FMGS – Financial Market Guarantee System
DIF – The Deposit Insurance Fund is an accounting unit of the Guarantee System from which the Guarantee System provides compensation to the holders of deposits in banks, credit cooperatives, and building societies that are unable to meet their commitments.
CRF – The Crisis Resolution Fund is an accounting unit of the Guarantee System from which the Guarantee system provides financial resources for crisis resolution of financial institutions using tools defined in the Act on Financial Crisis Prevention and Resolution.
Insured Deposits - examples
- Current account – A bank account kept at a bank in which the account holder (client) has his/her money deposited. He/she can use his/her funds at any time to carry out various cash or cashless transactions.
- Savings account – An account to which disposable funds can be deposited. The funds bear a higher interest rate than on a current account while still remaining readily available.
- Term account – An account offering a higher interest rate in exchange for the funds being tied down for a longer period. This is a bank deposit for a specified period of time with an interest rate set in advance.
- Deposit account – Serves for depositing the client’s money for a specified period at a fixed interest rate agreed in advance.
- Savings books – One of the savings products available on the market, but one that is now overshadowed by its competitors. There are Savings books in the name of their holder, with or without a termination period. Only the Savings book owner or persons authorised by him/her can dispose of the funds on a Savings book registered in the name of its holder.
- Deposits held in accounts of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers – these are deposits that represent financial resources entrusted by the entitled person to a payment institution, electronic money institution, small-scale payment service provider or small-scale electronic money issuer in order to carry out a transaction, or financial resources that were exchanged into electronic money. For the purposes of calculation of the amount that will be reimbursed from the Deposit Insurance Fund, the user of the payment services or the holder of the electronic money is considered the real owner of these financial resources. The compensation is paid directly to the institution, which subsequently compensates its clients.
- Deposits held in accounts of investment firms, deposits that represent financial resources of a client of an investment firm who deposited them under the Act on Capital Market Undertakings. For the purposes of the calculation of the amount that will be reimbursed from the Deposit Insurance Fund, the client is considered the real owner of these financial resources. The compensation is repaid directly to the investment firm, which subsequently compensates its clients.
- Deposits held in accounts of bailiffs, deposits that represent financial resources of entitled and registered creditors under the Enforcement Procedure Act. For the purposes of the calculation of compensation from the Deposit Insurance Fund, the entitled creditor is considered the real owner of these financial resources. The compensation is repaid directly to the bailiff, which subsequently compensates the entitled creditors.
- Supplementary pension insurance – A specific type of insurance offered by pension companies on a commercial basis. Together with private life insurance, this provides the policy holder with better financial security in the future for when he/she retires.
- Life insurance – Insurance in the event of death, reaching a certain agreed age, or in the event of another insured event. This provides financial security for the future (old age) or in cases of unexpected life situations; the funds deposited appreciate.
- Subordinated debt – It may have the form of a loan received, credit, or deposit, and in the case of a bank or an investment firm, also the form of an issued subordinated bond.
- Bill of exchange – A negotiable security giving rise to a debtor’s obligation. The drawee imposes an obligation on the debtor to pay and on the bill-of-exchange holder the right to demand the payment of the bill-of-exchange amount at the appointed place and time.
- Securities – Instruments meeting the requisites for securities, incorporating a right in such a manner that after the securities are issued, the right cannot be asserted or transferred without the relevant instrument.
- Member´s investment (contribution) to a cooperative credit union – a basic member’s investment and a subsequent member’s investment by a member of a cooperative credit union (Section 4b of Act No 87/1995 Coll., on Savings and Credit Cooperatives, as amended).
- Prepaid debit cards – debit cards that are not connected to any account, issued in the form of electronic money (e.g. Blesk peněženka, Cool karta, Napka, my paysafecard etc.)
- Deposits of cities and municipalities – deposits of territorial self-governing units whose tax revenues according to the Act on Budget Allocation of Taxes are higher than an amount equivalent to EUR 500,000 or if the territorial self-governing unit did not demonstrate compliance with the compulsory requirements to the financial institution in question. Information about the conditions of deposit insurance for territorial self-governing units whose tax revenues do not exceed the above mentioned limit can be found here.
Natural person – An individual with rights and obligations (a human).
Legal entity – A unit comprised of persons possessing certain rights and obligations. It can be a business company, cooperative, state company, bank, insurance company, etc.
