The EBA launched today a consultation on Guidelines on payment commitments to deposit guarantee schemes. These Guidelines are part of the EBA's work to promote a consistent and coherent approach to deposit guarantee schemes across the European Union (EU). The consultation runs until 2 January 2015.
The Deposit Guarantee Schemes Directive (DGSD) aims at ensuring a uniform level of protection for depositors throughout the EU and the same level of stability of Deposit Guarantee Schemes (DGSs) through the harmonisation of the financing methods. DGSs are financed by institutions through ex-ante contributions, regardless of any failure and ex post contributions when the failure actually materialises and the advanced contributions are not sufficient.
In particular, the DGSD allows institutions to honour up to 30% of their ex-ante contributions through payment commitments, provided the latter are fully collateralised by low risk assets unencumbered by third party rights and at the disposal of the DGS.
In line with the new EU framework on deposit insurance, the EBA has developed guidelines to ensure that payment commitments are technically sound and implemented in a consistent way across the Single Market.
In this regard, the proposed Guidelines lay down the requirements that will secure reliable funding for the DGS, notably a marking-to-market of the value of the collateral and the obligation for the institution to provide additional funding in case of deterioration. In addition, the Guidelines clarify the prudential treatment of payment commitments. In particular, within the supervisory review and evaluation process (SREP), competent authorities shall assess the risks to which the capital and liquidity positions of a credit institution would be exposed should the DGS call upon them to honour their commitment, which should be treated as a cash payment from a prudential point of view.
The Guidelines take account of the proportionality principle, which allows small institutions to adjust the requirements for diversification and low correlation with risks of the DGS pay-out, provided that its overall portfolio of collateral assets remains properly diversified.
Comments to these consultations can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 2 January 2015.
All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will then take place at the EBA premises on 21 November 2014 from 14.00 to 17.00 UK time.
Legal basis and next steps
The draft Guidelines have been developed in accordance with Article 10 (3) of the DGSD, which mandates the EBA to issue guidelines on payment commitments.
The EBA is also currently in the process of elaborating Guidelines on the methods for calculating risk-based contributions to Deposit Guarantee Schemes, which will should be launched for consultation in the coming weeks.