December the 10th, 2020 – The new law on the deposit insurance system will significantly strengthen Croatian banks and the Croatian banking system, the State Agency for Deposit Insurance and Bank Rehabilitation (DAB) said.
As Poslovni Dnevnik wrires, as of January the 1st next year, a new law on the deposit insurance system and on the compulsory liquidation of credit institutions will enter into force. It was recently properly harmonised with European directives, which, among other things, will shorten the duration of bankruptcy proceedings of credit institutions and additionally protect citizens and depositors.
This new law continues to further reform the banking system of Croatia and the entire European Union, strengthens the ability of banks to withstand financial shocks, which will also include Croatian banks, minimises the cost that taxpayers will bear in the event of problems with banks, and represents a single financial fund that is filled by the payment of credit institutions, not citizens, as was pointed out from the DAB. They also believe that the law will further facilitate the lives of Croatia’s residents and offer security when it comes to savings deposits as well as a general increase the stability of the financial system, which is becoming much more resilient to possible financial crises.
The new law, which combines the provisions of the current law on deposit insurance and the law on DAB, seeks to anticipate and regulate situations when a credit institution fails as much as possible, as such a scenario may lead to legal uncertainty regarding the protection of depositors.
In order to protect the financial stability of the system, the new law prescribes the activation of the deposit insurance system when opening a compulsory liquidation procedure against a credit institution.
In order to ensure the more efficient use of funds from the deposit insurance system, the new law stipulates that the deposit insurance fund consists of two parts – the basic deposit insurance fund and the additional deposit insurance fund. The purpose of the basic deposit insurance fund, which at any time has 1 percent of insured deposits, is the payment of insured deposits, while the purpose of the additional fund is to replenish the basic fund if its available funds fall below 1 percent of insured deposits.
Furthermore, its task is to support the collection of ex-post premiums, use its funds to take measures to reduce the risk of an insured event, and support the financing of the rehabilitation of credit institutions and the financing of forced liquidation of credit institutions.
Additionally, the new law will harmonise the source of financing according to the acquis communautaire by explicitly stating that the deposit insurance system cannot be financed at the expense of taxpayers, but exclusively at the expense of credit institutions. The entire system is harmonised with European directives and will help to make Croatian banks more resilient to potential future challenges on the country’s path to th Eurozone.