Compulsory engagement, to resolve an instance of default

The Fonds de Garantie des Dépôts (Deposit Guarantee Fund) is engaged following a request from the Commission Bancaire (French banking commission), whenever the Commission establishes :

• For deposits, that a credit institution "is no longer in a position to return funds received from the public under the relevant legal, regulatory or contractual terms for their return, either immediately or in the near future" (article L 312-5 of the Code monétaire et financier French monetary and financial code).
   
• For securities, that an agent described under article L 322-1 of the Code monétaire et financier, "is no longer in a position to return the financial instruments or the funds received from the public under the relevant legal, regulatory or contractual terms for their return, either immediately or in the near future" (article L 322-2 of the Code monétaire et financier),
   
• For warranties, that a credit institution "is no longer in a position to honour its warranty commitments established under law, regulations or contract benefiting legal entities or individuals under private law, either immediately or in the near future" (article L 313-50-III of the Code monétaire et financier).

For an instance of default, the Fonds de Garantie des Dépôts cannot refuse an engagement: it is obliged to implement the compensation procedures for depositors (see Types of guarantee).

The institution concerned is immediately removed from the list of approved institutions.