Deposit Guarantee and Resolution of Credit and Other Institutions Scheme

The Deposit Guarantee and Resolution of Credit and Other Institutions Scheme (DGS) was established and has been operating since 2000. The relevant legal framework is the Business of Credit Institutions Law, the Deposit Guarantee and Resolution of Credit and Other Institutions Scheme Laws of 2016 to (No. 2) of 2020, and the Regulations therein and the Resolution of Credit Institutions and Investment Firms Law of 2016. For the purposes of the DGS, which constitutes a separate legal public entity, a Management Committee was established, consisting of staff from the Ministry of Finance and the Central Bank of Cyprus.

The purpose of the DGS is twofold: on the one hand it is to compensate the depositors of covered institutions which pay contributions, in the event that a credit institution is unable to repay its deposits; on the other hand, it is the funding of the implementation of resolution measures. The DGS covers deposits denominated in all currencies.

The compensation process is activated when a decision is reached that a member of the DGS is unable to repay its depositors. In this case, the relevant decision is adopted either by the Central Bank of Cyprus or through an order for special liquidation of the credit institution in question issued by a Court of the Republic or by the judicial authority of the country where the member is established. 

The maximum amount of compensation, per depositor, per credit institution is €100.000, including accrued interest. This limit applies to the aggregate deposits held with a particular credit institution. When calculating the amount of compensation payable to a depositor, the deposits are set-off with all kinds of counterclaims that the credit institution has against the depositor (e.g. loan instalments or other credit facilities) provided these have fallen due and in respect of which such a right exists.

The compensation of the covered deposits of the credit institution is financed primarily out of the credit institution’s liquid funds, subject to certain conditions, and the DGS compensates the remaining covered deposits.   

Excluded from DGS coverage are certain categories of deposits. Such deposits are deposits by credit institutions (interbank), own funds, deposits by financial institutions, deposits by investment firms, deposits by insurance and reinsurance companies, deposits by collective investment schemes, deposits by public authorities with an annual budget in excess of €500.000, as well as debt securities issued by a credit institution and liabilities arising out of own acceptances and promissory notes. Furthermore, among the categories excluded from coverage are deposits arising from transactions for which criminal conviction for money laundering has been instigated and deposits the holder of which has never been identified. 

In case of DGS activation, the Management Committee of the DGS makes a relevant announcement on the website of the Central Bank of Cyprus and in the local press.

 

Answers to frequently asked questions regarding the Deposit Guarantee and Resolution of Credit and Other Institutions Scheme 

Latest update: 13 July 2020

 

 

Activation of the DGS for FBME Bank Ltd - Cyprus Branch

 


Methodology for calculating contributions to the DGF