (NCUA) insures credit unions. |
(b) Ownership and location of institutions to be covered
In Belgium, Canada, France, Luxembourg, the Netherlands, Sweden and the United Kingdom branches (where allowed) and subsidiaries of foreign banks are required in principle to participate in the deposit protection scheme. In Italy, however, participation in an Italian system is required for branches of EU or non-EU incorporated banks only if the foreign banks want to integrate the protection offered by their home country systems or, respectively, the home country systems are not equivalent to the Italian ones. In the United States, December 1991 amendments to the International Banking Act require that if a foreign bank wishes to conduct retail deposit activity (under $100,000), it must do so through a domestically-chartered insured banking subsidiary. Branches of foreign banks which were insured prior to these amendments are allowed to retain their insured status.
There are, however, exceptions to this principle, especially in the European Union where branches of institutions incorporated in other EU countries are covered by their home state scheme. In Belgium and the United Kingdom, exceptions may additionally be made for overseas institutions covered by any home-country scheme that provides equivalent coverage. In Canada, a proposal currently under review may result in membership in the Canada Deposit Insurance Corporation (CDIC) being made optional for foreign banks subsidiaries that do not accept retail deposits defined as less than C$ 150,000.
Only the German scheme for commercial banks provides for the protection of the foreign depositors of these banks operating abroad, wherever located. Membership is voluntary though usually necessary on competitive grounds. (c) Compulsory or voluntary participation Participation in the Belgian, French, Italian, Japanese, Luxembourg, Swedish and UK schemes is compulsory save for the exceptions already mentioned. In the case of Canada and the United States it is obligatory for federally-chartered banks to participate in the respective schemes. In Canada, credit unions and trust and loan companies incorporated in Quebec must belong to parallel plans operating at the provincial level instead. US Federal law exempts state-chartered institutions but most state-chartered institutions are required under state law to obtain insurance from the FDIC (through an application process). Dutch law provides for a voluntary agreement with the representative organisations of the banking sector, which agreement is declared legally binding for all licensed institutions by Royal Decree. If a voluntary agreement is not reached, a compulsory system can be introduced. Participation in the other two schemes (Germany and Switzerland) is in principle voluntary, although in Germany the participation of an institution which is a member of a savings (or co-operative) banking association administering a scheme is in practice nearly automatic. (d) Types of deposit to be covered With the exception of deposits with institutions in the savings banks and credit co-operatives sectors in Germany, each of the schemes limits itself to protecting non-bank deposits with somewhat different definitions of precisely what that means. Several of the schemes expressly exclude connected or related deposits and secured deposits, deposits on abnormal conditions, deposits by fraudsters or money-launderers and deposits which form part of the capital of the institution. The Canadian scheme excludes deposits with an original maturity exceeding five years. In the Netherlands, the scope of the term "creditors" is fairly broad. Any natural person or (small) legal entity having a claim on a participating institution may, in principle, submit a request for compensation (such as a partnership or a limited partnership as well as comparable foreign entities). Whether the claim has arisen from personal or business transactions is immaterial. (e) Currency coverage In Germany, Italy, Luxembourg, the Netherlands and Sweden deposits are protected irrespective of currency, whereas deposits in foreign currency are expressly excluded from the Belgian, Canadian, French, Japanese and British schemes. However, the EU Directive states that European Economic Area currencies, including the ECU/Euro, must be treated as domestic currencies for this purpose. (f) Coverage according to the depositor's country of residence In none of the G-10 countries is a distinction made between deposits of residents and non-residents. (g) Coverage of deposits by size With the exception of Germany, each of the schemes establishes a maximum amount which currently qualifies for insurance as follows: ECU 15,000 until 31st December 1999 (when it will rise to ECU 20,000); Canada C$ 60,000 per member institution; France FF 400,000; Italy Lit. 200 million; Japan Yen 10 million; Luxembourg ECU 15,000 until 31st December 1999 (when it will rise to ECU 20,000); Netherlands ECU 20,000; Sweden SEK 250,000; Switzerland Sw.fr. 100,000; United Kingdom £20,000 or ECU 22,222; United States US$ 100,000. In Luxembourg and the United Kingdom, compensation is limited to 90% of the insured deposit.
The scheme applied by the German commercial banks comes close to providing full protection to non-bank deposits, with the maximum per client being defined generally as 30% of the liable funds of an individual bank, and the scheme for the German central giro institutions principally protects in the same way. The scheme applied by the associations of the German savings banks and credit co-operatives sectors primarily protects the solvency of their members and thus indirectly fully safeguards the deposits as well.
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Deposit protection schemes in the G-10 countries
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