Financial Market Guarantee System Enters into New Agreement. Payout of Deposit Compensation to be Handled by Komerční banka, a.s.
Prague, 20 April 2021 – The Financial Market Guarantee System has entered into a new framework agreement for the handling of deposit compensation payout for the next four years.
If the Czech National Bank announces the insolvency of a bank, building savings bank or cooperative credit union, the Financial Market Guarantee System will hand over to the so-called ‘payout bank’ the materials and means necessary to effect the payment of deposit compensation. The payout bank was previously Česká spořitelna, a.s., but it has now been replaced by Komerční banka, a.s..
The newly signed framework agreement is the result of a tender process undertaken by the Guarantee System at the turn of 2020 and 2021. The agreement will come into force on 20 April 2021, when the current framework agreement with Česká spořitelna, a.s. expires.
This means that starting from 20 April, should any bank, building savings bank or cooperative credit union become unable to meet its obligations, Komerční banka, a.s. will be ready to pay out deposit compensation through its branches once instructed to do so by the Guarantee System. The last time this happened was in 2016, when compensation was paid out to clients of ERB bank, a.s.
In such cases, clients of the failed institution may collect compensation for their deposits up to an equivalent of EUR 100,000 in only 7 business days’ time. The payout period is three years from its start date, while payout is possible at selected branches of the payout bank; the client needs to come to a branch and present the relevant documents (for natural persons, a valid identity document will suffice). Payout is made by credit transfer to a selected account in the Czech Republic or in cash. In addition, it will now be possible to apply for the payout of compensation by mailing a completed form with an officially certified signature.
From now on, clients of a failed financial institution will be informed about the start of deposit compensation payout by letter sent to the client’s permanent residential address kept in the records of the financial institution concerned. This letter will describe the method of payment and state the amount of basic compensation to which the client is entitled. Information about the payment method is also always available on the website of the Guarantee System and is announced in the media.
More information about deposit insurance can be found on the Guarantee System’s website.
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