Gibraltar Deposit Guarantee Board Understand the significant protection open to depositors in Gibraltar - Gibraltar Finance Centre The Scheme The Deposit Guarantee Scheme Act 1997 was passed by the House of Assembly on 19th December 1997 to give effect to the European Directive 94/19/EC which requires Member States to establish deposit guarantee schemes. The Act was brought into force in two parts. On the 15th January 1998 the parts of the Act that constituted the Scheme and the Board came into force. They also gave the Board powers to request information, establish an administration fund and raise administration levies from participants. The remaining sections of the Act were brought into effect on the 5th April 1999. Effective 31 December 2010, the limits of the scheme set out in the Directive were increased from €50,000 to €100,000. Participation It is a condition of a bank's licence that the bank is a member of the Scheme. A branch of an EEA bank can also 'top up' into the Scheme where this offers more advantageous compensation than that of its home State. Similarly, branches of Gibraltar banks operating in other EEA States (none at present) can 'top-up' into that State's scheme. These branches may withdraw from the Scheme by giving six months’ notice but will still be liable to pay any contributions should another bank fail between the date of the notice and the expiry of the six months. Branches of non-EEA State banks are also required to participate in the Scheme where its home country does not offer equivalent protection. The Board The Act establishes 'The Gibraltar Deposit Guarantee Board.' This Board is charged with administering the Scheme. The Board is independent from the Financial Services Commission or Government of Gibraltar. The Board may employ persons to provide secretarial services for the day to day administration of the Scheme or for administering a bank failure.
Appointments to the Board are made by the Minister responsible for Finance and consists of the Financial Services Commission (FSC) Chief Executive Officer, the FSC Head of Banking and Investments and individuals nominated from the following industry associations:
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Gibraltar Bankers Association (GBA) Gibraltar Society of Accountants (GSA) General Council of the Bar in Gibraltar (GCBG)
The Chairman has a casting vote amongst members present at any meeting. The quorum of the Board will be three members, one of whom must be the Chairman. The Board meets annually and when deemed necessary; the table below lists current members' (and alternates') attendance at meetings held in 2012: The Board is a body corporate and may be sued in its name. However, members of the Board have immunity from prosecution or suit in performing their functions unless they are shown to have been acting in bad faith. The Board is required to have its accounts audited and these must be published within three months of the end of the audit taking place. Establishment of funds The Board has to establish:
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a fund to meet its administrative costs, and a fund for each bank failure, as the need arises.
The Board may raise administrative fees to cover the costs of the administration from Scheme participants. It may also hold its monies in a range of assets. The Board also has the power to borrow money and take out insurance policies. Failures A bank is said to be in default as soon as the Commissioner of Banking makes a declaration to that effect. This must take place within 5 days of any of the following events occurring:
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it appears to the Commissioner that a participant is unable to repay depositors. a winding-up order is made. a voluntary winding-up resolution is being passed. a creditors' meeting is called. a receiver is appointed. a voluntary arrangement with its creditors is made.
Compensation The Board must pay compensation to a depositor (who qualifies) if the bank with whom he held a deposit has been declared by the Commissioner in default and a claim by the depositor has been verified. Verified claims must be paid within 20 working days of the Commissioner's declaration having taken place. The Board may seek, in exceptional circumstance, an extension of this deadline as per the provisions in the GDGB Act. The Board must be in a position to provide claimants with a clear form in which they can submit their application for claims. This form must be in English in respect of Gibraltar deposits and in the official language of the EEA State in respect of deposits held at a branch elsewhere in the EEA. The form must state the right of the Board to subrogation. The form must also require claimants to give:
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their identity and address; the capacity in which they claim; evidence of the qualifying deposits; proof that they have made a claim to the liquidator or receiver; and any other reasonable matter.
Amount of Compensation Any claimant which has a qualifying deposit will be entitled to receive the LESSER amount of:
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100% of the total of all qualifying deposits with the failed bank (including all branches), or €100,000 (or the sterling equivalent, as calculated under subsection (6) on the date of declaration of default under section 10(1) of the GDGB Act).
The following will be deducted from the amounts payable by the Scheme:
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payments received from deposit guarantee schemes elsewhere; payments from any insurance policy taken out by the claimant in respect of the deposit payments from the liquidator or receiver; and any amounts which had a right of set-off at the date of declaration.
