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Frequently asked questions

About the Guarantee System

Is the Guarantee System a government institution? What is the position of the Guarantee System with respect to government administration?

The Financial Market Guarantee System (under its original title the Deposit Insurance Fund) was established as a legal entity pursuant to the Act on Banks and it is not part of the government administration. It is managed by a three-member Management Board (formed by its employees) that is appointed by the Board of Directors. The Board of Directors is appointed and recalled by the Minister of Finance. It is composed of two employees of the Czech National Bank, two employees of the Ministry of Finance of the Czech Republic and one representative appointed on a proposal from the Czech Banking Association.

What funds does The Financial Market Guarantee System manage? What is the purpose of these funds?

The Financial Market Guarantee System administers two funds, namely the Deposit Insurance Fund and the Crisis Resolution Fund. Both funds are separate accounting units of the Guarantee System, they have different purposes, and their funds can only be used for the purposes specified by law.

Deposit compensation is paid out from the Deposit Insurance Fund when the Czech National Bank decides that one of the financial institutions involved in the deposit insurance system (i.e. banks, building savings banks or cooperative credit unions) as unable to meet its obligations to beneficiaries under legal and contractual conditions, or the court issues a decision on the bankruptcy of such an institution.

The Crisis Resolution Fund is used in cases of threats to the stability of some of the financial institutions. Financial resources in this fund can also be used within individual crisis resolution tools, the aim of which is to prevent a situation that could otherwise result in insolvency, or bankruptcy of the financial institution in question, and the subsequent payment of deposit compensation to its clients. This fund is not used for direct deposit compensation payments, but enables solutions in situations where the rescue of a financial institution is feasible, credible and in the public interest.

Funding

Where does the Guarantee System get its money?

The Guarantee System manages now two separate funds. These funds have different purposes and the financial resources collected to individual funds can only be used for activities defined by law.

Under the law, all financial institutions (banks, branches of banks from non-EU Member States, building savings banks, and cooperative credit unions) that held insured deposits have to contribute to the Deposit Insurance Fund. Extraordinary contributions, loans from the financial market participants or from similar European institutions, or eventually from the state budget might supplement financial resources of the Deposit Insurance Fund in case of its insufficiency. Other forms of financial resources of the Fund are proceeds from bankruptcy, liquidation and insolvency proceedings of bankrupt banks, where the Guarantee System is a creditor.

The Crisis Resolution Fund will be built-up through annual contributions from financial institutions. In case of need, it is possible to supplement insufficient resources through the collection of extraordinary contributions. The Fund also has the possibility to obtain additional financial resources on the financial market, or by loans from similar European institutions. If it is not possible to get financial resources through these means, the Guarantee System may apply for a subsidy or refundable financial assistance from the state budget. The minimum target level of this fund is set at 1% of the total amount of covered deposits. This level should be reached by mid-2024.

Will Guarantee System have enough funds even if a bigger bank fails?

If a bigger bank failed and the funds in the Deposit insurance fund were not sufficient, the Guarantee System has several statutory options how to access additional resources so that all clients entitled to compensation obtained their money back. The Fund can obtain additional resources by prescription of extraordinary contributions, loan on the financial market or a loan from other deposit insurer within EU, as a last option also from the state budget.

However, in case of threat to the stability of any of the financial institutions which are systemically important/perform critical functions on the financial market, the Guarantee System also disposes of the Crisis Resolution Fund that can be used if the Czech National Bank decides on a different procedure with aim to save the failing bank. The Czech National Bank can temporarily take control over the institution and can e.g. divide and sell the "healthy" part to a new owner. The aim of this process is to keep the bank operating and with no negative effect on its depositors.

How does deposit insurance work

What to do if I want to insure my deposits, investments or other types of financial products

Deposit insurance rules including the list of financial products that are covered by the insurance, are defined by the Act on Banks. You cannot therefore influence whether the financial product will be insured and under which conditions. If the product is covered by insurance, it is insured automatically and you do not need to act.

Information regarding whether a financial product is insured has to be provided to you by the financial institution that offers such product. If you have doubts, you can verify the information you receive by contacting the Guarantee System.

Will I get my money back if my bank goes bankrupt?

If you had money at a bankrupt bank, building savings bank or cooperative credit union, e.g. in a current, savings or term account or in a passbook, you will not lose your money. This is because deposits kept with these financial institutions are legally insured up to the equivalent of EUR 100,000.

Will you compensate me for any interest I have earned on my account?

When the bank is declared in default, the depositor will be paid an interest accrued on deposits as at the record date as part of the compensation amount.

Does co-insurance apply in case od deposit compensation?

No, the depositor will obtain compensation for 100% of his/her deposits, up to equivalent of EUR 100 000 .

