The Deposit Guarantee Scheme Regulations 2015

Explanatory Note

(This note is not part of the Regulations)

These Regulations implement in part Directive 2014/49/EU of the European Parliament and of the Council of 16th April 2014 on deposit guarantee schemes (recast) repealing directive 94/19/EC (OJ L 173 12.6.2014, p.149) (“DGSD”).

From 4th July 2015 DGSD repeals and replaces an earlier European directive on deposit guarantee schemes (Directive 94/19/EC of the European Parliament and of the Council on deposit guarantee schemes (OJ L 135, 13.5.1994, p.5) (“DGSD94”)).

Whilst these Regulations implement some provisions of DGSD, the remainder are implemented through rules made, and other legally binding requirements imposed, by the Prudential Regulation Authority (“PRA”).

Regulation 4 provides that the PRA is the competent authority and the designated authority for the purposes of the DGSD.

Regulation 5 requires the PRA to notify the Financial Services Compensation Scheme (“FSCS”) (the “scheme manager”) if the PRA becomes aware that a credit institution has financial difficulties which are likely to require the intervention of the scheme manager.

Regulation 6 requires the PRA, or the FSCS in the case of a credit union, if it is satisfied that a credit institution has failed to repay deposits which are due and payable, to make a determination as soon as possible (and in any event within five working days) that the deposits are unavailable.

Regulation 7 requires the PRA to make rules specifying the maximum compensation payable under the compensation scheme in respect of deposits held by a person with a credit institution. The PRA must specify the maximum compensation payable in the usual case, and the maximum payable when a deposit is one of a limited number of kinds of deposit which the DGSD allows to have temporary increased protection.

Regulation 8 requires the PRA to determine whether the FSCS may raise contributions from members of the compensation scheme before the available financial means of the scheme are used to fund a payment of compensation under the scheme or to finance steps taken to resolve a credit institution which is experiencing financial difficulties.

Regulation 9 allows the PRA to approve a proposal by the FSCS to levy a compensation scheme member for an amount which is above a limit specified in the PRA's compensation scheme rules.

Regulation 10 requires the FSCS to pay compensation to a person who has made deposits through a UK branch with a credit institution that is a member of a deposit guarantee scheme in a state within the European Economic Area (“EEA”) other than the United Kingdom, provided that the non-UK deposit guarantee scheme provides the FSCS with funds to cover the payment.

Regulation 11 requires the PRA to notify the European Banking Authority (“EBA”) each year of the amount of deposits in the United Kingdom which are covered by the compensation scheme and the available financial means of the compensation scheme in the preceding year.

Regulation 12 requires the PRA to notify the EBA of the contents of any agreements concluded between the FSCS and deposit guarantee schemes established in EEA states other than the United Kingdom.

Part 3 contains amendments of primary and secondary legislation. It includes provision for a new category of preferential debt: that is, debts owed to the FSCS as a result of the FSCS funding actions to resolve a credit institution which is experiencing financial difficulties.

Part 4 requires the Treasury to review regulations 1 to 16 every five years.

An impact assessment has not been produced for this instrument as no impact on the costs of business or the voluntary sector is foreseen.