MFSA Consultation: Draft Regulations transposing Directive 2014/49/EU on Deposit Guarantee Schemes
News    ·   31-08-2015
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AUTHOR: Andrew Caruana Scicluna, Emma Grech

Via its consultation paper of 19 August 2015, the Malta Financial Services Authority (“MFSA”) published a draft set of regulations that will serve to implement Directive 2014/49/EU of the European Parliament and of the Council on Deposit Guarantee Schemes (the “Recast DGSD”). Once approved, the draft regulations will replace the existing Depositor Compensation Scheme Regulations (Legal Notice 369 of 2003).

The Recast DGSD was published in the Official Journal of the EU in June 2014, and introduces proposals relating predominantly to:

         i.            Funding: the deposit guarantee scheme will be funded by ex ante contributions payable by participant banks. Such funds may not be used for any purpose other than for paying compensation to depositors in the event of a default;

       ii.            Coverage: all deposit accounts will be covered by up to €100,000 or equivalent in any other currency. Coverage will be calculated on ‘per depositor per bank’ basis. In the event of a pay-out, the scheme will pay compensation in Euro. Foreign currency deposits will be converted accordingly;

      iii.            Temporary high balances (“THBs”): there will be temporary protection for deposits for limited periods in excess of the €100,000 limit with respect to certain types of deposits classified as THBs. These include proceeds from sale of private residential property and life events (such as sums received from a life policy). THB protection will be up to €500,000;

     iv.            Disclosure: there are new disclosure requirements for banks to inform depositors about the available compensation arrangements, including use of a prescribed information sheet;

       v.            Single customer view: banks will be required to mark deposit accounts in a manner which will facilitate the processing by the scheme of timely pay-out. Additionally, banks must adhere to prescribed technical standards in relation to the manner such information is maintained and processed by the scheme;

     vi.            Speed of pay-out: the timeframe for repayments will be gradually reduced from 20 to 7 working days by 2024;

    vii.        Eligibility: the scope of eligibility for deposit protection will be extended. Primarily, most companies, regardless of size, will now become eligible for deposit protection. EEA branches will also become eligible for protection. Nonetheless, certain deposits – such as those made by public authorities, or by pension and retirement funds, will remain ineligible.

Particularly to ensure that depositors in all Member States enjoy a uniform level of protection, the Recast DGSD is a largely maximum harmonisation directive. As a result, the areas where Member States have policy discretion are limited and largely operational.

The consultation is relevant to all banks operating in Malta, including those operating on a cross-border basis.

Interested stakeholders are to submit their comments on the draft regulations by not later than 30 September 2015.

The above constitutes a summary. To view the full consultation, access the following link: http://goo.gl/guQQ9r.

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