Where can I get information about my deposit insurance?

Since 1st January 2016, banks have an obligation to inform their clients about the deposit insurance system they participate in at least once a year. The information sheet must be strictly formulated according to Czech National Bank Decree No 12/2016 Coll. Banks comply with this obligation in different ways, such as publishing the information sheet via internet banking or by sending their clients a letter. The aim of the information sheet sent is to apprise clients of the fact that their deposits are insured and of the conditions of this insurance. If you have any further questions about deposit insurance, do not hesitate to contact your bank or the Guarantee System.

Who is insured

Are the deposits of legal persons insured as well?

Yes, deposit insurance covers physical persons as well as legal persons. However, according to the Act on Banks, some legal persons are excluded from coverrage (e.g. Financial institutions, insurance companies, health insurance companies, etc.)

If I, as a parent, open a bank account for my child, will this deposit also be separately insured as it would be for an adult?

Yes, this deposit will be insured just as it would be for an adult, while the deposit owner will be allowed to dispose of the deposit after reaching 18 years of age. If the bank goes bankrupt while the child is a minor, the deposit compensation payout may be collected by the child’s legal representative or guardian.

What is the situation with deposit insurance if a natural person has a bank account kept in his/her name and an account is kept with the same bank for a legal person of which this individual is a member? Are both deposits insured?

Yes, both deposits are insured up to a limit corresponding to the equivalent of EUR 100,000. In this case, there are two different account holders, one of them being a natural person and the other being a legal person. The case is different when a natural person who is an entrepreneur has two accounts at the same bank, one for a natural person and the other for a self-employed person. In this case, the person is one and the same, and only one limit of EUR 100,000 will apply. The balances of the two accounts would be added up to determine the deposit compensation amount.

I have a term deposit at a bank and so does my wife. Are we understood to be two natural persons, i.e. shout The Financial Market Guarantee System provide each of us with compensation equal to 100% of our deposit, including interest?

Yes, in this case there are two separate persons, and each of them is covered through a deposit insurance limit equivalent to EUR 100,000.

Are municipalities insured?

Generaly, deposits of the state and local authorities are not insured. There is only one exception for small municipalities with yearly tax incomes not exceeding equivalent of EUR 500 000. More information can be found here.

What is insured

What is insured? On what accounts does it apply?

Deposits with banks, branches of banks from non-EU Member States, building savings banks, and cooperative credit unions are insured.These are, in particular, current accounts, savings accounts, term deposits, savings books etc.

Bills of exchange, bonds, shares, and other securities are not insured.

Member’s investments (contributions) of cooperative credit union members (i.e. basic member’s investments and subsequent member’s investments under Section 4b of the Act No 87/1995 Coll., on Savings and Credit Cooperatives, as amended) are also not insured. Pre-paid debit cards not linked to any account, issued in the form of electronic money (e.g. my paysafecard) are not insured. Deposits of territorial self-governing units – if they do not fulfil the conditions defined by law (for further information, please click here) – and government deposits (including foreign diplomatic entities) are also now not insured.

Does the Financial Market Guarantee System covor deposits made in different currencies?

Yes, however compensation for deposits held at accounts located in the Czech Republic will be paid in Czech crowns.

Are cryptocurrencies or content safe boxes insured?

Unfortunatelly not. These products don´t fulfill the statutory definition of a deposit.

What is the situation with the insurance of deposits in pension funds and life insurance?

These financial products are not insured with the Guarantee System.

Does the deposit insurance cover funds deposited as the purchase price in notarial or lawyer’s custody in connection with the transfer of ownership of real estate and which the notary public or lawyer has deposited in a bank account for the custody period?

If, when depositing the funds, the notary public or lawyer properly notified the bank in accordance with the law that the deposit consists of funds owned by another specific person, the funds are covered by the deposit insurance, while any compensation will be paid directly to the owner of these funds. If the statutory conditions are met, increased compensation may also be provided for the deposit (see here for more details), while the three-month protection period (one of the conditions for granting increased compensation) could (depending on the specific custody conditions) begin to run only after the owner of the funds obtains authorization to dispose of the funds.

Is the claim for the settlement share of a former cooperative credit union member an insured deposit?

The claim for so-called settlement share of a former cooperative credit union member is not an insured deposit claim under the Act on Banks, as it is a settlement of a member´s investments in the capital of the cooperative credit union (i.e. basic member’s investments and subsequent member’s investments) and in respect of such a claim, under the current regulation, compensation cannot be provided from the Deposit Insurance Fund administered by the Financial Market Guarantee System.

Are structured deposits insured?

