Compensation procedure under the deposit guarantee scheme

Compensation procedure under the deposit guarantee scheme

what action should the customer of a failed bank take?

The customer of a failed bank does not need to take any action other than opening an account at another institution.

 

The compensation procedure under the deposit guarantee scheme is fully and automatically handled by the FGDR, which sends the customer the compensation to which he/she is entitled within 7 working days along with all necessary information.

 

Customers do not need to take any action other than opening an account at another institution if they do not already have one.

 

The FGDR contacts the customer directly if necessary. 

 

Important note:

 

Customers are strongly advised to keep their bank informed of any changes in their personal situation, such as name, postal address, email and telephone number.

It is essential that this information be up to date for each account or financial product opened at credit institutions.

Compensation sent by the FGDR to an old postal address may be returned to it, and the FGDR may then be unable to contact and compensate the customer.

Deposit guarantee: a four-step compensation procedure

Step 1: initiation

 

The procedure is initiated when the ACPR determines that the bank in question is no longer able to return its customers' holdings. The deposits have become "unavailable". The date on which the ACPR makes this determination is the "unavailability date”.

It is the date on which the bank is "closed”, for all practical purposes, and customers lose free access to their accounts. The ACPR then contacts the FGDR, which automatically makes the guarantee applicable and results in the removal of the institution, i.e. the immediate discontinuation of all its activities.

 

This date also marks the start of the compensation procedure and the 7-day period. It is also as of this date that customers' account balances and compensation amounts are calculated.

 

 

Step 2: Preparation of compensation, settlement of accounts and transmission of information to the FGDR

 

From the unavailability date, the bank settles each customer's accounts by including all outstanding transactions (for example, cheques, blue card deferred debits, etc.) and interest or remuneration due.

It prints a final bank statement in the usual format and sends it to each customer.

It then sends these computer files to the FGDR, along with the settlement of each customer's accounts and the compensation calculation.

 

The FGDR performs a technical verification of the files and, on that basis, determines the amounts to be compensated.

 

During this time, the FGDR informs customers of the status of the procedure on its website and answers questions via its call centre.

 

 

Step 3: Payment

 

Within a maximum of 7 working days, the FGDR opens a "Secure Compensation Area" on its website www.garantiedesdepots.fr to provide compensation for each customer:

- either by bank transfer, if the customer enters the details of a new bank account in the Secure Compensation Area;

- or by cheque letter with acknowledgement of receipt.

Irrespective of whichever payment method is chosen, the FGDR issues a compensation letter which contains:

- the references of the customer's accounts;

- the list of covered accounts and excluded accounts;

- the compensation calculation;

- the non-compensated amounts;

- the payment (bank transfer or cheque), where applicable; 

- a "Compensation by the FGDR" information notice.

During this time, the FGDR's Call Center is available to answer questions or contact customers.

This period may be extended only in cases where additional information or special processing is requested.

The customer then has two months to send the FGDR, if applicable, a request for additional compensation on the basis of "Temporary Extraordinary Deposits" or to contest his/her compensation, with the necessary supporting documents. 

 

 

Step 4: Special cases

 

Beyond the 7 working day time limit, the FGDR handles special cases, additional compensation and claims until they are completed. 

 

→ To view the intervention process under the deposit guarantee scheme, click here.

 

 

Depositor information

The compensation is sent to the account holder. Payment is made by cheque (default payment method used) or by bank transfer when the customer has entered new bank account details in the Secure Compensation Area. All appropriate information is enclosed with the compensation: accounts covered, accounts not covered, compensation amount, amounts for which compensation is not paid, information notice describing the calculation method and procedures. 

At the same time as the payment is being prepared by the FGDR, the failed bank sends each of its customers a final complete statement of his/her accounts as of the unavailability date in the customary format. 
This statement includes the final account statement on the unavailability date and the transactions completed since the previous statement that have been recorded, as well as the calculation of deferred debits, interest and remuneration due. This detailed statement allows the customer to ensure that the information concerning him/her is correct at the time the accounts are closed. The information on this statement is sent to the FGDR to calculate the compensation paid by it.

 

 

Special cases

 

The 7 working day period applies to all depositors whose situation does not pose any specific problems and whose contact information is complete and accurate. If circumstances so require, the 7-day period may be extended by 10 additional working days upon authorisation by the ACPR.

If the depositor's situation poses specific problems (such as accounts in dispute or on hold) or if the customer's contact information is incomplete or inaccurate, the FGDR performs additional practical or legal verifications in conjunction with the failed bank. If the situation allows, the FGDR begins by issuing a partial compensation for the accounts that do not pose any problems.
In any case, even if the 7-day period is exceeded for customers whose contact information is incomplete or whose situation is complex, their right to compensation is not affected.

 

 

Temporary extraordinary deposits

 

After receiving his/her initial compensation, the depositor has two months to send a request for additional compensation, along with supporting documents, for temporary extraordinary deposits.

Temporary extraordinary deposits are amounts that were received less than three months prior to the failure and come from:

1/ the sale of residential property belonging to you;

2/ a lump-sum payment of compensation for harm sustained by you;

3/ a lump-sum payment of a retirement benefit, an estate, a bequest or a donation;

4/ a compensatory benefit or a settlement or contractual indemnity following the termination of an employment contract.

