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EU DIRECTIVE ON DEPOSIT GUARANTEE SCHEMES AND RUSSIAN
APPROACH
Lipin A.P. (Russian Federation) Email: Lipin561@scientifictext.ru
Lipin Andrey Petrovich - Master of law,
RESEARCH UNIVERSITY HIGHER SCHOOL OF ECONOMICS, Lawyer,
CLEARY GOTTLIEB, MOSCOW
Abstract: the article purports to compare the European and Russian approaches to mandatory insurance of bank deposits. In the European Union, Directive 2014/49/EU is the current basis for such system, while in the Russian Federation it is Federal Law N 177-FZ. Both documents use substantially similar principles aimed at the protection of deposits but differ a lot in details so that the level of protection may vary significantly in certain aspects. The articles describes these major differences and suggests a few steps that could be taken to enhance protection of deposits under Russian law by using the experience of Directive 2014/49/EU. Keywords: deposit guarantee schemes, bank deposits, bank insolvency.
ДИРЕКТИВА ЕС О ПРОГРАММАХ ГАРАНТИРОВАНИЯ ВКЛАДОВ
И РОССИЙСКИЙ ПОДХОД Липин А.П. (Российская Федерация)
Липин Андрей Петрович - магистр права, Научный исследовательский университет Высшая школа экономики,
юрист, Клири Готтлиб, г. Москва
Аннотация: целью статьи является сравнение европейского и российского подходов к обязательному страхованию вкладов. В Европейском союзе текующую основу такой системы составляет Директива 2014/49/ЕС, а в Российской Федерации - Федеральный закон N 177-ФЗ. Принципы защиты вкладов, используемые в обоих документах, существенно схожи, но при этом в документах имеется множество различий в деталях, что может приводить к значительным расхождениям в уровне защиты, предоставляемой по разным аспектам. В статье раскрываются такие существенные различия и предлагаются определенные меры по повышению уровня защиты вкладов по российскому законодательству с использованием опыта Директивы 2014/49/ЕС.
Ключевые слова: программы гарантирования вкладов, банковские вклады, несостоятельность банков.
On 16 April 2014 the EU adopted the Directive 2014/49/EU of the European Parliament and of the Council on deposit guarantee schemes (the "Directive") to increase the level of deposit protection provided by the Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes, amended by the Directive 2009/14/EC of the European Parliament and of the Council of 11 March 2009. The Directive is aimed to reimburse a limited amount to compensate depositors whose bank has failed1 and lays down rules and procedures relating to the establishment and the functioning of deposit guarantee schemes (the "DGSs")
1 Deposit guarantee schemes. Overview. [Electronic resource]. URL: https://ec.europa.eu/info/business-economy-euro/banking-and-fmance/financial-supervision-and-risk-management/managing-risks-banksandfinancialinstitutions/deposit-guarantee-schemes_en/ (date of access: 20.06.2019).
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(Article 1(1)) in order to eliminate certain differences between the laws of the Member States as regards the rules on DGSs (Recitals (2)).
In the Russian Federation the legal framework in the same area has been created with the adoption of the Federal Law N 177-FZ "On Guaranteeing of Deposits in Banks of the Russian Federation" dated 23 December 2003, as amended (the "Deposit Law"), which sets out, inter alia, legal, financial and organizational grounds for the functioning of the system of mandatory guaranteeing of deposits of natural persons in banks of the Russian Federation (Recitals).
Researchers generally agree that both the Directive1 and the Deposit Law2 provide a fairly decent protection for depositors. However, it may be also fruitful to compare these two DGSs in order to understand which system offers more protection to depositors.
Scope
Generally, the Directive extends guarantees to all types of deposits, excluding a limited number of deposits, such as deposits made by other credit institutions on their own behalf and for their own account, financial institutions, investment firms, insurance undertakings, reinsurance and collective investment undertakings, pension and retirement funds and public authorities (Article 5(1)). On the contrary, the Deposit Law, as it follows from the definition of "depositor' (Article 2 (4)), covers only accounts of natural persons and small entitites, leaving the majority of legal entities without any protection. The Deposit Law also excludes from its scope deposits and accounts opened by notaries public, attorneys and accounts opened for certain other types of professional activity (Article 5(2)(1)).
Moreover, the Documents diverge on deposits opened with foreign branches of banks: the Directive extends protection to such deposits, both in branches with the EU and third countries (Article 14(1), Article 15(1)), while the Deposit Law excludes them from its scope (Article 5(2)(4)).
Designated Authority
Both documents provide for the designated authority which shall administer the DGS. However, if, under the Deposit Law, the Agency, a state corporation controlled by the Central Bank and the Government of the Russian Federation, is the sole administrator (Article 4 (3)), the Directive also provides for the administration of the DGS by a private entity supervised by a public authority of the Member State as an alternative to a public body (Article 2(1)(18) and allows for the establishment of more than one DGS in a Member State (Article 4(1)).
