Deposit Guarantee Fund Helping to Ensure Financial Stability

The Bank Deposit Guarantee Fund (FGDB), Romania’s deposit guarantee scheme, plays an essential role by helping to ensure depositors’ trust in Romania’s financial services system. CEO Eugen Dijmarescu explains, “The Fund guarantees deposits held at Fund member credit institutions, no matter the denomination, within the limits and according to the terms set by the EU legislation.”

The Bank Deposit Guarantee Fund is Romania’s only institution whose mission is to guarantee the deposits of natural and legal persons (mainly small and medium sized enterprises) held at member institutions, and to pay compensation to covered depositors when deposits become unavailable, up to a guaranteed ceiling of €100,000. FGDB has 33 member credit institutions, all legal persons licensed by the National Bank of Romania. Deposits with the other 8 EU banks’ branches operating in Romania are covered by the guarantee schemes in their home countries, as established by the European law.

Value of deposits now 73 times higher than in 1997

Eugen Dijmarescu says that at the end of December 2011, the deposits covered by the Bank Deposit Guarantee Fund stood at 143.1billion lei (€33.13 billion), which represents 50% of total deposits held with member credit institutions. “The value of guaranteed deposits has gone up over the years due to the extended scope of guarantees and raised guarantee levels. Consequently, the value of guaranteed deposits in nominal terms is now more than 73 times higher than back in 1997,” he notes.

In over 15 years of activity, the FGDB has steadily consolidated its resources and the coverage ratio nowadays is 1.5 %, which is among the highest in the EU. The Fund invests its resources in line with an annual investment strategy determined by the Fund’s board and approved by the National Bank of Romania, mainly within Romanian commercial banks, thus insuring liquidity to the Romanian market and contributing to the stability of the market.

Since 1996 the Bank Deposit Guarantee Fund has focused on resolving issues related to the failure of credit institutions in Romania. For example, the Fund paid compensation to depositors at seven bankrupt Romanian banks, and, in its appointed role as a judicial liquidator of failed financial institutions, the Fund has recovered significant percentages of the assets of these banks.

The Bank Deposit Guarantee Fund adheres to the highest EU and global standards and is an active member of the two international professional organisations in its field: the European Forum of Deposit Insurers (EFDI) and the International Association of Deposit Insurers (IADI). The Fund has also established partnerships with similar institutions worldwide as part of its effort to maintain best practices in all areas of its operations.

In November 2011, the Bank Deposit Guarantee Fund joined the National Committee for Financial Stability, whose mission is to consolidate Romania’s institutional framework in order to ensure the country’s financial health now and in the future.

Following the concern for insuring the financial stability, starting in 2012, the Fund’s attributions are enlarged as the Fund can participate in the measures for restructuring troubled credit institutions and could even become their administrator.