Deposit Protection Fund ("Fund" hereafter) pays out compensations to the depositors of those banks and home savings banks, that became unable to fulfil their commitments to the depositors. The Fund was set up by an amendment to the Law No. 21/1992 Coll., on Banks, adopted in the year 1994 through the Act No. 156/1994 Coll.
The Fund started to function actually from 1 January 1995. Under the Act No. 156/1994 Coll. were initially protected only the denominated bank deposits of natural persons in Czech currency (CZK) up to 80 per cent of the total amount with a compensation ceiling of 100 thousand CZK per depositor and bank. Annual contribution of a bank to the Fund was determined on 0.5 per cent of the total amount of protected deposits of natural persons to the 31 December of the current year. (Denominated deposits means those deposits, that are kept on accounts, on which the full name, address and birth date of the depositor are determined.)
Under a further amendment to the Law on Banks, introduced through the Act No. 83/1995 Coll. and applicable from 1 July 1995 also denominated deposits of natural persons in the home savings banks are equally protected. Annual contribution of the home savings banks to the Fund was determined on 0.1 per cent of the quarterly average amount of the protected deposits in the current year.
Compensation ceiling for the compensations to depositors of both banks and home savings banks was elevated on 300 thousand CZK per depositor and bank by the Act No. 16/1998 Coll. as from 6 February 1998.
By an amendment to the Law on Banks, introduced by the Act No. 165/1998 Coll. and applicable from 1 September 1998, the scope of protected deposits was extended on the deposits of natural persons – entrepreneurs, kept on an identification number of a natural person-entrepreneur and also on the deposits of legal persons in the Czech currency, kept on accounts where the name, seat and identification number of the deposit holder is identified. Compensation was set on 90 per cent of the total deposit amount with a ceiling of 400 thousand CZK per depositor and bank.
Under a further amendment to the Law on Banks, introduced by the Act No. 319/2001 Coll. and applicable from 7 September 2001, also the foreign currency deposits are protected. Compensation was set at 90 per cent of the total Czech and foreign currency deposit amount with a compensation ceiling of 25 thousand EURO per depositor and bank.
Another amendment to the Law on Banks by the Act No. 126/2002 Coll., applicable from 1 May 2002, defines relevant data for a calculation of the additional interest on deposit liabilities in specific cases of the banks concerned, that are mostly in bankruptcy.
The rights of the depositors connected with their deposits, compensated by the Fund, pass on the Fund up to the amount of the depositors entitlement to the compensation as to the day of the commencement of compensation pay out.
The Fund during its existence paid out to the clients of ten banks the deposit compensations totalling approx. 12.7 billion CZK.
Deposit Insurance Fund became in May 2002 one of the founding members of the International Association of Deposit Insurers. Main target of the Association is to contribute to the stability of financial systems through a support of the international co-operation in the deposit insurance sphere, to formulate recommendations leading to a higher efficiency of the functioning of deposit insurance systems, to facilitate the sharing and exchange of experience and information and to deal with the research topics in the deposit protection sphere.
For more detail see, please, official web site of the Deposit Insurance Fund