Response to consultation on draft Guidelines on the delineation and reporting of available financial means of DGS
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However, this proposal for the criteria of QAFM should not affect the level of available financial means (AFM) already reported by DGSs. This should hold particularly true in the case where DGSs AFM are integrated into national Treasury as non-fiscal revenues and where the fungibility of funds is high. In this case, DGSs may collect contributions from members institutions way above the minimum target level and AFM may be in excess. To counterbalance interlinkages between DGSs funds and Treasury funds and the fact that DGSs AFMs may be counted towards government budgetary deficits, we would support a system that could “flag” cases when DGSs accumulate AFM in excess.
We therefore advocate the revision of paragraph 26 of the guidelines as well as paragraph 47 of the consultation paper, according to which deposit guarantee schemes should report unclaimed repay-ments to the EBA. Such reporting does not add any value - except in the very specific case that a compensation event occurs shortly before the reporting deadline. On the contrary, experience shows that no further compensation is claimed from depositors within a few weeks of the occurrence of a compensation case. In the vast majority of cases, the remaining compensation claims are not claimed by the rightful claimant even at a later date.
Question 1: Do you agree with the proposals for the criteria that QAFM should fulfil, i.e. on the exclusion of borrowed resources, the exclusion of contributions from QAFM that contain an obligation to be repaid upon receiving recoveries and keeping track of the origin of funds, as outlined in section 4.1 and 4.4 of the guidelines?
So far, available financial resources in accordance with Art. 2 (12) EU Directive 2019/49 include "cash, deposits and low-risk assets which can be liquidated within a period not exceeding that referred to in Article 8 (1) and payment commitments up to the limit set in Article 10 (3)." This definition of AFM (in future QAFM) does not stand against the EBA's new interpretation. We support the proposal that in the future credit-financed funds, (extraordinarily) levied contributions with a repayment obligation as well as funds without a traceable source of funds no longer count as (qualified) available financial means. Keeping tracks of the origin of funds should just imply that DGSs are committed to usual accounting rules and then keep the records of what has been borrowed and repaid. No separation of banking accounts is needed to this end (section 4.1 (15)).However, this proposal for the criteria of QAFM should not affect the level of available financial means (AFM) already reported by DGSs. This should hold particularly true in the case where DGSs AFM are integrated into national Treasury as non-fiscal revenues and where the fungibility of funds is high. In this case, DGSs may collect contributions from members institutions way above the minimum target level and AFM may be in excess. To counterbalance interlinkages between DGSs funds and Treasury funds and the fact that DGSs AFMs may be counted towards government budgetary deficits, we would support a system that could “flag” cases when DGSs accumulate AFM in excess.
Question 2: Do you agree with the proposed approach to allocate recoveries to QAFM and other AFM, as outlined in section 4.2 of the guidelines?
We agree with the EBA's proposal to allocate recoveries to QAFM and other AFM according to their share of funding. This approach is essential to fulfill the new definition of QAFM and ensures the exclusion of borrowed funds to reach the target volume of the protection scheme. But it is also important, that the consistent calculating system does not lead to additional bureaucratic effort and that the derivation of the recoveries according to the origin of the funds cannot be distorted by individual specialties.Question 3: In your view, is the alternative approach or any other approach to allocating recoveries better, with particular focus on the method’s a) suitability to respect the principles of QAFM set out in section 4.1 and 4.4 of the guidelines, b) and simplicity of application?
There are no objections to option 3 or 4.Question 4: Do you agree with the proposal that the treatment of administrative fees relative to QAFM does not need to be specified?
In the EBA's perception, the administrative fees collected by DGSs from their member institutions have no meaning in achieving the target volume of available funds. We agree with the assessment of the EBA and see no need in the specification of administrative fees due to their marginal importance in the composition of the available financial means of the guarantee schemes.Question 5: Do you agree with the treatment of investment income relative to QAFM as proposed in section 4.3 of the guidelines?
Insofar as a subdivision of the available funds into QAFM and other AFM is carried out, the corresponding allocation of the income from the investment of the funds is also desirable in the sense of uniformity. However, it should be noted that the case of income from both sources of QAFM and other AFM is very rare and of minor importance. We therefore agree with the EBA's proposal and are particularly in favour of this subdivision only being necessary if there are claims against the DGS that have to be settled with other AFMs.Question 6: Do you agree with the proposed treatment of unclaimed repayments with regard to AFM?
We agree with the proposed treatment of unclaimed repayments and consider it desirable for the EBA to exclude the treatment of unclaimed repayment from the scope of these guidelines.Question 7: Do you agree with the proposed reporting of a) outstanding liabilities that have been incurred for the purpose of a DGS intervention, b) alternative financing arrangements and c) unclaimed repayments to the EBA and the publication of this information by the EBA as presented in section 4.4 of the guidelines?
We support the findings of the accompanying Impact Assessment of the Draft Guidelines regarding the treatment of unclaimed repayments. The outcome of the Impact Assessment should also apply to the reporting of unclaimed repayments. Since the impact of the total volume of unclaimed repayments on the available funds is not discernible, the reporting of unclaimed indemnity payments also does not add any value to the depositor's information gain.We therefore advocate the revision of paragraph 26 of the guidelines as well as paragraph 47 of the consultation paper, according to which deposit guarantee schemes should report unclaimed repay-ments to the EBA. Such reporting does not add any value - except in the very specific case that a compensation event occurs shortly before the reporting deadline. On the contrary, experience shows that no further compensation is claimed from depositors within a few weeks of the occurrence of a compensation case. In the vast majority of cases, the remaining compensation claims are not claimed by the rightful claimant even at a later date.