What is important, the functions of designated authorities differ. Both the Directive and the Deposit Law basically consider it as an insurance company which makes necessary repyments to the depositors after their bank has failed (so called 'paybox' function). However, the Directive also provides for a preventive function of the designated authority - it is allowed to use the available financial means for alternative measures in order to prevent the failure of a bank with a view to avoiding the costs of reimbursing depositors and other adverse impacts if certain conditions are met, including that the costs of the measures do not exceed the costs of fulfilling the statutory or contractual mandate of the DGS (Recitals (16), Article 11(3)).
Coverage Amount
Both the Directive (Article 6(1)) and the Deposit Law (Article 14(1, 3, 4)) limit the coverage amount per depositor rather than per deposit, so that the limit applies to the aggregate deposits placed by a depositor with the same bank irrespective of the number of deposits, the currency and the location. However, while the Directive sets the coverage at EUR 100,000 in the event of deposits being unavailable, the Deposit Law offers a considerably more limited protection in the amount of RUB 1,400,000 (approximately EUR 21,560, calculated as per the official exchange rate set by the Central Bank of Russia as at 7 June 2019) (Article 14(2)), i.e. almost five times lower.
1 Knepka, Tomasz, Towards a European Deposit Guarantee Scheme (July 13, 2017). [Electronic resource], URL: http://dx.doi.org/10.2139/ssrn.3047768/ (date of access: 20.06.2019).
2 Guruleva O.S. Deposit Insurance System in the Russian Federation. Problems and Prospects of Development // Young Scientist. 2018. No 16. p. 201.
Most researchers agree that this amount is inadequate1. Moreover, unlike the Deposit Law, the Directive provides for periodical review of the coverage amount at least once every five years, taking account in particular of developments in the banking sector, the economic and monetary situation in the EU and inflation (Article 6(6-7)).
Both the Directive (Article 7(7)) and the Deposit Law (Article 2(2)) provide that interest accrued on deposits is reimbursable. Also both the Directive (Recitals (24)) and the Deposit Law (Article 11(7)) allow to set off liabilities of a depositor before the bank against that depositor's claims for repayment. The difference is that, unlike the Deposit Law, the Directive allows this only if those liabilities are due on or before the date of unavailability.
Repayment Procedure
The Directive provides that the coverage is paid to a depositor without any requests or similar actions from his side and the necessary information on deposits and depositors is transmitted by the bank (Article 8(6)), while the Deposit Law requires that a depositor should file an application with the Agency before the insolvency proceeding with respect to the bank are completed (Article 10).
Different approaches have also been adopted with respect to the term of repayment. The Directive requires that depositor shall receive the repayable amount with seven working days of the date when the deposit became unavailable (Article 8(1)), subject to the extended repayment periods during the specified transitional periods (Article 8(2)). Furthermore, depositors should have access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request. Meanwhile, under the Deposit Law, a depositor generally receives the coverage only after the expiration of a 14-day period from the occurrence of the insurance event, which is either revocation of the bank's licence or introduction of a moratorium on payments to the bank's creditors (Article 12(4)).
While the Directive sets out a number of option with respect to the currency in which the repayment is made (Article 6(4)), the Deposit Law provides only for repayment in Russian roubles (Article 12(13)).
Following the repayment of coverage, the designated authority becomes entitled to subrogate into the rights of repaid depositors against a failed bank (Recitals (41) of the Directive, Article 13 of the Deposit Law).
Financing of DGS
The main source of financing of DGS in both EU Member States and the Russian Federation is periodical contributions made banks (Article 10(1) of the Directive, Article 34(1) of the Deposit Law), but other sources are also available, such as investment of available financial means (Article 10(7) of the Directive, Article 34(5) of the Deposit Law), loans from other DGSs (Article 12(1) of the Directive) and budgetary financing (Article 34(4) of the Deposit Law). Also both documents provide for the accumulation of available funds of the DGS up to a certain target level determined on the basis of the amount of the covered deposits of its members - 0,8% in the Directive (Article 10(2)) and 10% in the Deposit Law (Article 36(15)). After this level is reached no further contributions from banks are required unless the available financial means have been reduced, in which case further contributions are collected so as to reach the target level again (Article 10(2) of the Directive, Article 36(16) of the Deposit Law).
