Does the establishment of the Guarantee System mean lower deposit guarantees?

Absolutely not. On the contrary, deposit insurance system will be even stronger as there are new mechanisms to protect deposits and the financial market. Client deposits at financial institutions continue to be covered up to the basic limit of EUR 100,000 (per entitled person per bank). And if the Czech National Bank issues a notification about a bank’s inability to meet its obligations or a court makes a decision on a bank’s bankruptcy (insolvency), clients will still be compensated within a legally defined deadline. This deadline is 7 business days.

Has the Deposit Insurance Fund ceased to exist?

The Deposit Insurance Fund has not ceased to exist as an institution, but has been transformed by law into the Financial Market Guarantee System. The roles and all responsibilities of the former Deposit Insurance Fund have been taken over by the Guarantee System. Legislation has also defined new responsibilities and broadened existing ones. The Deposit Insurance Fund is now “only” an accounting unit of the successor institution – the Financial Market Guarantee System.

What is the coverage limit for deposit insurance?

The coverage limit for deposit compensation payout – i.e. money that a client has deposited onto a current/savings/term account at a financial institution - is EUR 100,000. In specific situations defined by law the limit can even be increased by an additional EUR 100,000. The equivalent in Czech crowns is calculated on the basis of the foreign exchange rate announced by the Czech National Bank as at the record date.

Does the Financial Market Guarantee System cover deposits made in different currencies?

Yes, however compensation for deposits held at accounts located in the Czech Republic will be paid in Czech crowns.

What does the record date mean?

It is 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, or the day on which a court issues a decision on the bankruptcy (insolvency) of such an institution. Since this day, the Guarantee System starts preparations for deposit compensation payout which has to be commenced within 7 business days from the record date.

If any financial institution fails, who will repay the compensation?

The deposit compensation payout is now performed by the Guarantee System from the Deposit Insurance Fund, whose assets are managed by the Guarantee System. The payout itself is performed through branches of a selected payout bank.

Is there a time limit for withdrawal of the deposit compensation?

The compensation payout runs for 3 years from the date of its commencement. You can withdraw your compensation any time within this period.

What is insured by the Deposit Insurance Fund? On what accounts does it apply?

All deposits with banks, the branches of banks from non-EU Member States, building societies, and credit cooperatives maintained under a name and surname, personal identification number, and address of a natural person (individual) or the name, identification number, and registered office of a legal entity are insured. These are, in particular, current accounts, demand deposits, term deposits, etc. Bills of exchange, bonds, shares, unit certificates and other securities are not insured.

Member’s investments (contributions) of credit cooperatives members (i.e. basic member’s investments and subsequent member’s investments under Section 4b of the Act No 87/1995 Coll., on Savings and Credit Cooperatives, as amended) are also not insured. Pre-paid debit cards not linked to any account, issued in the form of electronic money (e.g. Cool karta, my paysafecard, etc.) are not insured. Deposits of territorial self-governing units – if they do not fulfil the conditions defined by law (for further information, please click here) – and government deposits are also now not insured.

Increased compensation can now be paid out to natural persons in specific cases of temporary high balances - e.g. deposits arising from inheritance, the sale of real estate used for residential purposes, or insurance settlements for accident, illness, invalidity or death. For these types of deposit, increased compensation may be paid out above the basic limit (EUR 100,000) but only if the deposit was made to the financial institution at most 3 months before its failure.

Is it necessary to insure deposits even at "large" banks (such as KB and CS)? And from what amount?

Deposits at banks are insured by law. See the list of insured institutions. Your deposit at a bank is therefore insured automatically and you do not need to act.

Where does the Guarantee System get its money?

The Guarantee System manages now two separate funds. These funds have different purposes and the financial resources collected to individual funds can only be used for activities defined by law.

Under the law, all financial institutions (banks, branches of banks from non-EU Member States, building societies, and credit cooperatives) that held insured deposits have to contribute to the Deposit Insurance Fund. Extraordinary contributions, loans from the financial market participants or from similar European institutions, or eventually from the state budget might supplement financial resources of the Deposit Insurance Fund in case of its insufficiency. Other forms of financial resources of the Fund are proceeds from bankruptcy, liquidation and insolvency proceedings of bankrupt banks, where the Guarantee System is a creditor. As of 31st December 2018, the Deposit Insurance Fund had financial reserves approx. almost CZK 32 billion.

The Crisis Resolution Fund will be built-up through annual contributions from financial institutions. In case of need, it is possible to supplement insufficient resources through the collection of extraordinary contributions. The Fund also has the possibility to obtain additional financial resources on the financial market, or by loans from similar European institutions. If it is not possible to get financial resources through these means, the Guarantee System may apply for a subsidy or refundable financial assistance from the state budget. The minimum target level of this fund is set at 1% of the total amount of covered deposits. This level should be reached by mid-2024.

