DGS - EBA publishes guidelines on contributions and payment commitments to deposit guarantee scheme
On 28 May 2015, the EBA published its final Guidelines on contributions to deposit guarantee schemes (DGSs) and on payment commitments. These Guidelines will help ensuring consistent application of the new funding requirements provided for in the new Deposit Guarantee Schemes Directive (DGSD).
These Guidelines will provide with calculation methods in order to capture the main dimensions of the risk profile of credit institutions, they specify also the option for DGSs to authorise credit institutions to contribute, up to 30% of the required contributions, in the form of secured commitments to pay upon request.
Credit institutions will be able to make payment commitments by concluding two types of arrangements:
- Payment Commitment Arrangement
- Financial Collateral Arrangement.
The Guidelines provide for criteria on the eligibility and management of collateral, they also provide that DGSs should limit their exposure to debt, whether public or private, the value of which is highly correlated to events where the DGS would have to use its funds, and therefore might have to call in the payment commitment.
Collateral will be subject to regular marking to market and precautionary haircuts in order to cater for possible losses at the point of failure.
The Guidelines also introduce principles ensuring that the prudential treatment of payment commitments does not encourage procyclicality by incentivising payment commitments over cash contributions.
DGSs and designated authorities should implement these Guidelines by incorporating them in their practices by 31 December 2015.