Deposit insurance and financial stability schemes AEG New York, April 2012

Background Various schemes introduced by governments in wake of recent financial crisis to provide financial stability and to protect depositors. Raise a number of questions concerning treatment in the NA 2

Stability fee and deposit insurance schemes Compulsory payments levied by government –May or may not be hypothecated to a special fund –Which may or may not be hypothecated only to support the institutions that pay in to the fund. 3

Proposals Paid into a consolidated fund (not hypothecated) = tax –Or should there be a caveat in cases where the payments into the fund are broadly equal to expected payouts? Paid into hypothecated fund, –with sums paid in exceeding expected payouts = tax –with sums paid in broadly equalling expected payouts = (insurance) service ? Or should these always be treated as taxes for simplicity? 4

Deposit protection scheme Key issue: treatment of priority claims and acquisition of assets by government to redistribute to depositors as part of government’s deposits guarantee 5

Proposal Any positive difference between assets acquired by government and redistributed to depositors = service payment Any additional levy imposed by government to make up for any shortfall = tax. 6

AEG Asked to consider proposals And whether any additional guidance should be developed for GFS manual? 7