The contributions made by each bank are calculated based on the amount of its covered deposits in both cases (Article 13(1) of the Directive, Article 36(2) of the Deposit Law). However, the documents approach differently the percentage of that amount to be paid by a bank - while the Directive employs a risk-based method so that the calculation of contributions shall be proportional to the risk of the members and shall take due account of the risk profiles of the various business models, the asset side of the balance sheet and risk indicators, such as capital adequacy, asset quality and liquidity (Article 13(2) of the Directive), the Deposit Law sets a basic rate that applies to any bank (Article 36(7.1)) and additional and increased additional rates to be paid by certain
1 Samakov I.V., Denisov A.V. Mandatory Insurance of Bank Deposits: Problems and Prospects of Development // Banking Law. 2018. No 2, p. 39.
banks which received deposits with yields higher than that of the level determined by the Central Bank (Article 36(7.4-7.5)).
Provision of Information to Depositors
Both documents require that a bank shall provide certain information on deposit guarantuee to its depositors. However, while the Deposit Law contains only general provisions in this connection (Article 6(2)(3-4)), the Directive provides for much more detailed informational obligations of a bank, such as to inform its clients prior to the conclusion of the contract where their liabilities towards the bank are taken into account when calculating the repayable amount, to inform them about the aggregated amount of their eligible deposits (Article 7(5)), inform clearly that the bank operates under different trademarks and that the coverage level applies to the aggregated deposits that the depositor holds with the bank (Article 7(9)) and to notify clients of a merger, conversion of subsidiaries into branches or similar operations (Article 16(6)). Moreover, the Directive requires that before entering into a contract on deposit-taking a bank shall issue to its client special information sheets disclosing the neceassary information (Article 16(2)). Conclusion
In principle, both the Directive and the Deposit Law have adopted basically the same approach to the protection of depositors, namely the creation of the guarantuee fund financed mainly from mandatory contributions made by the deponent banks themselves which is used to repay a limited coverage to depositors whose bank has failed. However, probably due to the fact that it was adopted a decade later and after the financial crisis of 2007-2008, which allowed to take into account some valuable lessons1, the Directive's approach seems to be more progressive and it offers more protection for depositors, which is the primary goal of any DGS. In particular, unlike the Deposit Law, the Directive:
- extends guarantees to all types of deposits, both of natural and most legal entities, as well as deposits opened with foreign branches of a bank;
- provides for early intervention by the designated authority to prevent a bank's failure;
- offers a much larger coverage amount, which is also reviewed periodically;
- sets out a more convenient repayment procedure and shorter terms;
- employs a risk-based method while calculating the contribution to be paid by a bank which allows to tailor contributions to market circumstances and risk profiles; and
- provides for wider discolure of information by banks to their depositors.
In this connection, it seems that the Deposit Law may be improved at least in these regards so as to provide more protection for depositors of Russian banks.
References / Список литературы
1. Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes
2. Directive 2009/14/EC of the European Parliament and of the Council of 11 March 2009 amending Directive 94/19/EC on deposit-guarantee schemes as regards the coverage level and the payout delay
3. Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes
4. Federal Law N 177-FZ "On Guaranteeing of Deposits in Banks of the Russian Federation" dated 23 December 2003 // Consultant Plus.
1 Arthur Barbé. Evaluation of EU deposit guarantee legislation in the light of its objectives, 2016, p. 2. [Electronic resource]. URL: https://lib.ugent.be/Mltxt/RUG01/002/272/292/RUG01-
002272292_2016_0001_AC.pdf/ (date of access: 20.06.2019).Lukasz Szewczyk. The Funding Model of Deposit Guarantee Schemes in EU. Lessons from the Crisis. Studia Ekonomiczne. Zeszyty Naukowe, Nr 238, 2015, p. 145.
5. Arthur Barbé. Evaluation of EU deposit guarantee legislation in the light of its objectives, 2016. [Electronic resource]. URL: https://lib.ugent.be/Mltxt/RUG01/002/272/292/RUG01-002272292_2016_0001_AC.pdf/ (date of access: 20.06.2019).
6. Deposit guarantee schemes. Overview. [Electronic resource]. URL: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/managing-risks-banks-and-financial-institutions/deposit-guarantee-schemes_en/ (date of access: 20.06.2019).
7. Guruleva O.S. Deposit Insurance System in the Russian Federation. Problems and Prospects of Development // Young Scientist. - 2018. - No 16. - pp. 200-203
8. Lukasz Szewczyk. The Funding Model of Deposit Guarantee Schemes in EU. Lessons from the Crisis. Studia Ekonomiczne. Zeszyty Naukowe, Nr 238, 2015, pp. 144-152
9. Sarnakov I. V., Denisov A. V. Mandatory Insurance of Bank Deposits: Problems and Prospectes of Development // Banking Law. 2018. No 2, p. 37-42
10. Knepka, Tomasz, Towards a European Deposit Guarantee Scheme (July 13, 2017). [Electronic resource]. URL: http://dx.doi.org/10.2139/ssrn.3047768/ (date of access: 20.06.2019).
