Compensation procedure for a bank closure
What guarantees does the Fonds de Garantie des Dépôts (Deposit Guarantee Fund) offer to depositors in the event of a bank closure?
As soon as the Commission Bancaire (French banking commission) establishes that a member institution of the Fonds de Garantie des Dépôts is no longer in a position to return the funds it has received from the public, either immediately or in the future, it requests the engagement of the Fonds de Garantie des Dépôts.
At the same time, the French banking commission and potentially the commercial court take other measures relating to the administration of the institution. These measures lead to the closure of the branches of the institution, preventing its customers from using their various accounts.
From the start of the proceedings led by the french banking commission, the Fonds de Garantie des Dépôts publishes a statement indicating that its engagement is linked to seeking compensation for the depositors and that they do not have to take any particular action for the time being vis-à-vis the Fonds de Garantie des Dépôts in order to ensure their rights to compensation.
As soon as the Fonds de Garantie des Dépôts has the necessary information, i.e. usually immediately, it sends a letter to all the institution’s customers (with or without compensation claims) informing them of the procedure and the rules governing compensation that will be applied.
This letter is sent to depositors’ addresses as they appear in the institution’s files.
At the same time, the Fonds de Garantie des Dépôts arranges for each customer’s account to be analysed in order to identify those requiring compensation and the amount due.
Once each depositor’s situation has been established, a letter, enclosing an assigned discharge, is sent indicating the amount of the expected compensation. The customer may immediately accept the proposed compensation resulting from an analysis of the accounts in credit and in debit, but still retains the right to contest this proposed compensation for a period of 15 days.
Once the assigned discharge, involving acceptance of the proposed compensation and transfer to the Fonds de Garantie des Dépôts of the depositor’s rights and claims, has been signed by the depositor and returned to the Fonds de Garantie des Dépôts, it pays the amount due either by bank transfer or by cheque after verifying the identity of the depositor. The assigned discharge has the effect of transferring the depositor’s rights and claims towards the defaulting institution, up to the value of the compensation paid, to the Fonds de Garantie des Dépôts.
Regulations require the Fonds de Garantie des Dépôts to compensate depositors within a period of two months, which can be extended by a maximum of 4 additional months. In practice, if the internal documentation is immediately available, compensation payments begin within a few days.
In summary, the depositors of a credit institution for which the Fonds de Garantie des Dépôts is engaged do not have to take any action towards the Fonds de Garantie des Dépôts to recover their compensation. However, if they have not received the first standard letter sent to all customers describing the procedure and the compensation rules within 10 days of the closure of the credit institution, they should contact the Fonds de Garantie des Dépôts (4, rue Halévy - 75009 Paris).