Covered deposits at the end of the first semester 2016

As at 30 June 2016, FGDB guaranteed deposits of 221.2 billion lei, up with nearly 50 billion lei compared to the same date of previous year, mainly due to the expansion of the scope of guaranteed depositors at the end of 2015.
FGDF’s scope of guaranteed deposits as at 30 June 2016 comprised over three quarters of all deposits with the 29 credit institutions authorized in Romania by the National Bank of Romania.
By law, the total amount of money a depositor holds with a bank is covered up to 100,000 euros, in lei equivalent, regardless the situation of the credit institution (e.g. in state of difficulty or insolvency).
If the deposits of a bank become unavailable or the bank is subject to a resolution measure (e.g. bail-in), each depositor is guaranteed in full for any amount less than 100,000 euros and those with larger deposits than this ceiling are covered up to 100,000 euros. Moreover, by law, the covered deposits are expressly excluded from the bail-in.
For that part of the deposit exceeding 100,000 euros, the depositors receive a preferential treatment, their claims having a higher rank. Thus, for a deposit of 150,000 euros, the difference of 50,000 euros above the coverage ceiling may fall under bail-in only if all other claims were not sufficient to absorb losses and to ensure adequate capitalization of the credit institution. If, ultimately, it is taken a decision of converting the uncovered amount of 50,000 euro, the deposit holder shall receive in exchange equity securities (e.g. shares) in the bank in question.
The shareholders and the creditors of the bank in resolution are first to bear losses, provided that no creditor bear greater losses than if the credit institution would have been liquidated through insolvency proceedings.
Deposits covered by FGDB as at 30 June 2016 amounted to 152 billion lei, with over 12 billion lei over the level of 30 June 2015.
The decisive factor of the increased amount of FGDB guaranteed deposits was the extension of the guarantee scope as a result of coming into force of Law no. 311/2015 on deposit guarantee schemes and Bank Deposit Guarantee Fund. This law transposed into domestic legislation the provisions of Directive 2014/49/EU on deposit guarantee schemes, requiring a unitary deposit guarantee regime in all Member States of the European Union.
Under the new legislation, the guaranteed depositors in Romania benefit from an increased protection of deposits they hold with the FGDB member credit institutions, reflected by an increase in coverage of FGDB, while substantially reducing the payout term.
Currently, all individuals, all companies and other legal persons are guaranteed by FGDB and the payout period is 7 working days, three times faster compared to the former period.
During the first six months of 2016, the eligible deposits of individuals increased by 4.3% to 140.9 billion lei as at 30 June 2016. The highest growth was recorded in the segment of deposits in lei of values under the coverage ceiling.
Since the majority of the individuals’ eligible deposits are lower than the lei equivalent of 100,000 euros, the covered deposits represented 90.5% of the eligible deposits, respectively 127.4 billion lei as at 30 June 2016.
The situation is different for the guaranteed legal persons, these being mainly represented by companies whose deposits had typically values over the coverage ceiling. Thus, the covered deposits of the legal persons amounted to 24.5 billion lei (30.5% of the total eligible deposits of the legal persons) as at 30 June 2016.
The ratio between the resources for deposits guarantee and the individuals’ and legal persons’ covered deposits was 3.5% at 30 June 2016, substantially exceeding the minimum level of 0.8% to be achieved in all Member States of the European Union until 2024.
For both categories of depositors - individuals and legal persons – the covered deposits are fully protected if a bank enters into difficulty or is subject to a resolution measure or to the payment of compensations.

July 27, 2016