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 Crisis Resolution Fund as of the same date.

The first pillar of the Financial Market Guarantee System is the Deposit Insurance Fund. If the Czech National Bank makes an announcement on any financial institution included in the deposit insurance system being unable to meet its obligations to beneficiaries under statutory and contractual conditions, or if a court makes a decision on the bankruptcy of such institution, the Financial Market Guarantee System will commence disbursement of compensation for receivables from deposits to the clients of that financial institution from the resources collected in that fund . Banks, branches of banks from non-Member States, building savings banks and cooperative credit unions must make regular annual contributions to the Deposit Insurance Fund.

The second pillar of the Financial Market Guarantee System is the Crisis Resolution Fund. 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. This fund can also be used within the framework of individual crisis resolution tools whose objective is to prevent situations that could otherwise result in the insolvency or bankruptcy of a financial institution and the subsequent disbursement of deposit compensation to its clients . This fund does not serve for direct disbursements of compensation for deposits, but enables a solution in cases when the rescue of the financial institution is feasible, credible and in the public interest . Contributions to the Crisis Resolution Fund are made not only by institutions already participating in the deposit insurance system, but also by some investment firms, also on a regular annual basis.

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