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Fifth Anniversary Conference of the Banking and Payments Authority of Kosovo - Pristina, Kosovo, 11 - 12 November 2004.
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Fifth Anniversary of the BPKInternational Conference
Pristina, 11-12 November 2004
Bulgarian Deposit Insurance System
Georgi Petkov, Member of the Management BoardBulgarian Deposit Insurance Fund
BULGARIAN DEPOSIT INSURANCE SYSTEM
System development
Implicit government guarantee till Jan 1996
First explicit limited coverage DIS - introduced Jan 1996(Regulation of the Central Bank - BNB)
– only deposits of physical persons were insured– level of coverage - appr. EUR 2,500
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
System development
Outbreak of the financial crisis - mid 1996(within ten months 17 banks comprising 25% of the totalbanking system assets failed)
Extraordinary legislation - Law on State Protection of Deposits; repayment of deposits from the budget:
– 100% to physical persons– 50% to legal entities
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
System development
Introduction of Currency Board - mid 1997– curbing the crisis
Explicit DIS with limited coverage on deposits - Law on Bank Deposit Guaranty - Apr 1998
Bulgarian Deposit Insurance Fund - Jan 1999– independent legal entity– accountable to the Council of Ministers, BNB– financial activities audited by the National Audit Office
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF functions: Legal basis
1998 Law on Bank Deposit Guaranty (LBDG)– determines and collects premiums from banks– invests its assets under LBDG provisions– repays insured amount of deposits in failed banks
1999 Amendments to Law on Banks: Art.89a (repealed by LBB)– very limited control over trustees
2002 Law on Bank Bankruptcy (LBB)– administers bank bankruptcy proceedings by
controlling trustees and preparing draft regulations– control over 4 failed banks
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF: Criteria for membership
Mandatory membership for:– all Bulgarian banks– branches of foreign banks, licensed to operate on the territory of
Bulgaria, which are not covered by the DIS in the country of thehead office or the level of coverage is lower than in Bulgaria
– branches of Bulgarian banks abroad
Currently BDIF has 32 members of which 3 branches of foreign banks
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF: Funding
DIS of ex-ante type funding by banks– entry and annual premiums paid by banks
No initial fund contribution from the budget
Other sources of funding– interest on BDIF investments– proceeds from BDIF subrogated claims– loans, etc.
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEMBULGARIAN DEPOSIT INSURANCE SYSTEM
Bank premiums
Entry premiums - 1% of registered capital
Annual premiums - 0.5% of the total amount of the previous year’s deposit base (calculated on an average daily basis)
BDIF is considering the introduction of a risk-adjusted premium system.
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF: Investment activity
BDIF resources are invested in:
– securities issued or guaranteed by the Bulgariangovernment
– short-term deposits with commercial banks – authorizedprimary dealers of government securities
– deposits with the Bulgarian National Bank
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
Financing within shortfall of resources
By decision of BDIF Board shortfall may be covered by: – requiring an advanced payment of premiums– increasing the annual premium (max. 1.5%)– drawing loans:
- from the market- from the budget after a decision of Parliament
Loans may be secured by government guarantee or BDIF assets, incl. future claims on banks for annual premiums
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF: Size of funds
In accordance with the LBDG provisions - 5% of the totalamount of insured deposits in the banking system. Whenthe amount of the Fund exceeds the 5% target ratio BDIF Management Board may decide to reduce annual premiums
Currently BDIF funds amount to BGN 252 M (EUR 129 M) and the ratio BDIF funds/deposits is 2.14%
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
Scope of coverage
Insured are:– deposits of physical persons and legal entities– deposits in national and foreign currencyExclusions:– banks and non bank financial institutions, insurers, pension and
social security funds, investment intermediaries, privatizationfunds, government and government institutions, municipalities, BDIF
– bank' senior officers and auditors, shareholders of more than 5% ofbank’s equity, and their close relatives, preferential rate deposits
– deposits associated with ‘money laundering’BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
Level of coverage
1998 BGN 6,900/EUR 3,528 – to BGN 2,000 - 95%– over BGN 2,000 - 80% (max 5,000)
2002 BGN 10,000/EUR 5,113 – 100% (abolishment of coinsurance)
2003 BGN 15,000/EUR 7,670 – 100%
2005 BGN 25,000/EUR 12,782 – EU Timetable2007 BGN 39,200/EUR 20,043 – EU Timetable
Application of coverage limitsPer depositor per bank
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
Repayment of insured amounts of deposits
Deposits are repaid only in national currency
Repayment of insured amounts of deposits is done via aservicing bank determined by BDIF Management Board
Repayment begins not later than 45 days from the date of revocation of bank’s license by BNB
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF functions under Law on Bank Bankruptcy
Performs control over the lawful and appropriate exercise of trustee’s powers:– appoints and removes a trustee– determines trustee’s remuneration– controls trustee’s expenses– controls transactions made by the trustee– issues methodological instructions to trustee relating to the
exercise of his powers
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
BULGARIAN DEPOSIT INSURANCE SYSTEM
BDIF functions under Law on Bank Bankruptcy
Prepares draft regulations:– Regulation on the reporting requirements and trustee’s
budget – Regulation on trustee’s remuneration– Regulation on the BDIF inspections in the banks in
bankruptcy– Tariff on the fees collected by the BDIF relating to the
exercise of its controlling powers in the bankruptcyproceedings
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
How to contact BDIF
Bulgarian Deposit Insurance Fund2, Graf Ignatiev Str., 3rd Floor1000 Sofia, BulgariaTel.: +359 2 980 1438; Fax: +359 2 988 8207E-mail: [email protected]: http://www.dif.bg
BPK Fifth Anniversary Conference Pristina, 11-12 November 2004