Structured deposits are defined in Section 2(1)(r) of Act No. 256/2004 Coll. on Capital Market Business, as amended, as "deposits under the Act regulating the activities of banks" (i.e. Act No. 21/1992 Coll. on Banks, as amended). For this reason, the deposited amount can be considered as insured by the Guarantee Scheme. Considering the insurance of acrued interest/return, the legislation is not entirely clear at the moment, but we expect this issue to be further clarified in the next amendments.

Are products combining interest-bearing cash and investment instruments such as „Investment Reserve“ offered by Portu, Cyrrus Duo and others insured?

These products are usually made up of a combination of interest-bearing cash and investment instruments. The interest-bearing cash is deposited by the provider (investment firm) on a special account with a bank chosen by the provider, and this account is insured against the failure of the bank in question (insurance under the special regime pursuant to Section 41f et seq. of Act No. 21/1992 Coll., on Banks, as amended). In the event the bank with which these funds were deposited failed, the clients would receive compensation via the provider from the Guarantee Scheme in the same amount as would have been provided if each of the persons concerned had had funds registered with the bank in their own account. However, clients should bear in mind that for determining the total amount of compensation from the Guarantee System, all claims from deposits held within this bank (e.g., deposits at current or savings accounts, etc.) are aggregated to the statutory limit.

In contrast, the investment instruments component is not insured by the Guarantee Scheme, nor does the Guarantee System provide any protection in cases of investment firm insolvency. In such cases, customer assets entrusted to the investment firm are not protected under the deposit insurance scheme pursuant to the Act on Banks, even if those assets were held in bank accounts.

To some extent, customer assets may be protected by the Investor Compensation Fund under the Act on Capital Market Undertakings. This fund is legally obliged to provide partial compensation to customers of investment firms in cases where they are unable to meet their obligations to their clients. More information can be found on the website of the Investor Comensation Fund.

In cases where an investment firm is also a bank, both insurance schemes and procedures under the Act on Banks and the Act on Capital Market Undertakings would apply in the event of the institution's insolvency. This means that the €100,000 limit for cash deposits (covered by the Guarantee System) and the €20,000 limit for investment instruments (covered by the Investor Comensation Fund) would both be applicable.

Are Funds in a Long-term Investment Product ("DIP") Insured?

A long-term investment product ("DIP") is not a bank deposit. The Financial Market Guarantee System only insures the funds that a customer has deposited in the cash account linked to the DIP. This is typically a collection account in a bank chosen by the DIP provider and it is insured against the bank's failure. However, funds already invested in investment instruments are not insured by the Financial Market Guarantee System.

To a certain extent, invested funds may be protected by the Investor Compensation Fund, which provides partial compensation to customers of investment firms in situatons where the investment firms are unable to meet their obligations to their clients. More information can be found on the website of the Investor Comensation Fund.

Insured institutions

Which financial institutions are insured by The Guarantee System?

Deposits at banks, building savings banks and cooperative credit unions with their registered office in the Czech Republic are insured by law by the Guarantee System. The branches of banks with registered office outside an EU Member State are also obliged to participate in the Czech deposit insurance system. The complete list of insured institutions can be found here.

Do the payout limits also apply to the branches of foreign banks operating in Czech Republic? If not, what rules are followed in the event of their bankruptcy?

Branches of foreign banks from EU Member States (engaged in business here but not Czech legal entities) are insured in the country where the institution has its registered office. As of 31st December 2010, the minimum insurance limit in all EU Member States is EUR 100,000. Under Directive 2014/49/EU of the European Parliament and of the Council on deposit guarantee schemes, Member States are obliged to ensure that specific, strictly defined cases of deposits are temporally insured even up to a higher limit. The whole amount of this exceptionally higher coverage (temporary high balance) can reach a maximum of an additional EUR 100,000 in the Czech Republic (above the basic coverage limit of EUR 100,000). The particular conditions for temporary high balances (including the coverage limit and time period of the coverage) can vary from country to country and are defined by the legislation of the respective Member State.

Branches of foreign banks from non-EU Member States participate in the Czech deposit insurance system. In the event of failure, the Guarantee System will organize payout of compensation for deposits in the Czech Republic. Client deposits of such branches are insured under the same conditions as client deposits held in Czech banks.

How does the deposit insurance change if two banks merge?

If two banks merge, common limit of EUR 100 000 per person for this merged entity will apply to clients from the date of the merger. The bank involved in the merger has a statutory obligation to inform its clients of such a transaction at least one month before the final merger takes place.After the bank provides information about the merger in this way, clients may withdraw, or transfer to another bank, their funds that exceed the statutory insurance limit within the next three months without penalty, regardless of whether they are current, savings or term deposits.

Compensation amount

What is the coverage limit for deposit insurance?

