This document outlines the EBA guidelines on the delineation and reporting of available financial means (AFM) of Deposit Guarantee Schemes (DGS). It sets out compliance and notification obligations for competent authorities and financial institutions, as well as reporting requirements. The aim is to ensure a harmonized application of the Deposit Guarantee Schemes Directive within the EU.
This document is the consolidated version of the European Banking Authority (EBA) guidelines on the delimitation and reporting of available financial means (AFM) of deposit guarantee schemes (DGS). Initially published on December 17, 2021 (EBA/GL/2021/17), these guidelines were amended by EBA/GL/2023/02, applicable from July 3, 2024. The guide is intended for competent authorities supervising DGS within the European Union and covers definitions, qualification of AFM, their reporting to the EBA, as well as the modalities for handling recoveries and inter-DGS loans. The scope includes DGS administered by public or private entities, focusing on compliance with Regulation (EU) 1093/2010 and Directive 2014/49/EU (DGSD).
The document addresses the definition, qualification, and reporting of available financial means (AFM) of deposit guarantee schemes (DGS) in the European Union, in accordance with Directive 2014/49/EU. It aims to harmonize how competent authorities determine the qualified financial means (QAFM) that count towards the target level set by the DGSD, as well as how these data are reported to the EBA. This topic is crucial because divergent application of the rules could compromise data consistency, transparency, and the ability of DGS to meet their depositor protection objectives within legal deadlines. The main findings are that only AFM from contributions of affiliated institutions (QAFM) should be considered to reach the target level, while other means (borrowings, inter-DGS loans) do not count. The document specifies two alternative methods (approach A and B) for allocating recoveries between QAFM and other AFM, as well as the treatment of investment income and inter-DGS loans. It requires competent authorities to ensure the compliance of DGS under their supervision and their annual reporting to the EBA, including amounts of AFM, QAFM, other AFM, liabilities incurred, inter-DGS loans, and recovery allocation methods. The main recommendations are to strictly apply these guidelines from March 30, 2022, adopt one of the two approaches for recovery management, and ensure traceability and transparency of funds to guarantee data consistency and regulatory compliance (p. 1-7).
These guidelines were developed to address the lack of uniformity in the definition and reporting of available financial means (AFM) of DGS within the European Union. Without harmonized rules, DGS risk not reaching the required target level within the deadlines set by Directive 2014/49/EU, which could compromise depositor protection. The EBA, under its regulatory mandate (Regulation EU 1093/2010), adopted these guidelines to ensure consistent application of rules related to AFM, clearly distinguishing qualified financial means (QAFM) from contributions of affiliated institutions from other non-qualified means. The objective is also to improve transparency and comparability of data reported to the EBA, to strengthen supervision and trust in DGS. The scope covers competent authorities supervising DGS, whether public or private, and applies from March 30, 2022. Limitations concern the exclusion of rules on the effective availability of funds for each intervention, which remain at the discretion of the DGS (p. 2-4).
Definition and qualification of AFM: AFM include cash, deposits, and low-risk assets that can be liquidated quickly, as well as payment commitments within limits set by the DGSD. QAFM are AFM originating from contributions of affiliated institutions or derived from these funds, and only these QAFM count towards the target funding level of DGS. Other AFM, such as borrowed funds, are not included in this calculation (p. 3-4).
Treatment of recoveries: Two methods are proposed to allocate recoveries from interventions between QAFM and other AFM. Approach A: recoveries first restore other AFM until they cover liabilities incurred, then the surplus is allocated to QAFM. Approach B: calculates a specific debt ratio for each intervention to determine the share of recoveries allocated to other AFM, the remainder being allocated to QAFM. The choice of approach must be communicated to the competent authority (p. 5-6).
Treatment of investment income: Income from DGS investments, if added to AFM, must be considered as QAFM, regardless of the initial source of invested funds. Investment losses are charged to QAFM (p. 6).
Loans between DGS: Loans granted by one DGS to another do not count in the lender’s AFM. Borrowings of a DGS from another are not considered QAFM but may be recorded as other AFM if they meet the AFM definition. DGS must consider repayment terms of these loans in their contribution management (p. 6-7).
Reporting to the EBA: Competent authorities must report annually, no later than March 31, several data points for each supervised DGS: amount of guaranteed deposits, total AFM, QAFM, other AFM, liabilities incurred related to interventions, inter-DGS loans, and the chosen method for allocation of recoveries. A reporting template is annexed to the document (p. 7-8).
Findings:
- QAFM are the only financial means to be considered to reach the target level of DGS, in accordance with Article 10(2) of the DGSD (p. 3-5).
- Two alternative approaches are validated for allocation of recoveries, ensuring some flexibility while guaranteeing data consistency (p. 5-6).
- Investment income is integrated into QAFM, thus strengthening the financial capacity of DGS (p. 6).
- Inter-DGS loans are excluded from the lender’s QAFM and recorded as other AFM for the borrower, clarifying their accounting treatment (p. 6-7).
Assumptions:
- The document assumes that DGS have adequate systems to trace the origin of funds and correctly apply the rules (p. 5).
Interpretations:
- The EBA considers that harmonization of definitions and reporting is essential to guarantee transparency and regulatory compliance within the EU (p. 3).
Uncertainties:
- The document does not address the effective availability of funds for each intervention, leaving room for interpretation by DGS (p. 3).
The EBA recommends that competent authorities apply these guidelines from March 30, 2022, to ensure harmonization in the qualification and reporting of AFM of DGS. DGS must adopt one of the two proposed approaches for allocation of recoveries and inform their competent authority. It is essential that DGS have systems allowing precise tracing of the origin of funds to guarantee the reliability of reported data. Authorities must ensure that DGS under their supervision comply with these rules, notably regarding calculation of QAFM, treatment of investment income, and management of inter-DGS loans. Annual reporting to the EBA, including detailed financial data and the recovery allocation method, must be submitted before March 31 each year. These measures aim to strengthen transparency, consistency, and effective supervision of DGS within the European Union (p. 1-8).
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