The law on deposit insurance is expected to change to align with the EU

2024-01-22 07:48:00, Ekonomi CNA

Albania should apply legal changes to the deposit insurance scheme to ensure compliance with European Union legislation.

The analysis of the harmonization of legislation in the chapter of financial services has shown that the level of compatibility of the law "On deposit insurance" with the EU directive "On deposit insurance schemes, of 2014, is assessed as moderate.

To enable full compliance with this directive there are several issues that need to be addressed, starting with the inconsistency of the maximum level of insurance coverage. Currently, the bank deposit insurance scheme in Albania guarantees legal coverage up to the maximum amount of 2.5 million ALL. Meanwhile, the deposit coverage scheme in the European Union provides coverage up to the amount of 100 thousand euros.

Another shortcoming in Albanian law is the lack of a risk-based insurance premium collection system. Currently, all subjects of the scheme pay a fixed insurance premium, as 0.125% of the arithmetic mean of the amount of insured deposits, which have been registered in the bank on the last day of each month of the previous quarter.

The Law "On Deposit Insurance" stipulates that "the Agency (ASD) can reduce the quarterly premium payable by member banks of the deposit insurance scheme up to 0.025% of the arithmetic mean of the amount of insured deposits, which are registered in the bank on the last day of each month of the previous quarter, but only if the financial means of the Agency are not less than 5% of the average of these deposits".

According to ASD information, at the end of 2022, the ratio reached 7%, from 6.66% that was a year ago. This indicator is calculated as the ratio between the total value of the insurance fund of bank deposits and the total value of insured deposits.

Given that the law foresees this possibility, commercial banks have been asking the regulatory authorities for more than two years to reduce the deposit insurance premium.

However, ASD has stated that it is still in the analysis phase regarding the ways of further development of the deposit insurance scheme. Considering that Albania needs to align with the highest level of coverage of the EU scheme, it is likely that a revision of the law will be made, increasing the maximum amount of coverage.

The value of the deposit insurance fund in banks at the end of 2022 reached about ALL 57.9 billion, with an increase of 9.6% compared to the previous year. This fund has two main sources of financing: premiums paid by banks and income from the investment of the fund.

Other issues that need to be addressed in the deposit insurance legislation to ensure compliance with the EU framework are the inconsistency of the timelines for starting the compensation process, the non-determination of a target level of the deposit insurance fund in banks and of the deposit insurance fund in savings and credit companies or the lack of provisions for temporary credit balances.

The changes in the law will be a necessary part of the integration process, but so far the Bank of Albania and the Deposit Insurance Agency have not yet determined the time limits for drafting these changes./ Monitor.al