Guaranteed Deposit Compensation

What is guaranteed compensation?

The state guaranteed amount to be disbursed to the depositor - a natural or a legal person - in the case of unavailability of deposits, to be paid in accordance with the certain procedure and in the certain amount.

Who is entitled to receive the state guaranteed compensation?

Depositors shall be entitled to receive the state guaranteed compensation:

• customers of credit institutions registered in Latvia and branches thereof, credit unions as well as Latvian branches of credit institutions registered abroad;
• customers of Latvian branches of credit institutions registered in the Member States if they participate in the Deposit Guarantee Fund. 

Who is entitled to receive the guaranteed compensation?

The State guaranteed compensation is subject to investments, current accounts, salary accounts, savings accounts of a depositor and other monetary funds of the depositor in the credit institution, besides, all investments of one depositor made to one credit institution shall be added together and shall be deemed as one guaranteed deposit. The amount of the guaranteed compensation shall refer to one such deposit in a particular credit institution. 

In what cases is it possible to receive the guaranteed compensation?

A depositor may receive the guaranteed compensation in cases, when the deposit taker is not able to disburse deposits and at lease one of the following circumstances has occurred:

• a court has declared the deposit taker as insolvent;
• The Latvijas Banka has cancelled an authorisation (permit) for operation of the credit institution or credit union;
• The Latvijas Banka has established that the deposit taker is not able to disburse a deposit to the depositor and has taken a decision regarding occurrence of inaccessibility of deposits. 

The guaranteed compensation shall not be paid for: 

• the deposits of credit institutions and credit unions;  
• the deposits of financial institutions;
• the deposits of such municipalities, the annual budget of which exceeds 500,000 euros, and the deposits of the institutions of direct administration;
• the deposits that are related to money laundering or are to be recognised as illegally acquired assets, provided a convicting judgment of a court has entered into force;
• the deposits the depositor of which has not been identified as client as required under the provisions of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing;
• deposits, which, in accordance with Article 51 and 62 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, constitute own funds of the deposit taker, including the amortised part thereof in accordance with Article 64 of the abovementioned Regulation;
• the deposits of insurance and reinsurance companies;
• the deposits of investment firms;
• the deposits of investment management firms;
• the deposits of private pension funds;
• the deposits of the managers of alternative investment funds;
• debt securities issued by a credit institution, as well as obligations arising from its bills of exchange, including transferable bills of exchange;
• the deposits with which no transactions have been made within the last two years of the date of occurrence of unavailability of deposits and the value of which is lower than 10 euros.

What is the amount of guaranteed compensation?

Amount of the guaranteed compensation for one depositor is determined regardless of the time, when the deposit was submitted to the bank.

In the case of unavailability of deposits disburse of the guaranteed compensation  shall be ensured to both, natural as well as legal persons, from the funds of the Deposit Guarantee Fund for deposits in all currencies, but not exceeding the amount of EUR 100 000.

The guaranteed compensation shall be paid in euros.

When the guaranteed compensation is disbursed? 

The guaranteed compensation shall be disbursed as of the 8th working day from the day of the ocurrence of  unavailability of the deposit.

What happens if the Deposit Guarantee Fund is short of resources?

If the Deposit Guarantee Fund does not have sufficient funds to pay the guaranteed compensation, the compensation will be paid in accordance with the procedure specified in Article 21 of the Deposit Guarantee Law.

Information was prepared on the basis of the report of the Latvijas Banka, submitted to mass media, in accordance with the Deposit Guarantee Law adopted by the Saeima.

***

Background Information on the Protection of the State-guaranteed Deposits