Alex Kuczynski Director – Corporate Affairs Financial Services Compensation Scheme, UK SKATING ON THIN ICE – WHAT DEPOSIT INSURANCE SCHEME FOR EUROPE? 13 January 2011

Recent European and UK History 1979 Banking Act – UK DGS 1994 Deposit Guarantee Schemes Directive (94/19/EC) 2005 EC Communication 2007– FSCS removal of co-insurance, increasing the limit to £35, – FSCS increased limit to £50, – amending DGS (2009/14/EC) – Banking Act – draft amending DGSD 2011– FSCS increased limit to £85,000 and simplified process

2009 Amending DGS €100,000 – maximum harmonisation basis Temporary increased account balances Pan EU DGS Harmonisation of scope of products and depositors Link with reimbursing depositors, including emergency payout

Draft DGS – 12 July 2010 Simplification and harmonisation, in particular scope of coverage and arrangements for payout Further reduction of the time limit for payout of depositors and better access for DGS to information about their members Sound and credible DGS that are sufficiently financed Mutual borrowing between DGS i.e. a borrowing facility in certain circumstances Home/host handling of claims/payout

Simplification and Harmonisation “Deposit” Eligible depositor – all individuals, all corporates No set off Fixed interest return Currency of payout Temporary high balances

Time Limit For Payout 3 months – extendable (1994) 20 working days (2009) 7 calendar days? (2010) Single customer view and account flagging No application/claim Trust and beneficiary accounts Information template

PAN EU DGS/Mutual Borrowing  De Larosiere report  Alternative structures/28 th scheme?  Single Pan EU scheme?  Home/Host state’s responsibilities  Mutual borrowing – 0.5% - EBA role - repayment in 5 years - priority in liquidation  Resolution funding

Funding  Ex ante – 1.5% target fund  Ex post – 0.5% contribution  Risk-based levies/differential premiums  Liquidity and access to funds  Investment of funds – limited range  Transitional period – 2020?

Operational Issues and Concerns  Contingency planning/stress testing – access to data  Corporate governance structures – independence  Cross-border cooperation/single point of contact - funding  Speed and access to funds, and currency of payout  Method of payout – cheques, electronic payout, bank branches, other

Contribution to Financial Stability  Increased expectations  Role in consumer confidence and financial stability  Resolution funding

Work In Progress  Revised draft DGSD  IADI/EFDI/BCBS/IMF Assessment methodology for the core principles of effective deposit insurance systems  EFDI Multilateral Memorandum of Understanding  Faster payout workshops

Thank you for listening Any questions?