Accounts held in joint names will be divided equally amongst the account holders unless there is an indication of the proportion which each account holder is entitled to. Partnerships or similar associations will be treated as one claimant. Deposits held by trustees, or their equivalent, will be treated as one claimant unless each of the beneficiaries can be separately identified and has a separate right under the trust before the date of the declaration by the Commissioner. Deposits held in EEA currencies will be converted into Sterling at the rate published by the European Community on the date nearest to the declaration by the Commissioner. It should be noted that only accounts held in Sterling or another EEA currency will be compensated. Compensation will not be paid to verified claimants until such time as the deposit became due. Claimants who are dissatisfied with decisions of the Board in respect of the compensation may appeal to the Supreme Court. Defaults by EEA branches and branches of Gibraltar banks operating in the EEA If the bank which has been declared in default is a branch of an EEA State bank, which had 'topped up' into the Scheme, then the Board will ask that States competent authority to supply it with details of:
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the default; the amount of compensation paid to each claimant under that State's Scheme; any subrogated or other rights to recover compensation; and any other useful information.
Similarly, the Commissioner of Banking will co-operate with a competent authority of a EEA State in which a branch of a Gibraltar bank has participated in that State's scheme. Fees and levies Administrative fees Each year, the Board will require each participant to pay an amount determined by the Board. These fees will seek to cover the expected administrative expenses in that year together with any shortfall in previous financial years of administrative expenses over receipts. These fees become due at the beginning of each financial year of the Board, or, in the case of a new participant, the date on which it becomes a participant.
The Board will also be required to take a decision on the amount and apportionment of start-up costs of the Scheme. There is substantial work required to be undertaken in respect of information technology systems that will enable the smooth administration of any bank failure. These costs will need to be met by participants in the Scheme. It is also possible for the Board not to charge administrative fees in any financial year if it has sufficient funds already. Levies On the Commissioner declaring a default, the Board will levy, from the remaining participants, one or more levies to meet the costs of the compensation payable under the Scheme. The basis of raising these levies is the proportion of the participant's own qualifying deposits to that of the failed bank. If necessary, the Board may raise additional levies to meet the costs of compensation and other costs relating to the administration of that bank failure. Similarly, once all payments have been effected by the Board, any surplus funds will be repaid to participants in the same proportion as the levy was raised. Written notice must be given to each participant when raising the levy. This must state:
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the amount of the participant's contribution; the method by which it is calculated; and the date on which it is due (at least 14 days after the notice).
If a bank fails between the notice of the levy and payment being made, the liability of that bank will be cancelled. Co-operation Participants must make available to the Board all information which it requires in order to carry out its functions. This duty also extends to the successor of a participant (liquidator, receiver, etc). The duty in relation to the liquidator or receiver extends to information which will assist the Board in exercising its rights of subrogation. The Board will be considered a creditor of a bank which is in default. It can also nominate a member (or alternate) to sit upon a creditor's committee or committee of inspection and is also entitled to receive any notice addressed to creditors as well as being able to attend and vote at any creditors' meeting.
The liquidator or receiver of a defaulting bank must pay to the Board any amount realised in respect of a qualifying deposit up to the amount of compensation paid or payable by the Board to the claimant. Subrogation Before paying any compensation, the Board must receive confirmation from the claimant that:
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his rights in respect of that deposit will vest in the Board, he will assist the Board in exercising those rights, he will pay the Board any amounts he receives in respect of those rights, after deduction of any amount the Board may be required to repay him, and any prospect of recovering an amount in excess of the compensation payable will vest in the Board, who may settle the claim.
The Board must pay any of these amounts into its funds. Any excess amount over and above the amount of compensation paid or payable and any costs incurred by the Board directly in relation to that deposit must be paid to the claimant. Withdrawals from the scheme If a bank does not comply with the requirements of the Act, the Board will inform the Commissioner of Banking of this occurrence who may decide to cancel the licence granted to it under the Banking Act. Depositors who had deposits in a bank at the time of cancellation of that bank's licence will still be covered by the Scheme and the bank will still need to pay the annual fees as well as any levies that are imposed. Information for depositors All participants in the Scheme must make available to their depositors information about the scheme(s) to which they belong as well as a summary of the provisions of the scheme(s) including the amount and scope of their coverage. Actual or intending depositors may ask banks for details about the conditions for compensation and the procedures for claiming it and the bank must provide this. All this information must be provided in English when given in Gibraltar or in the official languages of the member State in which the branch is operating. Advertisements for deposits may not make reference, however, to the level of coverage but may make factual references to the existence and participation of the bank in these schemes. If a licensed bank is not a participant, it must also state this fact. Please note details are correct as at March 2013 and are subject to change. Please refer to http://www.gdgb.gi/?goback=.gde_4888704_member_226048734#! for up to date information.