17 December 2021
- The Guidelines aim to improve confidence in financial stability across the EU, by establishing a more harmonised approach to the funding of DGSs, and by enhancing transparency and comparability of the financial position of deposit guarantee schemes (DGSs).
- The Guidelines set out that only funds that were originally contributed by credit institutions to the ex-ante funds of DGSs will count towards reaching the target level of said funds.
- The Guidelines also expand the current reporting requirements from DGSs to the EBA, with a view for the EBA to publish more extensive information on DGS funding going forward.
The European Banking Authority (EBA) published today its Final Guidelines on the delineation and reporting of available financial means (AFM) of DGSs. The purpose of the Guidelines is to ensure that only funds that credit institutions originally contributed to a DGS fund, or that stem indirectly from such contributions, such as recoveries, will count towards reaching the target level of said DGS fund. Conversely, funds that stem directly or indirectly from borrowed resources should not count towards the target level. These clarifications aim at preventing a situation whereby a DGS could meet the target level by taking out a loan, instead of raising contributions from the industry.
By developing these Guidelines, the EBA follows up on its recommendations from the EBA Opinion on deposit guarantee scheme funding and uses of deposit guarantee scheme funds published on 23 January 2020. In the Opinion, which was addressed to the European Commission to support its ongoing review of the Deposit Guarantee Schemes Directive (DGSD), the EBA identified differences across Member States in relation to the interpretation of the concept of AFM. The Opinion recommended clarifying Directive 2014/49/EU (DGSD) that borrowed funds or funds stemming from borrowed funds should not count towards reaching the minimum target level for DGS funds.
Given that a review of the DGSD has not yet been proposed and is still several years away from being negotiated and finalised, the proposed Guidelines provide such a clarification ahead of any such changes in the future, using the existing DGSD as a legal basis. More precisely, the final Guidelines clarify that AFM are comprised of two subsets:
- Qualified AFM (QAFM) – funds stemming directly or indirectly from contributions of DGS member institutions, which qualify towards reaching the target level of the DGS fund;
- Other AFM – funds, which are not QAFM, including borrowed funds that stem from liabilities such as loans, and hence do not count towards reaching the target level of the DGS fund.
In terms of reporting, the Guidelines will extend the reporting requirements from DGSs to the EBA to reflect the clarified concept of AFM, qualified AFM (QAFM) and other AFM proposed earlier in the Guidelines. They also introduce new reporting requirements of DGSs to the EBA, most notably the reporting of outstanding liabilities of DGSs and high-level information on alternative funding arrangements that are in place. That information will be published on the EBA website annually and should provide more transparency and comparability of the financial position of DGSs across the EU.
Compared to the draft Guidelines published on 28 April 2021 for consultation, the final Guidelines replaced the approach on the allocation of recoveries to QAFM and other AFM with an approach that permits two alternatives, both of which better fulfil the aims of the Guidelines. Also, the treatment of investment income with regards to QAFM has been simplified. Furthermore, a clarification has been introduced regarding the treatment of loans between DGSs. Finally, the reporting requirements now include loans between DGSs and exclude unclaimed repayments.
These Guidelines have been developed according to Articles 16(1) and 26(2) of Regulation (EU) No 1093/2010 (EBA Regulation). The Guidelines aim at harmonizing the funding of DGSs according to Article 10(1) of Directive 2014/49/EU (DGSD) and thereby strive to strengthen the European system of national DGSs in accordance with Article 26(1) of the EBA Regulation.