About the Guarantee System
The Financial Market Guarantee System (the “Guarantee System”) is an institution established by law to ensure, administer and use financial resources for securing and preserving stability on the financial market in the Czech Republic. The Guarantee System cooperates primarily with the Czech National Bank, Ministry of Finance of the Czech Republic and, in the case of need, also with similar mechanisms in other European countries. The Guarantee System was established on 1st January 2016 on platform of the former Deposit Insurance Fund. Since this date the Deposit Insurance Fund has become an internal unit of the Guarantee System, similarly to the newly established Crisis Resolution Fund.
The Guarantee System will ensure the payout of deposit compensation in situations when any of the banks, building societies, or credit cooperatives (“financial institutions”) are declared insolvent by the Czech National Bank or in situation when a court decides on the bankruptcy of such a financial institution. This was the role of the Deposit Insurance Fund until the end of 2015, which organized the process of deposit compensation payout.
The establishment of the Guarantee System means the introduction of a more comprehensive protection system for depositors and promotion of stability on the financial market. Changes in the configuration of the securing of the financial market stem from a plan of European Union Member States. The objective is to ensure a stable and strong protective financial network that will minimise the potential problems of financial markets in individual Member States as well as the whole of the European Union.
The Guarantee System manages funds that can be used not only to make deposit compensation payouts but also to address potential problems of financial institutions in order to stave off bankruptcy. For clients of banks, building societies and credit cooperatives, this change will thus mean a strengthening of certainty in terms of the security of deposits insured under the law, and a more flexible approach during payouts of deposit compensation in the event that the bankruptcy of one of these institutions actually occurs.