Participants in the deposit insurance system – Banks, building societies and credit cooperatives that pay annual contributions to the DIF.
Record date – The day on which the Czech National Bank delivers a written notice to the Guarantee System about the inability of a financial institution to meet its commitments to entitled persons arising from statutory and contractual conditions, or the day on which a court or foreign court issues a decision on the bankruptcy (insolvency) of such an institution or other decision for reasons directly related to the financial situation of the insured institution, which results in the suspension of depositors’ right to dispose of their insured deposits.
Amount of deposit compensation – 100% of the amount of a deposit is compensated, up to a maximum basic compensation of the equivalent of EUR 100,000 per depositor per bank, building society, or cooperative credit union. Compensation for deposits in foreign currencies is paid out in the currency of the state where the account is located.
Conversion of the euro exchange rate – The equivalent of the limit in Czech crowns is calculated on the basis of the FX market exchange rate announced by the CNB as at the record date.
Basic deposit compensation – Basic compensation equals a maximum of the equivalent of EUR 100,000 per depositor per bank.
Increased deposit compensation – Deposit compensation for deposits provided in special, legally determined cases above the basic limit of EUR 100,000 up to an additional EUR 100,000. Increased compensation can be provided to a natural person only.
Institutional deposit compensation – Deposit compensation for financial resources entrusted by the entitled person to a payment institution, electronic money institution, small-scale payment service provider or small-scale electronic money issuer to carry out a transaction, or for financial resources that were exchanged into electronic money. It is also deposit compensation for financial resources entrusted to an investment firm and held in an account of the investment firm, or deposit compensation for financial resources held in an account of a bailiff for entitled and registered creditors under the Enforcement Procedure Act. The compensation is paid to the payment institution, electronic money institution, small-scale payment service provider, small-scale electronic money issuer, investment firm or bailiff, which subsequently compensate their clients.
Deposit compensation payout – This must commence within 7 business days from the record date (in the case of institutional compensations within 15 business days).
The depositor does not need to apply for basic and institutional compensation payout. Information about the commencement of the payout and its method is published in the press, on the FMGS website, on the website of the insolvent institution, and also through the payout bank.
The compensation payout runs for 3 years from the date of its commencement. The compensation is paid out through banks (see Payout point) with an extensive branch network, both in cash and through cashless transfers.
Payout point – As of 2017, one of the largest domestic banks - Česká spořitelna - has been appointed as the payout point for injured clients. The selected bank has more than 500 branches throughout the country, which guarantees good access for all clients.
Bank – A joint-stock company that receives deposits from the public and provides loans. It must have a banking licence to perform these activities.
Cooperative credit union – Fulfils the same role as banks, but has specific differences. Only members may save their funds in them. One can become a member upon the signing of an application form and the payment of a member’s investment.
Building society – An institution offering construction savings, construction savings loans, and bridging loans.
Inability to meet one’s commitments – An inability to meet one’s commitments to entitled persons, as arising from statutory and contractual conditions.
Bank based in the Czech Republic – A joint-stock company based in the Czech Republic that receives deposits from the public and provides loans. It must have a banking licence from the Czech National Bank to perform these activities.
Insurance of foreign banks based in EU with a branch in the Czech Republic – Deposits with these institutions are insured through the deposit insurance system in the country in which the foreign bank is based. The minimum deposit insurance in EU Member States, like in the Czech Republic, is 100% of the deposit, but to no more than EUR 100,000. Information about deposit insurance must be provided to depositors by the relevant branch of the foreign bank, or it can be obtained from the respective deposit insurance system. For more information, read Useful links.
Insurance of foreign banks based outside EU with a branch in the Czech Republic – Deposits with these institutions are insured trough the Guarantee System. The conditions of deposit insurance are the same as in case of deposit insurance in Czech banks, building societies or credit cooperatives.
Interest – Calculated as the multiple of the initial principal and the interest rate divided by 100.
Interest rate – Usually stated as a percentage and is the price of the borrowed or deposited money.
Claims form – If a client thinks that he/she has not been granted compensation in the right amount, he/she can use the claims process. To this end, he/she will fill out a claims form, and send it to the Financial Market Guarantee System, Týn 639/1, 110 00 Prague 1.
Power of attorney – A legal document that can be established between natural persons and legal entities in any combination. It is governed by the Civil Code. A power of attorney can precisely specify the tasks to be performed by a legal representative. A sample power of attorney for the payout of deposit compensation can be downloaded here.