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Payday Loan Advice service: Deposits Guarantee Fund

Saturday, September 21, 2013

Deposits Guarantee Fund

The Deposit Guarantee Fund Credit Institutions was created by Royal Decree -Law 16/2011 , of October 14 . The Deposit Guarantee Fund is to guarantee the deposits of cash or securities or other financial instruments made ​​in credit institutions , with a limit of 100,000 euros for the deposits in cash or , in the case of deposits denominated in another currency , the equivalent using the exchange rates prevailing , and 100,000 euros for investors who have committed to a credit institution securities or other financial instruments.

The warranty applies per depositor , whether natural or legal person whatever the number and kind of guaranteed deposits listed as a starter in the same entity. This limit shall apply also to depositors holding deposits for amounts above the maximum guaranteed.

When an account has more than one holder, the amount will be divided among all the holders , in accordance with the provisions of the Deposit Agreement and , failing that , in equal parts. Each holder has guaranteed to the maximum limit described above.

The fund is constituted annual contributions of financial institutions - banks, savings banks and credit unions , registered in the Bank of Spain and linked to deposits has captured . If necessary , an institution shall calling up ( extraordinary contributions ) . In addition , the Fund may draw on extraordinary contributions of the Bank of Spain and resort to borrowing.

In December last year, the Executive decided to extend quotas to FGD entities . He spent the previous legal limit of two per thousand of their deposits , up to three per thousand , and the actual contribution increased to two per thousand ( about 1,600 million euros per year). That is, for each $ 1,000 that depositors left in the company, this should provide a maximum of three euros to provision the Fund
Which products are covered by the Deposit Guarantee Fund

There are basically three products guaranteed by the FGD :

    Current accounts.
    Savings accounts .
    Fixed term deposits .

Thus, in case of bankruptcy of an entity , the fund guarantees up to a limit of € 100,000 per deposit and owner. In the case of deposits denominated in another currency, the money to be returned will be the equivalent to the application of the exchange rates .

This guarantee of 100,000 euros is for Spanish entities that are required by law to adhere to the FGD . The institutions of the European Union with a branch in our country are benefiting from guarantee funds in their countries of origin. A fund that is never less than 50,000 euros.

For entities that are not members of the EU and are not covered by the guarantee system of their country of origin, are required to adhere to the FGD . The list of member entities of the FGD is published annually in the Official Gazette .

In case of bankruptcy of an entity, the FGD must pay within three months of bankruptcy.
Products not covered by the Deposit Guarantee Fund

These are the products that are not covered by the deposit guarantee fund

    Stocks : stock market investment is outside the protection of the FGD .
    Notes and bonds : This fixed income product , fashion after Salgado law and marketed by the bancano massively covered by the FGD . Nor are protected by the FGD or bonds or obligations . In case of bankruptcy of the company, will be reimbursed only if there was enough money in the bank balance sheets to cover them.
    Preference Shares : are not covered by the FGD , how and have lived in the flesh thousands of Spanish savers .
    Investment fund and pension plan are not guaranteed by the FGD . Investment funds and pension plans are independent to the bank as it is the fund manager who administers or plan . The failure of the bank , therefore, would not affect them unless they had deposited the cash in the bank or invested in bonds had this .
    Insurance: All insurance associated with a bank product are not covered by the FGD . But yes they are by the Insurance Compensation Consortium .

Among these we must distinguish those at risk with the financial institution that issues and are therefore debt is bank balance , how notes, bonds , onligaciones , preferred . On the other hand the shares or investment funds are not in the bank's balance sheet and therefore only have the risk of the underlying asset . If you invest in shares of Coca Cola just the risk that Coke break .

In the case of shares and mutual funds, the FGD covers the risk that the credit had not made the deposit or registration of the customer's purchase order . This means that in the case of actions you really have not been acquired by the bank to their client and the client's money had been used for other purposes .

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