Irish Deposit Guarantee Scheme Bill Published

by Robin Pilgrim, LawAndTax-News.com, London

05 May 2009

In a statement on April 29 the Irish Minister for Finance Brian Lenihan announced the publication of the Financial Services (Deposit Guarantee Scheme) Bill 2009, as amended and approved by the Irish government.

The Bill in conjunction with amending regulations to be made upon the enactment of the Bill, will give legal effect to the update of the Irish deposit guarantee scheme (DGS) announced by the Government on September 20, 2008. The follow-on regulations will also transpose the recently published EU amending deposit guarantee schemes Directive (2009/14/EC).

The legislative package complements the Credit Institutions (Financial Support) Scheme, 2008. The Guarantee Scheme provides a State guarantee for all deposits and certain liabilities of the guaranteed institutions to the extent these are not covered by existing deposit protection schemes in Ireland or any other jurisdiction. It is also important to emphasise that while the Credit Institutions (Financial Support) Scheme 2008 applies to the seven covered credit institutions, the deposit guarantee scheme legislation applies to all credit institutions authorised by the Irish government. This includes credit unions which did not previously benefit from statutory deposit protection.

The Financial Services (Deposit Guarantee Scheme) Bill 2009 and accompanying regulations are expected to be in place by June 30, 2009, so as to meet the EU Directive’s transposition deadline.

The main provisions of the Bill itself are:

• to empower the Minister to make regulations prescribing the amount payable to an eligible depositor of a credit institution which fails;
• to empower the Minister to prescribe by regulation the contribution to be made by credit institutions to the Central Bank to fund the DGS; and
• the Bill incorporates some provisions currently in SI 168 of 1995 (e.g. the use of the Deposit Protection Account in the CBFSAI, which funds the DGS) so as to give a firmer footing in primary legislation to those provisions.

The follow-on statutory instrument to be made by the Finance Minister will:

• increase the statutory limit for the DGS for banks and building societies from EUR20,000 to EUR100,000 per eligible depositor per institution from September 20, 2008;
• abolish the co-insurance requirement for the depositor to bear the first 10% of his/her loss;
• extend DGS cover to credit union savers;
• reduce the minimum time period within which duly verified depositor claims must be made from three months to twenty working days;
• make various other amendments, mainly of a technical nature, to update the 1995 scheme.

Finally, as the domestic and EU deposit protection proposals were similar, it was decided to implement them in one legislative package. The legislation has now been finalised and will be published shortly following the publication of the amending EU Directive in March, according to the Finance Minsistry.

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