Regulations
The Depositor Compensation Scheme serves as a safeguard for investors and depositors from possible losses which might be suffered if an investment firm or a bank is unable to reimburse money belonging or owed to its clients. This scheme has been introduced in Malta in 2003, and it has been subsequently amended on the 12th of March 2019 through Legal Notice 43 of 2019.
The Depositor Compensation Scheme
The Depositor Compensation Scheme has been introduced into Maltese Law, in order to transpose the Deposit Guarantee Scheme Directive (DGSD). The Maltese legislator has implemented this scheme by offering a higher level of protection. This is by reason of the fact that all credit institutions licensed in Malta are obliged to keep a Deposit Guarantee Scheme Reserve.
The objectives of this scheme are: holding funds which are going to be used for payments for depositors and to administer claims for compensations made by depositors as fast as possible. Moreover, all the credit institutions licensed in Malta which also receive deposits from depositors are obliged to contribute to the Depositor Compensation Scheme.
The amendments
The main changes made to the Depositor Compensation Scheme (Amendment) Regulations are:
Changes made to the non-eligibility of deposits
With regards to deposits, the following are considered as non-eligible deposits:
a) Deposits made by different credit institutions;
b) Own Funds;
c) Deposits resulting from transactions which are linked to money laundering;
d) Deposits made by financial institutions;
e) Deposits made by investment firms;
f) Deposits of which the holder has never been identified;
g) Deposits by reinsurance undertakings or insurance undertakings;
h) “Deposits by collective investment undertakings”;
i) “Deposits by pension and retirement funds”;
j) “Deposits by public authorities”;
k) Debt securities;
l) Deposits held in a branch which is situated in a non-Member State;
This list was amended and “Electronic money and funds received in exchange for electronic money” were added, and they are now considered as non-eligible deposits.
Changes made to the financing of the scheme
Changes were also made to the article concerning the financing of the scheme, as new provisos were introduced:
i. The first proviso introduced states, that if the available financial means has decreased less than 2/3 of the target level than the regular contribution shall be arranged as to allow the target level to be attained within 6 years;
ii. The second proviso introduced holds that, if the available financial means were decreased by reason of the Scheme “having paid compensation to depositors” , then the Scheme can demand that the payment of contributions by members is provided either in whole or in part, through a payment commitment;
Changes made to the compensation contribution
With regards to the compensation contribution, another proviso has been introduced. This proviso maintains that, when a member stops being licensed “on account of a merger with or acquisition by another member” , the Scheme may at its fullest discretion, either:
i. Request the payment of the payment commitment or else;
ii. Demand that the payment commitment is transferred to the other member which has attained the member who has stopped being licenced in Malta.
Regulations
The Depositor Compensation Scheme serves as a safeguard for investors and depositors from possible losses which might be suffered if an investment firm or a bank is unable to reimburse money belonging or owed to its clients. This scheme has been introduced in Malta in 2003, and it has been subsequently amended on the 12th of March 2019 through Legal Notice 43 of 2019.
The Depositor Compensation Scheme
The Depositor Compensation Scheme has been introduced into Maltese Law, in order to transpose the Deposit Guarantee Scheme Directive (DGSD). The Maltese legislator has implemented this scheme by offering a higher level of protection. This is by reason of the fact that all credit institutions licensed in Malta are obliged to keep a Deposit Guarantee Scheme Reserve.
The objectives of this scheme are: holding funds which are going to be used for payments for depositors and to administer claims for compensations made by depositors as fast as possible. Moreover, all the credit institutions licensed in Malta which also receive deposits from depositors are obliged to contribute to the Depositor Compensation Scheme.
The amendments
The main changes made to the Depositor Compensation Scheme (Amendment) Regulations are:
Changes made to the non-eligibility of deposits
With regards to deposits, the following are considered as non-eligible deposits:
a) Deposits made by different credit institutions;
b) Own Funds;
c) Deposits resulting from transactions which are linked to money laundering;
d) Deposits made by financial institutions;
e) Deposits made by investment firms;
f) Deposits of which the holder has never been identified;
g) Deposits by reinsurance undertakings or insurance undertakings;
h) “Deposits by collective investment undertakings”;
i) “Deposits by pension and retirement funds”;
j) “Deposits by public authorities”;
k) Debt securities;
l) Deposits held in a branch which is situated in a non-Member State;
This list was amended and “Electronic money and funds received in exchange for electronic money” were added, and they are now considered as non-eligible deposits.
Changes made to the financing of the scheme
Changes were also made to the article concerning the financing of the scheme, as new provisos were introduced:
i. The first proviso introduced states, that if the available financial means has decreased less than 2/3 of the target level than the regular contribution shall be arranged as to allow the target level to be attained within 6 years;
ii. The second proviso introduced holds that, if the available financial means were decreased by reason of the Scheme “having paid compensation to depositors” , then the Scheme can demand that the payment of contributions by members is provided either in whole or in part, through a payment commitment;
Changes made to the compensation contribution
With regards to the compensation contribution, another proviso has been introduced. This proviso maintains that, when a member stops being licensed “on account of a merger with or acquisition by another member” , the Scheme may at its fullest discretion, either:
i. Request the payment of the payment commitment or else;
ii. Demand that the payment commitment is transferred to the other member which has attained the member who has stopped being licenced in Malta.