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Alex Kuczynski Director – Corporate Affairs Financial Services Compensation Scheme, UK

SKATING ON THIN ICE – WHAT DEPOSIT INSURANCE SCHEME FOR EUROPE?. 13 January 2011. Alex Kuczynski Director – Corporate Affairs Financial Services Compensation Scheme, UK. Recent European and UK History. 1979 Banking Act – UK DGS 1994 Deposit Guarantee Schemes Directive (94/19/EC)

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Alex Kuczynski Director – Corporate Affairs Financial Services Compensation Scheme, UK

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  1. SKATING ON THIN ICE – WHAT DEPOSIT INSURANCE SCHEME FOR EUROPE? 13 January 2011 Alex Kuczynski Director – Corporate Affairs Financial Services Compensation Scheme, UK

  2. Recent European and UK History • 1979 Banking Act – UK DGS • 1994 Deposit Guarantee Schemes Directive (94/19/EC) • 2005 EC Communication • 2007 – FSCS removal of co-insurance, increasing the limit to £35,000 • 2008 – FSCS increased limit to £50,000 • 2009 – amending DGS (2009/14/EC) – Banking Act 2009 • 2010 – draft amending DGSD • 2011 – FSCS increased limit to £85,000 and simplified process

  3. 2009 Amending DGS • €100,000 – maximum harmonisation basis • Temporary increased account balances • Pan EU DGS • Harmonisation of scope of products and depositors • Link with reimbursing depositors, including emergency payout

  4. Draft DGS – 12 July 2010 • Simplification and harmonisation, in particular scope of coverage and arrangements for payout • Further reduction of the time limit for payout of depositors and better access for DGS to information about their members • Sound and credible DGS that are sufficiently financed • Mutual borrowing between DGS i.e. a borrowing facility in certain circumstances • Home/host handling of claims/payout

  5. Simplification and Harmonisation • “Deposit” • Eligible depositor – all individuals, all corporates • No set off • Fixed interest return • Currency of payout • Temporary high balances

  6. Time Limit For Payout • 3 months – extendable (1994) • 20 working days (2009) • 7 calendar days? (2010) • Single customer view and account flagging • No application/claim • Trust and beneficiary accounts • Information template

  7. PAN EU DGS/Mutual Borrowing • De Larosiere report • Alternative structures/28th scheme? • Single Pan EU scheme? • Home/Host state’s responsibilities • Mutual borrowing – 0.5% - EBA role - repayment in 5 years - priority in liquidation • Resolution funding

  8. Funding • Ex ante – 1.5% target fund • Ex post – 0.5% contribution • Risk-based levies/differential premiums • Liquidity and access to funds • Investment of funds – limited range • Transitional period – 2020?

  9. Operational Issues and Concerns • Contingency planning/stress testing – access to data • Corporate governance structures – independence • Cross-border cooperation/single point of contact - funding • Speed and access to funds, and currency of payout • Method of payout – cheques, electronic payout, bank branches, other

  10. Contribution to Financial Stability • Increased expectations • Role in consumer confidence and financial stability • Resolution funding

  11. Work In Progress • Revised draft DGSD • IADI/EFDI/BCBS/IMF Assessment methodology for the core principles of effective deposit insurance systems • EFDI Multilateral Memorandum of Understanding • Faster payout workshops

  12. Thank you for listening Any questions?

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