Frequently Asked Questions
How are guaranteed deposits reimbursed in case of a bank failure?
In case of a protected event occurrence, that is, bank bankruptcy, the Fund will reimburse guaranteed deposits via one or more banks.
Bank bankruptcy administrator is obliged to provide the Fund with data and documentation regarding deposits held in the bank within 10 business days following the protected event date. After establishing the amount of guaranteed deposits and the number of depositors, the Fund commences the payout procedure.
The payout must begin no later than within 20 business days as of the bank bankruptcy date.
The Fund will inform the public/depositors of the failed bank on the conditions and manner of deposits payout in at least two printed media distributed in the territory of Montenegro and by posting the information on its website.
Is there any possibility that DPF is unable to reimburse all guaranteed deposits?
In case of a bank bankruptcy, the Deposit Protection Fund is obliged to reimburse guaranteed deposits.
If the Fund’s resources collected from premiums and other revenues are insufficient, the lacking funds may be provided from additional sources:
- collection of an extraordinary premium from banks, provided that the total amount of both regular and extraordinary premiums may not exceed 1% of total deposits in banks as at the last day in a month preceding the protected event date.;
- borrowing from the Budget of Montenegro;
- taking loans from foreign banks and financial institutions;
- issuing securities.
The Managing Board decides on the most efficient, cost-effective and expedient way of obtaining the lacking funds and thus ensuring the guaranteed deposits payout within the prescribed time period.
If a child has a savings account managed by a parent or a legal guardian, are the child’s deposits protected separately from deposits of his/her parents and/or legal guardian?
Yes, they are. Deposits of all depositors are protected, so deposits held in the name of a child, a spouse or a third party are guaranteed separately and do not count as the parent’s or the guardian’s deposits, whoever the person authorized to withdraw such deposits may be. The same applies for deposits of a spouse or a third party on whose behalf the account has been opened.
Is there any exclusion from the deposit protection scheme?
Yes, there is. Some depositors are not entitled to the guaranteed deposit payout, in accordance with best practises in the EU Member States. Under Article 6 paragraph 2 of the Deposit Protection Law (OGM 44/10), the deposit protection does not cover the following depositors:
- Legal persons providing insurance services;
- State bodies and organizations, municipal bodies and organizations and/or other forms of local self-government;
- Funds for mandatory health, pension and social insurance;
- Voluntary pension funds and their management companies;
- Investment funds and their management companies;
- Banks, credit unions, microcredit financial institutions and persons performing credit and guarantee operations;
- Persons in whose name and for whose account a bank, on their order, performs operations for which the provider of funds is a sole bearer of risk;
- Legal persons with direct or indirect participation in the bank capital or voting rights arising from at least 5% share in the bank capital;
- Persons who are members of the bank managing bodies and/or standing bodies of the bank management, persons responsible for daily bank operations, managers of organizational units in the bank, legal persons holding, whether directly or indirectly, at least 5% share in the bank capital or voting rights, as well as their spouses and children;
- Persons responsible for the auditing of the bank’s financial reports over the past three years before the initiation of the bankruptcy proceedings;
- Depositors holding non-nominative deposits;
- Holders of securities and other financial instruments issued by a bank or which payout is guaranteed by the bank.
In addition to the aforesaid, the following depositors are not entitled to the guaranteed deposit payout:
- depositors for whom the supervision reports of the Central Bank established that they have contributed to deterioration of the financial position of the bank and who, as the holders of bank accounts, have received higher interest rates or financial advantages in obtaining a loan or other banking services, and particularly if they:
- a) have obtained a loan which, due to the type of transaction, risk level, creditworthiness of the borrower or the type of provided collateral would otherwise not be granted to another person;
- b) have paid significantly lower interest on loans than those paid by other depositors of the bank;
- c) have received higher interest on deposits than those paid to other depositors of the bank.
- Persons convicted of criminal offence constituting money laundering or terrorism financing, involving their deposits.
How does DPF provide funds for the guaranteed deposits reimbursement?
All banks in Montenegro are included in the deposit protection scheme and are obliged to pay the deposit protection premium to the Deposit Protection Fund. Guaranteed deposits are reimbursed from these funds.
In addition to the charged premiums, the Fund earns revenues from investments of its funds. It may also provide funds from donations, such as 3,000,000 € worth donation given by the Government of the Federal republic of Germany via the KfW (Development Bank) as a support to the Montenegrin deposit protection scheme.
What premiums are paid by banks?
Banks in Montenegro are obliged to pay the initial and the regular premium to the Fund:
- The initial premium amounts to 50,000 €. Any licensed bank is obliged to pay this premium before the commencement of its operations.
- The regular premium is calculated and paid on a quarterly basis. The regular premium base comprises an average amount of total deposits with a bank as at the last day of each month for the previous quarter. The rate for the regular premium calculation may not exceed 0.5%. The Managing Board decides on the regular premium rate and the manner of the regular premium calculation for the following year, as a rule, at the end of November of a current year.
When the Fund’s resources reach the level of 10% of the guaranteed deposits, the Managing Board may decide, subject to the assessment of the amount of guaranteed deposits in banks, the Fund’s resources and overall situation in the banking sector, to reduce the regular premium rate or temporarily discontinue the regular premium collection.
The Managing Board may set different premium rates for individual banks, depedning on their rating and risk profile.
How does DPF invest collected resources?
The primary investment objective of the Deposit Protection Fund is not profit-making but security. Therefore, the Fund may only invest in top-rated securities.
The law prescribes that the Fund may invest in securities issued or guaranteed by the State of Montenegro, securities issued by a foreign bank, a financial institution and/or a country holding a high rating assigned by an internationally recognized rating agency, and deposits in central banks and foreign banks holding high ratings assigned by an internationally recognized rating agency.
The internationally recognized ratings range from AAA/AA/A/AB/….BBB …down to C, including various combinations thereof.
The Managing Board establishes the investment policy of the Fund based on the Fund`s stability and ongoing liquidity principles.
Are there deposit insurance schemes in other countries?
The oldest deposit insurance system is in the USA (Federal Deposit Insurance Corporation) and it has been operating as of 1934.
Some 104 countries in the world have deposit insurance (protection) in place, with 137 operating deposit protection schemes.
There are several countries with more than one deposit insurance system in operation such as Austria (5), Canada (10), Germany (8), and Italy (3). One deposit insurance system can also cover more than one country as in the Marshal Islands, Micronesia and Puerto Rico which deposits are insured by the U.S. Federal Deposit Insurance Corporation. Deposits in Cameroon, Chad, Congo, Equatorial Guinea and Gabon are also covered by a single deposit protection scheme.
Situation in a country in which a deposit insurance scheme is to be established mostly determine the main features of the scheme, as well as the required public education and awareness. Deposit insurance schemes in many countries were establish as a response to a financial crisis, whereas in countries in transition, deposit insurance systems were established following economic and bank stabilization.
However, regardless of their differences, deposit insurance scheme objectives are mainly the same in all countries – providing the basic protection to depositors and contributing to the country’s financial stability.