Is the Guarantee System allowed to issue bonds?

The Guarantee System also has the option to obtain financial resources on the financial market by issuing bonds. For this purpose, the Guarantee System has established a bond issue programme with a duration of 10 years and a maximum amount of unpaid bonds issued as of CZK 100 billion. This programme was approved by the Czech National Bank in 2016. The bond issue programme is ready for situations when it would be necessary to get additional financial resources for the Deposit Insurance Fund. The establishment of the programme will enable the Guarantee System to complete bond issue in the shortest possible timeframe in case of urgent need.

Do the payout limits also apply to the branches of foreign banks operating in the Czech Republic? If not, what rules are followed in the event of their bankruptcy?

Branches of foreign banks from EU Member States (engaged in business here but not Czech legal entities) are insured in the country where the institution has its registered office. As of 31st December 2010, the minimum insurance limit in all EU Member States is EUR 100,000. Under Directive 2014/49/EU of the European Parliament and of the Council on deposit guarantee schemes, Member States are obliged to ensure that specific, strictly defined cases of deposits are temporally insured even up to a higher limit. The whole amount of this exceptionally higher coverage (temporary high balance) can reach a maximum of an additional EUR 100,000 in the Czech Republic (above the basic coverage limit of EUR 100,000). The particular conditions for temporary high balances (including the coverage limit and time period of the coverage) can vary from country to country and are defined by the legislation of the respective Member State.

Branches of foreign banks from non-EU Member States participate in the Czech deposit insurance system. In the event of failure, the Guarantee System will organize payout of compensation for deposits in the Czech Republic. Client deposits of such branches are insured under the same conditions as client deposits held in Czech banks.

How soon after the collapse of a bank will I get my money back? Do the same rules apply to domestic banks and the branches of foreign banks?

The deadline for the payout of deposit compensation is defined by law. On 1st June 2016, this deadline was shortened in the Czech Republic to 7 business days from the record date.

In the case of branches of foreign banks, the rules for deposit compensation payout - including the deadline for payout commencement - can vary from country to country according to the home country legislation. Your bank should provide you with this information upon opening an account, or at any time upon your request. Information can also be usually found on the website of the respective bank.

Will you compensate me for any interest I have earned on my account?

When the bank is declared in default, the depositor will be paid an interest accrued on deposits as at the record date as part of the compensation amount.

How should I insure one million euros when I can only insure 100,000? Can I divide the deposit over several banks? Can it be under one name, or does each deposit have to be made by a different person?

The insurance limit applies to a depositor per bank. You would have to distribute your savings to several banks or deposit them at the name of different persons (e.g. all family members).

What is the situation with the insurance of deposits in pension funds and life insurance?

These financial products are not insured with the Guarantee System.

Is there any difference between the insurance of deposits in a bank and in a cooperative credit union?

There is no difference.

How is the deposit compensation amount calculated?

All insured deposits of a depositor at a single insured institution, including the interest calculated as at the record date, are added up. Deposit compensation is paid out in the amount of 100% of this aggregate sum of deposits, but to a maximum of EUR 100,000. This coverage limit is converted to other currencies according to the exchange rate announced by the CNB as at the record date.

When did the insurance of deposits first originate and where?

The oldest fund is the American Federal Deposit Insurance Corporation, established in 1933. In addition to deposit insurance, the Federal Deposit Insurance Corporation also performs banking supervision over more than 4,900 banks and savings banks, which is more than a half of the institutions active in the US banking system. Since then, deposit insurance has spread worldwide. Today, the International Association of Deposit Insurers (IADI) has 83 members. Deposit insurance exists at least in 113 countries. The former Deposit Insurance Fund was one of the 25 founding members of the IADI.

At what exchange rate are deposits converted to establish the equivalent of the EUR 100,000 limit?

The equivalent of the limit in Czech crowns is calculated on the basis of the foreign exchange rate published by the Czech National Bank as at the record date.

Is the Guarantee System a government institution? What is the position of the Guarantee System with respect to government administration?

The Financial Market Guarantee System (under its original title the Deposit Insurance Fund) was established as a legal entity pursuant to the Act on Banks and it is not part of the government administration. It is managed by a three-member Management Board (formed by its employees) that is appointed by the Board of Directors. The Board of Directors is appointed and recalled by the Minister of Finance. It is composed of two employees of the Czech National Bank, two employees of the Ministry of Finance of the Czech Republic and one representative appointed on a proposal from the Czech Banking Association.