Banks to Contribute Less to Guarantee System in 2024 as Funds Reach EU-Mandated Levels

Prague, June 13, 2024: For 2024, mandatory contributions to the Deposit Insurance Fund have been set at CZK 1.5 billion. This is CZK 400 million less than last year. “By law, all institutions with insured deposits must contribute to the Fund. The decrease is due to the fact that the amount of financial reserves in the Deposit Insurance Fund, after the return of earnings from the insolvency proceedings with Sberbank CZ, has again reached the legally stipulated limit of 0.8% of covered deposits (i.e., deposits up to 100,000 euros),” explains Renáta Kadlecová, Executive Director of the Guarantee System.

In the context of the record-breaking successful insolvency proceedings with the failed Sberbank CZ, the Financial Market Guarantee System received, in the second half of March 2024, financial reserves corresponding to 95% of the claim arising from the payout of deposit compensation to Sberbank CZ clients. In total, this amounted to CZK 26 billion. As of the cut-off date for calculating contributions, the Deposit Insurance Fund reached over CZK 43 billion. These funds are used for potential payouts of insured deposits to clients of banks, cooperative credit unions, and bank building societies.

The contributions to the Crisis Resolution Fund have also significantly decreased. This fund, established to prevent situations where the collapse of a major financial institution is imminent, is contributed to not only by institutions already participating in the deposit insurance system but also by some securities dealers. “Last year, mandatory entities paid almost CZK 4.5 billion into the Fund. This year, the contributions amounted to just under CZK 2.7 billion,” states Renáta Kadlecová.

Thanks to the sufficient funding of both funds, lower contributions could be set this year. However, their amount is also influenced by the volume of insured deposits in banks, bank building societies, and cooperative credit unions, which grows year by year. “In the Czech Republic, this exceeds the European trend. Data as of December 31, 2023, show that compared to 2022, the volume of covered deposits in the EEA increased by 1.7%, which is less than the 2.6% increase in 2022, the 5.4% increase in 2021, and even the 8.2% increase in 2020, but the growth trend is still evident year on year,” adds Renáta Kadlecová.

Individual deposit insurance systems within the EU have until July 2024 to reach the minimum target level of financial reserves, which in most cases is 0.8% of covered deposits. By the end of 2023, 21 out of 36 systems had reached this level. The target level of reserves in the Crisis Resolution Fund is 1% of covered deposits and is to be achieved by December 31, 2024, which should be met after receiving this year's contributions.

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