What is deposit protection?
Deposit protection scheme is a system of protecting depositors against loss of their deposits or a part of their deposits in case of bankruptcy of a bank in which they hold funds. This is provided by making the deposits available to depositors up to the guaranteed coverage amount prescribed in the law.
Deposit insurance objectives are generally the same everywhere – providing for the basic protection of depositors against loss of deposits or parts thereof and thus contributing to financial stability and confidence in the banking system.
The main features of the deposit protection scheme in Montenegro:
- The deposit protection scheme covers deposits of private citizens and legal persons, both resident and non-resident. All types of deposits of account holders are protected, including giro accounts, current accounts, and savings deposits. All exclusions from the scheme are prescribed in Article 6 paragraph 2 of the Deposit Protection Law, in accordance with the common practise in the world.
- In case of a bank bankruptcy, the Deposit Protection Fund guarantees the reimbursement of up to 50,000 € per depositor, regardless of the number and type of deposits held in such a bank, provided that a transitional solution is introduced whereby the guaranteed deposit coverage is to be gradually increased, starting from 20,000 € in 2010 and 2011 and up to 35,000 € in 2012.
- The payout amount is calculated by adding up balances in all accounts held by a depositor in a bank as at the bankruptcy initiation date and reduced by the depositor’s matured liabilities to the bank.
- All banks licensed by the Central Bank of Montenegro are automatically included in the deposit protection scheme, which means that deposits in all banks in Montenegro are protected.
- The Deposit Protection Fund is in charge of deposits` protection and it guarantees the reimbursement of deposits in case of a bank failure up to the guaranteed coverage and within the specified time period.
Deposit protection is free of charge for all depositors – citizens, entrepreneurs and legal persons. Banks are obliged to pay the deposit protection premium.