Post on 28-Dec-2015
Experiences from a small compensation case
Helena PerssonDeposit Guarantee ManagerSwedish National Debt Office
Swedish Deposit Insurance - Outline
• Overview responsibility and legislation
• Experience from a compensation case
• Regulatory changes
• Contingency Planning
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Swedish National Debt Office
• Public authority responsible to the Ministry of Finance
• Providing banking services for the central government
• Raising loans and managing central government debt
• Providing state guarantees and loans
• Managing government support for banks
• Responsible for the deposit insurance and investor compensation schemes = “Guarantee Authority”
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Swedish Deposit Insurance
• EU directive/Swedish Act (1996)
• 1996: Covers accounts with deposits for immediate withdrawal2008: Also covers accounts for fixed term deposits2011: SNDO approves accounts covered
• Compensation level (2006: SEK 250 000, 2008: SEK 500 000 2009: SEK 500 000/EUR 50 000) 2010: EUR 100 000
• Both actual holdings and accrued interest
• Per depositor and institute
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Swedish Deposit Insurance
• Pay out period1996: 3 months2010: 20 working days
• Pay box (“plus” if including SNDO bank support mandate)
• Trigger points 1996: Bankruptcy 2010: Also if decided by the FSA
• Preparations1996: No access to data before bankruptcy2010: Possible to receive data when asked
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Swedish Deposit Insurance
• All institutes with a permit from the FSA to take on deposits are automatically covered by the Deposit Insurance
• Member institutes supervised by the FSA
• 140 members (banks, credit market companies, securities companies)
• Ex-ante funding
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Ex-ante funding
• Member institutes holding covered deposits pay an annual fee.
• The total fee is 0,1% of covered deposits.
• 1 313 million SEK (2013).
• Over time the fee shall finance the scheme in full (including our administration costs).
• All fees are transferred to a fund. No target level.
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Fund management
• Government bonds (up to 10 years maturity) or interest bearing account
• 28,3 billion SEK (31 December 2012)(approx. 2,2% of covered deposits)
• Unlimited possibilities to borrow from the state by law
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Three compensation cases
2 failures in 2006
•Custodia - 1 282
depositors- SEK 135
million
•Allmänna kapital - 287
depositors- SEK 41
million
1 bank failure in 2010•Capinordic Bank – branch of Danish Bank
- Topping up arrangement- Administered by the Danish
DIS- Payment from the Swedish
DIS SEK 10,6 million
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Compensation cases in 2006
Allmänna Kapital» Organized data and few customers» Easy payout
Custodia » Several technical and operational problems» Much to learn from this case
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Custodia
Investigation by the Swedish FSA
Lack of internal rules and procedures
Revoke of license
Bank run
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Custodia
Significant time before the guarantee could come into effect
•Company appealed decision to court – avoid liquidation
•Paid the most persistent depositors
•Court rejected appeal – company appealed to higher court
•Bankruptcy 8 months after FSA’s decision
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Custodia
Extended payment period for reimbursements
•No access to IT-system before bankruptcy
•Verification of accounts
•Investigation of database
•Apply to court for extension of payment period + 3 months
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Custodia – Practical problems
• Bankruptcy only trigger
• No access to the company’s IT-system
• Uncertainty about quality of data
• Uncertainty about covered accounts
Swedish Commission
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New regulations 2010
• Decision from FSA to trigger the deposit guarantee
• IT-system requirements
• Mandate to request information about depositors from institutes
• Institutes are required to provide information about depositors without delay
• Institutes must apply for accounts
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Experiences - Custodia
Bank run caused by the decision to revoke the license
Significant time before the guarantee could come into effect
Difficult to verify the depositors’ accounts
• FSA can decide for the deposit guarantee to come into effect
• Authority to provide information about covered accounts
•Quality requirements for IT-system•Access to depositor data at any time
Problems Solutions
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Contingency Planning
• SNDO since 2008
• 5 employees at the Financial Stability & Consumer Protection Department
• Separate legal, communication, back office and IT-resources
• Stand by working force within the SNDO • Agreements signed with external staff agencies
• Possibility to use external call center
• Contingency plan
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Contingency Planning
• IT-system developed in-house
• Institutes required send depositor information
• Periodic tests of the institutes’ files
• Periodic training of staff
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International Cooperation
• European Forum of Deposit Insurers (EFDI)
• International Association of Deposit Insurers (IADI)
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