The €100,000 coverage level is increased by an additional €500,000 for each of the above events, except for the compensation of bodily injuries which are covered without any limit. 

 

 

Possible avenues of appeal

 

Customers have two months from the date of receipt of their last compensation letter to file an appeal (or informal claim) with the FGDR if they disagree on the compensation. 
The "Claim Form" is available from the FGDR upon request. It should be filled out and sent by registered post with acknowledgement of receipt to the FGDR, 65, rue de la Victoire, 75009 Paris, along with the required supporting documents.

The FGDR's new decision regarding this informal claim is sent to the customer and can then be disputed before the Paris Administrative Court within an additional two-month period from the date of this second decision. For an appeal brought before the Administrative Court, representation by a lawyer is mandatory.

 

 

Declarations to the liquidator

 

Customers do not need to make a declaration to the liquidator for the portion of their deposits for which compensation was paid.

For any portion of their deposits for which compensation was not paid and for any deposits that do not fall within the scope of the guarantee, the customers remain the creditor of the failed bank.

The FGDR will also inform them of the rules and procedures for filing claims with the assignees in bankruptcy or liquidator for any amounts for which they were not compensated.

After compensation is paid, the FGDR replaces the customers as the creditor of the bank in liquidation in the amounts paid by it (it is subrogated to the customers' rights).

 

Investor compensation: What action should the customer of a failed investment services provider take?

The customer of a failed service provider does not need to take any action. The entire procedure is handled by the FGDR, which sends the customer the compensation to which he/she is entitled within three months, along with all necessary information.

If needed, the FGDR contacts the customer directly.

 

Important note:

Customers are strongly advised to keep their service provider informed of any changes in their personal situation, such as name, postal address, email and telephone number. 

Compensation sent by the FGDR to an old postal address may be returned to it, and the FGDR may then be unable to contact and compensate the customer.

Deposit guarantee: a four-step compensation procedure

Step 1: Initiation

 

The procedure is initiated when the ACPR determines that the securities and associated cash entrusted by customers to the bank or the investment services provider are no longer available to them and that the service provider's financial situation prevents it from fulfilling its obligation to return the securities and associated cash or to pay compensation to customers. The date on which the ACPR makes this determination is the "unavailability date”.

 

It is the date on which the customers lose free access to their securities and associated cash.  Customers lose free access to their securities and associated cash. The ACPR then contacts the FGDR, which automatically makes the guarantee applicable and results in the removal of the institution, i.e. the immediate discontinuation of all its activities.

 

This date marks the start of the compensation procedure and the three-month compensation period. It is also as of this date that customers' balances, the value of their financial instruments and their compensation amounts are calculated.

 

 

Step 2: preparation of compensation, settlement of accounts and transmission of information to the FGDR

 

The failed institution sends the FGDR, as quickly as possible, all the information and documents needed to verify the customers' situation and the amount, composition and availability of their holdings in order to calculate the compensation.

 

The FGDR verifies the data sent, identifies the securities for which compensation is to be paid and calculates the compensation for each customer. It prepares a compensation letter for each customer which explains the compensation procedure and calculation: accounts and amounts that fall within the scope of the investor compensation scheme, the compensation amount paid and amounts for which compensation is not paid (for example, the portion over €70,000).

 

The verifications, particularly of the securities accounts, are performed on an account-by-account, security-by-security basis, and in some cases may require additional time and resources, such as in the event of fraudulent failure, if the number of intermediaries makes data traceability more difficult, or if the securities are deposited with foreign intermediaries.

 

Step 3: payment of the compensation within three months​

 

The FGDR prints the compensation letters and sends them to each customer within three months of the unavailability date. An additional three-month period may be applied, if necessary.

 

Step 4 : Special cases

 

The FGDR handles any special cases and claims and informs customers of completion of the compensation process.

 

Performance bonds guarantee scheme: a three-step compensation procedure

Step 1: Initiation

 

The procedure is initiated when the ACPR determines that the credit institution is unable to honour the guarantee commitments given by it.

The performance bonds guarantee takes effect on the date on which the ACPR notifies the FGDR of this determination, the so-called "intervention" date.

 

This determination triggers:

- first, the assumption or transfer of the guarantee commitments made by the failed institution to the business professionals in favour of their end customers;

- followed by the compensation of these end customers, if the covered professional has failed and the performance bond is called or has already been called but has not yet been honoured. 

 

Step 2: identification of the failed institution's performance bonds

 

The FGDR identifies the guarantee commitments given by the failed institution to business professionals.

It informs them within two months of the procedure to follow and documents to provide in order for the commitments to be assumed. This period may be extended once by two additional months.

 

Step 3: calculation of the compensation

 

If the performance bond is called, i.e. if the professional defaults vis-à-vis its customer, the FGDR compensates the customer in an amount capped at 90% of the harm suffered, with a deductible amount of €3000 payable by the customer.
After compensation is paid, the FGDR is subrogated to the customers' rights vis-à-vis the failed institution in the amounts paid.