Bank – A joint-stock company that receives deposits from the public and provides loans. It must have a banking licence to perform these activities.
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.
Basic deposit compensation – Basic compensation equals a maximum of the equivalent of EUR 100,000 per depositor per bank.
Building savings bank – An institution offering construction savings, construction savings loans, and bridging loans.
Compensation transfer request – in case a client is unable to collect the compensation at the payout bank branches, payment viabank transfer is also possible by written correspondence. A written instruction with an officially certified signature of the entitled person haa to be sent to the payout bank´s address: Komerční banka, a.s., CKB department 2192, Václavské náměstí 42, Prague 1, postcode 114 07. A sample form is available on the Documents required to obtain compensation page.
Complaint form – If a client thinks that he/she has not been granted compensation in the right amount, he/she can use the complaint process. To this end, he/she will fill out a complaint form, and send it to the Financial Market Guarantee System, Týn 639/1, 110 00 Prague 1.
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.
Crisis Resolution Fund – 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.
Deposit – any funds entrusted to a bank, cooperative credit union or a building savings bank that constitute an obligation to the depositor to repayment thereof.
Deposit Insurance Fund – Accounting unit of the Guarantee System from which the Guarantee System provides compensation to the holders of deposits in banks, cooperative credit unions, and building savings banks that are unable to meet their commitments.
Failed bank – a bank that is labelled by the Czech National Bank as unable to meet its obligations to beneficiaries under statutory and contractual terms.
Financial Market Guarantee System – An institution established by law that administers the Deposit Insurance Fund and the Crisis Resolution Fund.
Inability to meet one’s commitments – An inability to meet one’s commitments to entitled persons, as arising from statutory and contractual conditions.
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.
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 savings bank or cooperative credit union.
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.
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.
Natural person – An individual with rights and obligations (a human).
Participants in the deposit insurance system – Banks, banks with registered office outside the EU, building savings banks and cooperative credit unions that pay annual contributions to the Deposit Insurance Fund.
Payout bank – a bank,through its selected branches the clients can withdraw their deposit compensation. The Guarantee System selects the payout bank every 4 years in a public tender according to the Act No 134/20016 on Public Procurement, as amended. Since April 20, 2021 Komerční banka , a.s. has been determined as a payout bank.
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.
Record date – The day on which the Czech National Bank delivers a written notice to the Financial Market 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.
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.
- Deposit account – Serves for depositing the client’s money for a specified period at a fixed interest rate agreed in advance.
- 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.
- 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 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.
- Savings account – An account to which disposable funds can be deposited. The funds usually bear a higher interest rate than on a current account while still remaining readily available.
- 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.
- 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.
Uninsured deposits - examples
- 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.
- Bonds – Securities with an incorporated right to repayment of a certain amount owed and an eventual defined yield.
- 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.
- 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.
- 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. my paysafecard etc.)
- 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. Securities can be issued in paper form or in book-entry form (registered in Central Securities Depository).
- Shares – Securities proving that their owner (holder) is a shareholder, i.e. that he/she owns a certain share (capital) in a joint-stock company.
- 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.
- 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.