Deposit guarantee scheme
The deposit guarantee scheme protects customers and the banking system as a whole
When a bank is no longer able to repay its customers' deposits, the Fonds de Garantie des Dépôts et de Résolution (FGDR) compensates customers in an amount up to €100,000 within 7 business days subject to certain conditions and limits. By protecting depositors, the deposit guarantee scheme helps to maintain confidence in the banking system and ensure its stability.
The "DGSD2" directive adopted on 16 April 2014 (2014/49/EU), which was transposed into French law at the end of 2015 and includes 5 implementing decrees of 27 October 2015, introduced several significant improvements for depositors:
- expansion of the guarantee to include all deposits and all European and non-European currencies;
- reduction of the compensation period to 7 working days instead of 20 days as of 1 June 2016;
- creation of an increase in the coverage level for "temporary extraordinary deposits";
- new obligations of institutions regarding the notification of depositors.
- Protection of "temporary extraordinary deposits": the deposit guarantee scheme now covers amounts that were received less than three months prior to the institution's failure and which 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 injury, for which there is no limit. To exercise their rights, customers must write to the FGDR within two months of receiving their initial compensation and provide the necessary supporting documents.
New customer information to be provided by the banking institutions :
Starting in 2016, banks must provide a fact sheet describing the deposit guarantee scheme to anyone wishing to open an account covered by the scheme. If the account is opened, the customer will then be asked to sign an acknowledgement of receipt of the fact sheet. The banks provide this sheet once a year to each of the customers concerned. At the same time, the banks will henceforth refer in periodic statements to coverage by the deposit guarantee scheme for the accounts concerned. These regulations increase the information for customers on the deposit guarantee scheme in the event of a bank failure.
Deposit guarantee: about 350 institutions covered
All banks and credit institutions operating in France are covered by the deposit guarantee scheme. Membership in this scheme is a prerequisite for conducting their business in France.
€100,000 guaranteed per customer and per institution, within a 7-day time limit
All deposits covered by the guarantee are added up to determine the amount which the bank owes its customer. The FGDR pays compensation in this amount, up to €100,000 per person, per institution, within seven working days.
Moreover, all sums deposited in savings accounts guaranteed by the French government (Livret type 'A' savings account and Livret Bleu savings account, Livret Développement Durable et Solidaire (LDDS) savings account and Livret d’Epargne Populaire (LEP) savings account) are covered, up to €100,000 per customer, per institution.. The FGDR compensates customers at the request of and for the French Government.
A deposit guarantee scheme that benefits all bank customers
As a general rule, all bank customers are covered by the deposit guarantee including:
- natural persons whether minors, adults under guardianship or represented by a third party;
- companies (limited companies (SA), limited liability companies (SARL), one-person limited liability companies (EURL), ... of any size, regardless of their status;
- associations and other professional groups, non-trading partnerships, foundations and groups of any kind;
- public institutions, local governments and their own institutions.
The scope of this coverage is designed to strengthen the public’s confidence in the banking system to the greatest extent possible. This is consistent with the goal of preserving financial stability.
However, the laws and regulations provide for certain exceptions and special cases.
A guarantee that covers all bank deposits
All amounts deposited at a bank in current accounts and savings accounts are covered by the deposit guarantee scheme regardless of the currency in which the accounts are denominated.
This applies regardless of the contractual or commercial name of the current or savings account into which the deposit is made:
- current account, demand account, savings passbook account, term account, savings passbook account and plan, Compte d’Epargne-Logement (CEL) savings account, Plan d’Epargne-Logement (PEL) savings plan, Plan d’Epargne Populaire (PEP) savings plan;
- Livret Jeune savings account;
- cash account associated with an equity savings scheme (PEA), a pension savings scheme (PER) or equivalent held at an FGDR affiliated institution;
- bank cheque issued and not cashed;
- current or savings accounts that may combine various products from the above list;
- deposits given as collateral, such as to guarantee loan or financial market transactions, once they have become payable, i.e. when the transaction covered by the deposit has been settled (since the guarantee deposit is no longer applicable, it must be returned to the customer);
- total net balance of factoring transactions.
In addition, all amounts deposited in savings accounts guaranteed by the French government are covered up to an amount of €100,000 per customer, per institution:
- Livret type 'A' savings account (and Livret type 'Bleu' savings account);
- Livret Développement Durable (LDDS) savings account; and
- Livret d’Epargne Populaire (LEP) savings account.
The FGDR compensates customers on behalf of the French government.
How is compensation paid on a business owner's business accounts?
Individual business owners (craftsmen, merchants, self-employed professionals, etc.) sometimes use bank accounts for business purposes which are separate from their personal accounts.
- If a business owner conducts business through a separate legal entity, such as a one-person limited company (EURL), or under the status of a limited liability individual business owner (EIRL), a second €100,000 ceiling is made available to compensate his/her personal accounts and a guarantee of up to €100,000 to compensate his/her business accounts.
Otherwise, a single coverage level of €100,000 applies for all the business owner's personal and business accounts.
How does the deposit guarantee work for a joint-tenants account?
Each co-holder of a joint-tenants account (or joint account) is eligible individually for a coverage level of €100,000.
Unless otherwise specified in the account agreement, a joint account is shared equally amount the co-account holders.
The compensation paid to each joint holder is the sum of the amount of his/her personal deposit accounts and his/her portion of the joint account, up to a total of €100,000 per customer.
Person A has a personal account with a credit balance of €5,000 and person B has a personal account with a credit balance of €9,000. Together they have a joint account with a credit balance of €3,000.
- Compensation amount for which person A is eligible: €5,000 + one half of €3,000 = €6,500;
- Compensation amount for which person B is eligible: €9,000 + one half of €3,000 = €10,500.
The name of a joint account generally includes the words "Person A or Person B" and the account can be opened for more than two people.
Information notice describing compensation under the deposit guarantee scheme
The compensation procedure under the deposit guarantee scheme is described in a 4-page Information Notice.
This notice can be printed in double-sided A3 format. It is available from the FGDR upon request.