The coverage limit for deposit compensation payout is EUR 100,000 per client per insured financial institution. In specific situations defined by law the limit can even be increased by an additional EUR 100,000. The equivalent in Czech crowns is calculated on the basis of the foreign exchange rate announced by the Czech National Bank as at the record date.

Example: Czech National Bank foreign exchange rate announced at the record date is 27,02 Czech Crowns/EUR, the coverage limit in Czech Crowns calculation: 100 000 x 27,02 = 2 702 000 Czech Crowns.

In which cases can I receive higher compensation?

Higher compensation can only be received in cases precisely defined by law - for instance, if funds credited/deposited onto your account originate from the sale of a residential property, from an inheritance, or from an insurance settlement for an accident, illness, disability or death, etc.). In such a case, it will be possible to obtain compensation above the standard limit of EUR 100,000 EUR - up to an additional EUR 100,000. Another condition is that the funds were credited onto the account no later than 3 months before the relevant bank/building savings bank/ cooperative credit union went bankrupt.

More information on increased compensation can be found here.

How should I insure one million euros when I can only insure 100,000? Can I divide the deposit over several banks? Can it be under one name, oe does wach deposit have to be made by a different person?

The insurance limit applies to a depositor per bank. You would have to distribute your savings to several banks or deposit them at the name of different persons (e.g. all family members).

Is it possible to get back also my deposits exceeding the coverage limit?

Deposits exceeding the coverage limit have to be claimed in liquidation/insolvency proceedings. The result will depend on specific circumstances of each case.

Payout process

Who will repay the compensation?

The deposit compensation payout is now performed by the Guarantee System from the Deposit Insurance Fund, whose assets are managed by the Guarantee System. The payout itself is performed through branches of a selected payout bank.

How soon after the collapse of a bank will I get my money back?

Your compensation will be ready for payout after 7 working days from the “record date” (i.e. day when the Guarantee System receives the Czech National Bank Notification about the inability of the bank to meet its obligations to eligible persons under statutory and contractual conditions).

What does the record date mean?

It is the day on which the Czech National Bank delivers a written notice to the Guarantee System about the inability of a financial institution to meet its commitments, or the day on which a court issues a decision on the bankruptcy (insolvency) of such an institution. Since this day, the Guarantee System starts preparations for deposit compensation payout which has to be commenced within 7 business days from the record date.

Is there a time limit for withdrawal of the deposit compensation?

The compensation payout runs for 3 years from the date of its commencement. You can withdraw your compensation any time within this period.

Other questions about payout process

Other questions about payout process can be found here.

Information sheet on deposit insurance

Who and why I am obtaining the information sheet on deposit insurance?

According to the law, banks are obliged to inform their clients at least once per year that their deposits are insured. They do so by providing them the "Depositor Information Sheet". This information sheet must be strictly formulated according to Czech National Bank Decree No 12/2016 Coll. and is provided to the clients in different ways, such as publishing the information sheet via internet banking or by sending their clients a letter.

The aim of this information sheet is to inform clients about deposit insurance and its conditions. As the Guarantee System does not have access to the information on clients accounts, their balances, their credit cards, etc. in the given bank, we ask clients to adress their questions on these topics directly to the banks themselves.

Others

What to do if I use a financial product that the financial institution is refusing or unable to pay out?

If it is a financial product covered by deposit insurance, and if the legal conditions for deposit compensation payout are fulfilled, you will be reimbursed up to the amount defined by law. If the product you use is not covered by deposit insurance, your claim must be submitted to the financial institution in question or to a competent court. You can also contact the Financial Arbitrator of the Czech Republic (www.finarbitr.cz).

What to do if I want to complain about services provided by a financial institution, financial advisor or other person providing financial services?

We recommend first taking up this issue with the management of the financial institution in question. You can also contact the Financial Arbitrator of the Czech Republic (www.finarbitr.cz) or eventually a competent court. The Guarantee System is not permitted to intervene in disputes between clients and financial institutions – it does not dispose the relevant powers, information or tools to do this.

What to do if I want to know if the financial institution whose product I use is in good condition?

This is a rather difficult and professionally demanding question. The condition of financial institutions is assessed by teams of financial analysts. You can also assess this as well by using information that the institution discloses about itself. Banks, building savings banks and cooperative credit unions are, for example, obliged to disclose quarterly information about their financial condition on their websites. Ratings from international agencies, if provided, can also be helpful. In the Czech Republic, the body responsible for the supervision of financial institutions is the Czech National Bank. However, the employees of the Czech National Bank have a confidentiality obligation and can disclose information only to the extent not forbidden by law. We recommend choosing products from financial institutions that you feel most confident about.