In providing a deposit guarantee scheme covering aggregate deposits of each depositor up to Nkr2 million (€260,000), the Guarantee Schemes Act 1996 clearly exceeds the obligations set out by the European Economic Area (EEA) agreement in relation to the EU Deposit Guarantee Schemes Directive (1994/19/EC).
In recent years, the Norwegian authorities have experienced increased pressure from various EU member states to scale back the scheme. The common deposit guarantee is set at €100,000 under the applicable requirements in amending EU Directive 2009/14/EC.
Notwithstanding, the amendment has not yet been included in the EEA agreement. Therefore, at present, Norway guarantees deposits of up to Nkr2 million, following the issue of a supportive resolution by the European Parliament in February 2012.
The deposit guarantee scheme is mainly funded by the member institutions through an annual fee. However, under the existing act, the annual fee should not be paid if the guarantee fund's own capital exceeds the minimum requirements under the act. Since the fund has not yet made any major payments (following the Norwegian banking crisis in the early 1990s), this exemption has been effective in both 2011 and 2012. Thus, no annual fee payments have been made for the past two years. The guarantee fund now holds around Nkr23 billion.
Given the current liability of the international credit and financial markets and the unstable nature of the international economy, the Ministry of Finance recently proposed to abolish the use of the guarantee fund's upper limit to establish an exemption from paying the annual fee. Among other things, the proposal aims to strengthen the fund so that it will be better placed to handle larger problems in individual banks and problems that affect several banks simultaneously. There is no reason to limit the size of the fund while the damages may be significant. Furthermore, the ministry observed that abolishing the upper limit will make the fee more predictable.
The current proposal would make the Norwegian guarantee fund more robust for major crises and would offer even greater protection to depositors in Norwegian credit institutions. This may have a positive effect on the funding portfolios of the member institutions.
The proposal is undergoing a public consultation, which closes on August 6 2012.
For further information on this topic please contact Paul Sveinsson at Arntzen de Besche Advokatfirma AS by telephone (+47 23 89 40 00), fax (+47 23 89 40 01) or email ([email protected]).