Opinion of the European Central Bank of 10 March 2009 at the request of the Central Bank of Cyprus and of the Cypriot Authority for the Supervision and Development of Cooperative Societies on certain draft regulations related to the Deposit Protection Scheme (CON/2009/20)
Date: 2009-03-10
Institutions: European Central Bank
Subjects: Cyprus, bank deposit, financial stability, guarantee, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 March 2009 

at the request of  the Central Bank of Cyprus and of the Cypriot Authority for the 

Supervision and Development of Cooperative Societies on certain draft regulations 

related to the Deposit Protection Scheme  

(CON/2009/20) 

Introduction and legal basis 

On  13  February  2009  the  European  Central  Bank  (ECB)  received  a  request  from  the  Central  Bank  of 

Cyprus  for  an  opinion  on  draft  regulations  amending  the  Establishment  and  Operation  of  a  Deposit 

Protection  Scheme  Regulations  of  2000  to  2006  and  on  23  February  2009  the  ECB  received  a  request 

from the Cypriot Authority for the Supervision and Development of Cooperative Societies for an opinion 

on  draft  regulations  amending  the  Establishment  and  Operation  of  the  Deposit  Protection  Scheme 

Regulations of 2000 to 2004 (hereinafter the ‘draft regulations’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to the Central Bank of Cyprus and to rules applicable to 

financial institutions insofar as they materially influence the stability of financial institutions and markets. 

In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 

Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the draft regulations 

The  draft  regulations  will  amend  the  Establishment  and  Operation  of  a  Deposit  Protection  Scheme 
Regulations  of  2000  to  20062  and  the  Establishment  and  Operation  of  the  Deposit  Guarantee  Scheme 
Regulations of 2000 to 20043, establishing two separate schemes for the benefit of the clients of Cypriot 

banks  and  cooperative  credit  institutions  (CCIs),  respectively.  As  a  result,  in  both  cases,  the  deposit 

guarantee  and  deposit  protection  schemes  will  be  amended  so  that:  (i)  statutory  deposit  protection 

coverage will be raised from EUR 20 000 to EUR 100 000; (ii) the payout delay will be reduced from 

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OJ L 189, 3.7.1998, p. 42. 
Reg. No 66/2000, Official Gazette of the Republic, 3.3.2000, Annex III (Part I), p. 241.  
Reg. No 40/2000, Official Government Gazette of the Republic, 25.2.2000, Annex III (Part I), p. 203. 

 
 
  
 
 
                                                 
three months to 20 working days; (iii) the co-insurance requirement resulting in depositors bearing 10 % 

of the loss up to the statutory deposit protection level will be eliminated; (iv) coverage will be expanded 

to  include  deposits  denominated  in  all  currencies;  and  (v)  the  deposit  guarantee  and  deposit  protection 

schemes will be reinforced through a progressive increase in its basic capital. The latter may be achieved 

by increasing the initial contribution from the banks and CCIs, by raising the maximum amount of required 

special and/or supplementary contributions, and/or by abolishing the maximum limit on the amount that the 

Management Committee may borrow. 

2.  

ECB observations 

2.1  

In line with its previous opinions4, the ECB welcomes the proposed increase in the total amount of 
protected  deposits  in  accordance  with  the  conclusions  of  the  Ecofin  Council  of  7  October  20085 

and the Directive of the European Parliament and of the Council amending Directive 94/19/EC on 

Deposit  Guarantee  Schemes  as  regards  the  coverage  level  and  the  payout  delay  (hereinafter  the 
‘amending Directive’)6. The ECB also notes that the guaranteed amount under the two schemes is 

identical and that this will help to avoid distortions in the national financial system. The ECB takes 

this  opportunity  to  reiterate  that  Member  States,  when  implementing  the  above-mentioned 

amending Directive, should act in a coordinated manner to avoid significant differences in national 

implementation measures from having a counterproductive effect by creating distortions in global 

banking markets. 

2.2  Reducing  delays  in  payouts  of  guaranteed  deposits  can  strengthen  depositor  confidence,  which 
plays a key role in the effectiveness of deposit protection schemes7. At the same time, it is essential 

that a pragmatic approach be taken to introducing the necessary reduction in payout delays, thereby 
preserving credibility of the deposit guarantee schemes8. Finally, attention should be drawn to the 

importance  of  establishing  efficient  operational  processes  for  verifying  claims  and  reimbursing 

depositors, as well as ensuring that sufficient sources of funding are available. 

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See,  e.g.,  paragraph  2.2  of  ECB  Opinion  CON/2008/51  of  17  October  2008  at  the  request  of  the  Greek  Ministry  of 
Economy  and  Finance  on  a  draft  law  on,  inter  alia,  the  establishment  of  the  ‘Depositors  and  Investors  of  Credit 
Institutions Compensation Fund’; paragraph 2.1 of ECB Opinion CON/2008/61 of 28 October 2008 at the request of the 
Belgian Minister for Finance on a draft royal decree implementing the Law of 15 October 2008 on measures promoting 
financial stability (title shortened); and paragraph 2.1 of ECB Opinion CON/2008/69 of 17 November 2008 at the request 
of the Irish Minister for Finance on a draft Financial Services (Deposit Guarantee Scheme) Bill 2008. 
The  Ecofin  Council  agreed  that  ‘all  Member  States  would,  for  an  initial  period  of  at  least  one  year,  provide  deposit-
guarantee  protection  for  individuals  for  an  amount  of  at  least  EUR  50  000,  acknowledging  that  many  Member  States 
determine to raise their minimum protected amount to EUR 100 000’. See the Press Release for this meeting (13784/08), 
available on the Council’s website at www.consilium.europa.eu.   
Not  yet  published  in  the  Official  Journal.  For  a  summary  of  the  salient  points  of  this  Directive  see  ‘The  Council 
strengthens  depositor  protection’,  Press  Release,  Brussels,  26  February  2009  No  6983/09,  available  on  the  Council’s 
website at www.consilium.europa.eu. 
See,  e.g.,  paragraph  2.2  of  ECB  Opinion  CON/2008/70  of  18  November  2008  at  the  request  of  the  Council  of  the 
European  Union  on  a  proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Directive 
94/19/EC on Deposit-Guarantee Schemes as regards the coverage level and the payout delay. 
See Opinion CON/2008/70. 

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This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 10 March 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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