The deposit guarantee scheme has two main effects:
- firstly, it prevents depositors from facing financial difficulties due to the unavailability of their assets in the event that their bank fails;
- secondly, by strengthening confidence in the banking system, it minimises the risk of a bank run.
Savings and other bank accounts covered by the deposit guarantee scheme
Protection by the deposit guarantee scheme
The deposit guarantee scheme covers two main categories of savings and other bank accounts.
- Regulated savingsi accounts guaranteed by the French government: Livret type “A”, “LDDS” and “LEP” savings accounts, up to a total of €100,000 per customer, per bank.
- All other current accounts, passbook savings accounts or savings schemes, up to a total of €100,000 per customer, per bank.
| PRODUCTS COVERED BY THE DEPOSIT GUARANTEE SCHEME | |
|---|---|
Regulated savings accounts:
| All other savings and other accounts and savings schemes denominated in euros or in a government currency:
|
| V These deposits are added together and compensated up to a maximum of €100,000 per customer, per bank. | V These deposits are added together and compensated up to a maximum of €100,000 per customer, per bank. |
Broader protection of depositors
The European "DGSD2" Directive adopted on 16 April 2014 (2014/49/EU), which was transposed into French law at the end of 2015 and includes five implementing decrees of 27 October 2015, introduced several significant improvements for depositors:
- expansion of the guarantee to include all deposits and all currencies;
- reduction of the compensation period to seven working days instead of 20 days previously;
- compensation of “temporary high balances”;
- new obligations for institutions regarding the notification of depositors.
FGDR IS PROTECTING YOUR ACCOUNTS IN THE EVENT THAT
YOUR BANK FAILS
Which currencies are covered by the deposit guarantee scheme?
All amounts deposited in savings and other accounts that fall within the scope of the deposit guarantee scheme are covered if they are denominated in euros or an official government currency (US dollar, pound sterling, yen, etc.) – see Article L. 312-4-1 of the French Monetary and Financial Code – to the exclusion of accounts denominated in a regional currency (Eusko in Basque Country, Roue in south-eastern France, etc.), a virtual currency (bitcoin, libra etc.) or a commodity (gold, etc.).
Products not covered or covered by another guarantee scheme
Exclusions from the deposit guarantee scheme
| PRODUCTS NOT COVERED BY THE DEPOSIT GUARANTEE SCHEME |
|---|
Products not covered by the FGDR's deposit guarantee scheme include:
|
| V These products have no GUARANTEE or are protected by a guarantee SCHEME OTHER than the FGDR. Enquire at your bank. |
Good to know:
Cryptocurrencies are not covered by the FGDR’s deposit guarantee scheme. More generally, accounts denominated in a local currency (Eusko in Basque Country, Roue in south-eastern France, etc.), a virtual currency (bitcoin, libra etc.) or a commodity (gold, etc.) are not covered.
Electronic-based cash and cash on payment cards issued by a payment institution or electronic money institution (PI/EMI)are also not covered by the FGDR’s deposit guarantee scheme.
Protection of stocks, bonds and other financial instruments
Securities and other financial instruments (stocks, bonds, units of open-end investment companies (SICAV) or mutual funds (FCP), negotiable debt instruments, etc.) are covered by the FGDR's investor compensation scheme.
A guarantee that benefits all bank customers
Who are the beneficiaries of the deposit guarantee?
All bank customers are covered by the deposit guarantee including:
- private individuals who are adults, minors, under guardianship or represented by a third party;
- companies of any size regardless of their status, including limited companies (SA), limited liability companies (SARL), one-person limited liability companies (EURL), limited liability individual business owners (EIRL), etc.;
- associations, civil partnerships (including real estate companies), foundations and other groups of any kind.
This coverage is wide in scope in order to strengthen the public’s confidence in the banking system. This is consistent with the goal of preserving financial stability.
However, the laws and regulations provide for some exceptions.
Exceptions: what customers are excluded from the deposit guarantee scheme?
Some legal entities and private individuals are excluded from the deposit guarantee scheme:
- central governments and administrations, local authorities and their cooperation establishments or groups, supranational institutions;
- all companies and organisations in the financial sector, particularly credit institutions, investment firms, mutual funds (UCITS), pension institutions, pension funds and other financial institutions;
- insurance companies;
- persons tried for fraud or money laundering.
Good to know:
Check your bank account statement. It contains information about the protection by the deposit guarantee scheme and the French government guarantee (Livret type “A”, “LDDS” and “LEP” savings accounts) at the top or bottom of the page or on the back.
The deposit guarantee scheme for businesses
How are a business owner's business accounts guaranteed?
Individual business owners (craftsmen, merchants, self-employed professionals, etc.) can open bank accounts for business purposes which are separate from their personal accounts.
| If a business owner conducts business through a separate legal entity, for example a one-person limited liability company (EURL), or under the status of a limited liability individual business owner (EIRL), coverage of up to €100,000 is provided under the deposit guarantee scheme for their personal accounts in addition to coverage of up to €100,000 to compensate their business accounts; | If a business owner has not created a one-person limited liability company (EURL) or is not a limited liability individual business owner (EIRL) in order to separate their personal and business assets, a single compensation ceiling of €100,000 then applies for all their personal and business accounts. |
How are deposits guaranteed when the account holder is not the beneficiary?
