Your SlideShare is downloading. ×
0
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Implementation of Deposit Insurance in Transition Economy: The Case of Bulgaria

276

Published on

Conference on Measures for Improving Confidence in the Banking System - Bishkek, the Kyrgyz Republic, 1 - 2 July 2004.

Conference on Measures for Improving Confidence in the Banking System - Bishkek, the Kyrgyz Republic, 1 - 2 July 2004.

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
276
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. International Conference MEASURES FOR IMPROVING CONFIDENCE IN THE BANKING SYSTEM Bishkek City, 1-2 July 2004 Implementation of Deposit Insurance in Transition Economy: the Case of BulgariaRoumyana Markova, Chief Expert, International Cooperation and PR Bulgarian Deposit Insurance Fund
  • 2. Presentation Outline The main challenges encountered: Proper timing to launch DIS Criteria for membership and funding Scope and level of coverage Efficient repayment procedures Public awarenessInternational Conference Bishkek City, 1- July 2004
  • 3. Proper Timing to Launch DIS 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 2,500International Conference Bishkek City, 1- July 2004
  • 4. Proper Timing to Launch DIS Outbreak of the financial crisis - mid 1996 (within ten months 17 banks comprising 25% of 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 entitiesInternational Conference Bishkek City, 1- July 2004
  • 5. Proper Timing to Launch DIS 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 (BDIF) - Jan 1999 – independent legal entity – accountable to Council of Ministers, BNB, National Audit Office – financial activities audited by the National Audit OfficeInternational Conference Bishkek City, 1- July 2004
  • 6. Mandates and Powers of BDIF 1998 Law on Bank Deposit Guaranty (LBDG) – determines and collects premiums from banks – invests its assets under LBDG provisions – repays insured amount of deposits with 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 banksInternational Conference Bishkek City, 1- July 2004
  • 7. Criteria for Membership Mandatory membership for all banks licensed to take deposits Under certain circumstances only foreign banks’ branches may be allowed not to participate in the system 32 members institutions (incl. 3 foreign banks’ branches) Branches of Bulgarian banks operating abroad – ?International Conference Bishkek City, 1- July 2004
  • 8. Funding DIS of ex-ante type funding by banks – entry and annual premiums paid by banks No initial capital contribution from the budget Other sources of funding – interest on BDIF investments – proceeds from BDIF subrogated claims – loans, etc.International Conference Bishkek City, 1- July 2004
  • 9. Banks Premiums Flat rate system Entry premiums - 1% of registered capital Annual premiums - 0.5% of total amount of previous year’s deposit base; due by 31 March in current year – deposit base determined on average daily basis (end 2001) BDIF is considering the introduction of a risk-adjusted premium systemInternational Conference Bishkek City, 1- July 2004
  • 10. Target Size of Funds Under LBDG - 5% of total amount of insured deposits in the banking system – Management Board may decide to reduce annual premiums if funds exceed 5% target ratio Ratio of BDIF funds / deposits - 2.23% – Current funds of BDIF - BGN 249 Mio / € 127 MioInternational Conference Bishkek City, 1- July 2004
  • 11. 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 securities funds, investment intermediaries, privatization funds, government and government institutions, municipalities, BDIF – bank’s 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’ (end 2001)International Conference Bishkek City, 1- July 2004
  • 12. Coverage Level of coverage – currently 100% up to BGN 15,000 / € 7,670 Application of coverage limits – per depositor per bankInternational Conference Bishkek City, 1- July 2004
  • 13. Increase of Coverage 1998 BGN 6,900 / € 3,528 – to BGN 2,000 - 95% – over BGN 2,000 - 80% (max 5,000) 2002 BGN 10,000 / € 5,113 – 100% (abolishment of coinsurance) 2003 BGN 15,000 / € 7,670 – 100% 2005 BGN 22,000 / € 11,248 – EU Timetable 2007 BGN 39,200 / € 20,043 – EU TimetableInternational Conference Bishkek City, 1- July 2004
  • 14. The Case of DSK Bank (former State Savings Bank) State Savings Bank – the ‘bank of the people’ – regulated by SSB Law of 1967 – accepting only household deposits in BGN Till May 2000 - full government guarantee on deposits in SSB Smooth transition to limited guarantee – small average size of deposits – two-year transitional period for SSB transformation into commercial bank (DSK Bank);International Conference Bishkek City, 1- July 2004
  • 15. 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 date of revocation of bank’s license by BNB Deadline for repayment of insured depositsInternational Conference Bishkek City, 1- July 2004
  • 16. Efficient Repayment Procedures BDIF has successfully performed its insurance function in the two bank failures since its establishment – Credit Bank - 1999 – Balkan Universal Bank - 2000 Subrogation - in both failures BDIF recovered the repaid amounts of insured deposits in fullInternational Conference Bishkek City, 1- July 2004
  • 17. The Case of Credit Bank 12 Jan 1999 Revocation of license 1 Mar 1999 Start of repayment 1 Mar 2004 Expiration of prescriptive period Insured deposits in total BGN 9.5 Mio Repaid deposits BGN 8.9 Mio - 94% Nov 2002 Termination of bankruptcy proceedings Dec 2002 BDIF starts issuing certificates to depositors – smooth processInternational Conference Bishkek City, 1- July 2004
  • 18. Public Awareness Strong emphasis on public awareness BDIF public relations policy – objectives and principles BDIF Public Relations Rules – specify terms and procedures for relationships with media and general public, and other communication activities – chief spokesperson is BDIF Chairman Organization of PR activities: in-house resourcesInternational Conference Bishkek City, 1- July 2004
  • 19. Public Awareness Objectives – popularization of DIS features & BDIF functions – maintaining confidence in banking system – enhancing BDIF image Target audiences – general public (present and potential depositors, uninsured depositors and creditors of failed banks) – media – banks and their front line staff, banking association – lawmakers and public officialsInternational Conference Bishkek City, 1- July 2004
  • 20. Public Awareness Communication techniques – press releases and conferences, interviews for media – Q & A Brochure on deposit insurance - 2000 – hot telephone line - 2000 – provision of information to general public in BDIF office – written responses to requests and complaints – web site - 2001 (both in Bulgarian and English) – discussions and seminars – paid advertisement in printed mediaInternational Conference Bishkek City, 1- July 2004
  • 21. Survey on Public Awareness of DI National representative study - 2002 (quantitative & qualitative) Findings – 24% of respondents know in general about BDIF – 43% of bank depositors are familiar with DIS in place – level of awareness of population and depositors is low Recommendations: enhance effectiveness in provision of public information, higher involvement of banks’ employees, diversifying communication channels Findings and recommendations - presented also to BNB Banking Supervision Dept. and Association of Commercial BanksInternational Conference Bishkek City, 1- July 2004
  • 22. New Communication Techniques Use of additional communication techniques and tools – educational radio-series on deposit insurance – TV ads – seminars for banks’ branch directors – front-door and counter stickers – product registers – revamp of BDIF web site – Q & A leaflet on bank bankruptcy Cost issues and evaluation of resultsInternational Conference Bishkek City, 1- July 2004
  • 23. 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.bg or International Cooperation and Public Relations Dept. Ms. Roumyana Markova Tel. +359 2 981 3809; E-mail r.markova@dif.bgInternational Conference Bishkek City, 1- July 2004
  • 24. Thank you for your attentionInternational Conference Bishkek City, 1- July 2004

×