Contributions to the Financial Market Guarantee System also grew this year. Financial institutions paid over five and a half billion crowns
Prague, 6 October 2021 – Banks, cooperative credit unions, building savings banks and selected investment firms have paid CZK 5,616.7 million in regular contributions to the Financial Market Guarantee System this year. Most of this amount, specifically CZK 4,332.6 million, was sent to the Crisis Resolution Fund. The reserves on the Deposit Insurance Fund have increased by CZK 1,278 million.
Compared to last year’s total (CZK 4,908.9 million), the amount of collected contributions grew by CZK 707.8 million.
The main reason was the gradual year-on-year increase in the volume of deposits from which the contribution amount is calculated. This volume was the highest ever recorded. Another parameter influencing the contribution amounts is the riskiness of the financial institution. The Financial Market Guarantee System now manages CZK 58.2 billion in the Deposit Insurance Fund and the Crisis Resolution Fund.
The Deposit Insurance Fund currently has CZK 37.1 billion in available funding, which ensures the basic readiness of the Guarantee System to commence deposit compensation payouts to clients in the event a financial institution encounters financial problems. Nevertheless, this is not the only funding to which the Guarantee System has access. Its financial resources may be promptly bolstered by additional sources of funding, e.g. by potentially imposing extraordinary contributions, generating revenue from the sale of bonds or receiving credits or loans from foreign funds or from the state budget. Compensation is currently being paid to clients of the bankrupt Československé úvěrní družstvo. This was commenced on 11 August this year, and for a period of three years from the start of payments the Guarantee System is to provide compensation to 25 clients through branches of the paying bank. The total amount earmarked for client compensation is CZK 49.7 million.
The total amount available to the Guarantee System in the Crisis Resolution Fund is CZK 21.1 billion. This fund does not serve for direct disbursements of compensation for deposits. The resources collected in it may be used if there is a threat to the stability of any of the financial institutions, assuming compliance with other statutory conditions. The Crisis Resolution Fund contribution amounts are determined by the Czech National Bank after consultation with the Guarantee System, during which the CNB is obliged to take into account that the Crisis Resolution Fund target amount should reach one percent of the total volume of covered deposits by 31 December 2024, i.e. approximately CZK 37 billion.
The preliminary amount of the contribution that financial institutions are to pay to the Crisis Resolution Fund next year is already known. The total contribution should amount to approximately CZK 5.3 billion.
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