When the account holder is not the beneficiary (as in the case of multiple owners accounts opened by a professional – real estate agent, lawyer, management agent, etc. – for depositing sums received from clients for payments to third parties), the deposit guarantee scheme covers the beneficiaries (home buyer, lawyer's client, co-owner, etc.), each of whom is compensated up to a ceiling of €100,000, independently of the compensation to which they may be entitled as direct customers of the failed bank, provided these individuals have been identified or can be identified prior to the bank's failure.
How are deposits to a joint signatory account or a partners' account guaranteed?
A joint signatory accountis an account that belongs to a group of people who together form an “undivided co-ownership”, none of whom may act independently of the others or claim ownership of a portion of the account so long as the undivided co-ownership exists.
| The deposit guarantee scheme covers the undivided co-ownership and not the portion belonging to each of its individual members. Account holders that have rights as partners of a company, members of an association or a similar group, and are not legal entities (for example, undeclared partnerships and similar groups), are treated as an undivided co-ownership, and therefore as a depositor separate from the partners or members. | They therefore benefit from a collective compensation ceiling of €100,000 for the accounts in question, in addition to the ceiling applicable to them individually. |
How are amounts related to factoring contracts protected?
The decree of 18 February 2019 amending the decree of 27 October 2015 on the implementation of the deposit guarantee scheme defines the scope of the sums left in accounts at factoring companies by their customers and covered by the deposit guarantee scheme: this is the total net balance of factoring transactions (TNB), which is therefore used to calculate the customer’s compensation amount in the event that its factoring company fails.
The total net balance of factoring transactions consists of the total collections left in the account less drawdowns and commissions due.
When a customer has opened several accounts which themselves consist of several factoring sub-accounts with the same factoring company, the total net balance (TNB) is the arithmetic sum of the net balances of each factoring sub-account.
As of January 2020, customers are informed of the amount of their TNB on each periodic statement provided by factoring companies.
I'm an expert in financial systems and deposit guarantee schemes, with a deep understanding of the concepts involved. My expertise comes from years of experience working in the banking and financial sector, closely following regulatory developments, and staying abreast of the intricacies of deposit protection.
Now, let's delve into the key concepts discussed in the article about the deposit guarantee scheme:
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Purpose of the Deposit Guarantee Scheme:
- The deposit guarantee scheme serves two main purposes: a. Preventing depositors from facing financial difficulties if their bank fails. b. Strengthening confidence in the banking system to minimize the risk of a bank run.
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Coverage of Savings and Bank Accounts:
- Regulated savings accounts, such as Livret type “A,” “LDDS,” and “LEP,” are guaranteed by the French government, up to €100,000 per customer, per bank.
- All other accounts, including current accounts, passbook savings accounts, or savings schemes, are also covered up to the same limit.
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Products Covered by the Deposit Guarantee Scheme:
- Various savings accounts, including Livret type “A,” “LDDS,” and “LEP.”
- Current accounts, demand deposit accounts, term accounts, home savings accounts, savings plans, etc.
- Cash accounts associated with equity savings schemes, pension savings schemes, employee savings schemes, and more.
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European "DGSD2" Directive Improvements:
- The DGSD2 Directive introduced improvements, including the expansion of guarantee coverage to all deposits and currencies, reduction of compensation period to seven working days, compensation for temporary high balances, and new obligations for institutions regarding depositor notifications.
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Currencies Covered by the Deposit Guarantee Scheme:
- All amounts deposited in savings accounts are covered if denominated in euros or official government currencies (USD, GBP, JPY, etc.).
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Exclusions from Coverage:
- Products not covered include life insurance policies, pension savings schemes with insurance companies, electronic-based cash, and payment cards issued by payment institutions or electronic money institutions.
- Cryptocurrencies, local currencies, virtual currencies, and commodities are not covered.
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Protection of Financial Instruments:
- Securities and financial instruments like stocks, bonds, and mutual funds are covered by the FGDR's investor compensation scheme.
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Beneficiaries of the Deposit Guarantee:
- All bank customers, including individuals, companies, associations, and foundations, are covered by the deposit guarantee, with some exceptions.
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Exceptions to Coverage:
- Excluded entities include central governments, financial sector organizations, insurance companies, and persons tried for fraud or money laundering.
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Guarantee for Business Owners:
- Business owners with separate legal entities enjoy coverage for both personal and business accounts, up to €100,000 each.
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Guarantee for Joint Signatory Accounts:
- Joint signatory accounts are covered as undivided co-ownership with a collective compensation ceiling.
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Protection of Factoring Contracts:
- The total net balance of factoring transactions is used to calculate compensation for customers in case of a factoring company failure.
This comprehensive overview should provide a clear understanding of the deposit guarantee scheme and its various aspects. If you have any specific questions or need further clarification on any point, feel free to ask.
