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Bulgarian Deposit Insurance System
 

Bulgarian Deposit Insurance System

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Fifth Anniversary Conference of the Banking and Payments Authority of Kosovo - Pristina, Kosovo, 11 - 12 November 2004.

Fifth Anniversary Conference of the Banking and Payments Authority of Kosovo - Pristina, Kosovo, 11 - 12 November 2004.

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    Bulgarian Deposit Insurance System Bulgarian Deposit Insurance System Presentation Transcript

    • Fifth Anniversary of the BPK International Conference Pristina, 11-12 November 2004Bulgarian Deposit Insurance SystemGeorgi Petkov, Member of the Management Board Bulgarian Deposit Insurance Fund
    • BULGARIAN DEPOSIT INSURANCE SYSTEM System development Implicit government guarantee till Jan 1996 First explicit limited coverage DIS - introduced Jan 1996 (Regulation of the Central Bank - BNB) – only deposits of physical persons were insured – level of coverage - appr. EUR 2,500BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM System development Outbreak of the financial crisis - mid 1996 (within ten months 17 banks comprising 25% of the total banking system assets failed) Extraordinary legislation - Law on State Protection of Deposits; repayment of deposits from the budget: – 100% to physical persons – 50% to legal entitiesBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM System development Introduction of Currency Board - mid 1997 – curbing the crisis Explicit DIS with limited coverage on deposits - Law on Bank Deposit Guaranty - Apr 1998 Bulgarian Deposit Insurance Fund - Jan 1999 – independent legal entity – accountable to the Council of Ministers, BNB – financial activities audited by the National Audit OfficeBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF functions: Legal basis 1998 Law on Bank Deposit Guaranty (LBDG) – determines and collects premiums from banks – invests its assets under LBDG provisions – repays insured amount of deposits in failed banks 1999 Amendments to Law on Banks: Art.89a (repealed by LBB) – very limited control over trustees 2002 Law on Bank Bankruptcy (LBB) – administers bank bankruptcy proceedings by controlling trustees and preparing draft regulations – control over 4 failed banksBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF: Criteria for membership Mandatory membership for: – all Bulgarian banks – branches of foreign banks, licensed to operate on the territory of Bulgaria, which are not covered by the DIS in the country of the head office or the level of coverage is lower than in Bulgaria – branches of Bulgarian banks abroad Currently BDIF has 32 members of which 3 branches of foreign banksBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF: Funding DIS of ex-ante type funding by banks – entry and annual premiums paid by banks No initial fund contribution from the budget Other sources of funding – interest on BDIF investments – proceeds from BDIF subrogated claims – loans, etc.BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM Bank premiums Entry premiums - 1% of registered capital Annual premiums - 0.5% of the total amount of the previous year’s deposit base (calculated on an average daily basis) BDIF is considering the introduction of a risk-adjusted premium system.BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF: Investment activity BDIF resources are invested in: – securities issued or guaranteed by the Bulgarian government – short-term deposits with commercial banks – authorized primary dealers of government securities – deposits with the Bulgarian National BankBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM Financing within shortfall of resources By decision of BDIF Board shortfall may be covered by: – requiring an advanced payment of premiums – increasing the annual premium (max. 1.5%) – drawing loans: - from the market - from the budget after a decision of Parliament Loans may be secured by government guarantee or BDIF assets, incl. future claims on banks for annual premiumsBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF: Size of funds In accordance with the LBDG provisions - 5% of the total amount of insured deposits in the banking system. When the amount of the Fund exceeds the 5% target ratio BDIF Management Board may decide to reduce annual premiums Currently BDIF funds amount to BGN 252 M (EUR 129 M) and the ratio BDIF funds/deposits is 2.14%BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM Scope of coverage Insured are: – deposits of physical persons and legal entities – deposits in national and foreign currency Exclusions: – banks and non bank financial institutions, insurers, pension and social security funds, investment intermediaries, privatization funds, government and government institutions, municipalities, BDIF – bank senior officers and auditors, shareholders of more than 5% of bank’s equity, and their close relatives, preferential rate deposits – deposits associated with ‘money laundering’BPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM Level of coverage 1998 BGN 6,900/EUR 3,528 – to BGN 2,000 - 95% – over BGN 2,000 - 80% (max 5,000) 2002 BGN 10,000/EUR 5,113 – 100% (abolishment of coinsurance) 2003 BGN 15,000/EUR 7,670 – 100% 2005 BGN 25,000/EUR 12,782 – EU Timetable 2007 BGN 39,200/EUR 20,043 – EU Timetable Application of coverage limits Per depositor per bankBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM Repayment of insured amounts of deposits Deposits are repaid only in national currency Repayment of insured amounts of deposits is done via a servicing bank determined by BDIF Management Board Repayment begins not later than 45 days from the date of revocation of bank’s license by BNBBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF functions under Law on Bank Bankruptcy Performs control over the lawful and appropriate exercise of trustee’s powers: – appoints and removes a trustee – determines trustee’s remuneration – controls trustee’s expenses – controls transactions made by the trustee – issues methodological instructions to trustee relating to the exercise of his powersBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • BULGARIAN DEPOSIT INSURANCE SYSTEM BDIF functions under Law on Bank Bankruptcy Prepares draft regulations: – Regulation on the reporting requirements and trustee’s budget – Regulation on trustee’s remuneration – Regulation on the BDIF inspections in the banks in bankruptcy – Tariff on the fees collected by the BDIF relating to the exercise of its controlling powers in the bankruptcy proceedingsBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • How to contact BDIF Bulgarian Deposit Insurance Fund 2, Graf Ignatiev Str., 3rd Floor 1000 Sofia, Bulgaria Tel.: +359 2 980 1438; Fax: +359 2 988 8207 E-mail: contact@dif.bg Internet: http://www.dif.bgBPK Fifth Anniversary Conference Pristina, 11-12 November 2004
    • Thank you for the attentionBPK Fifth Anniversary Conference Pristina, 11-12 November 2004