Alex KuczynskiDirector – Corporate AffairsFinancial Services Compensation Scheme, UK

SKATING ON THIN ICE – WHAT DEPOSIT INSURANCE SCHEME FOR EUROPE?

13 January 2011

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

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

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

Simplification and Harmonisation

“Deposit” Eligible depositor – all individuals, all corporates No set off Fixed interest return Currency of payout Temporary high balances

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

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

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?

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

Contribution to Financial Stability

Increased expectations Role in consumer confidence and

financial stability Resolution funding

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

Thank you for listening

Any questions?