United Kingdom: Financial Services Compensation Scheme

In mid-September 2007, as credit markets froze, Northern Rock, the United Kingdom’s fifth-largest mortgage bank, struggled to secure short-term funding and sought emergency liquidity assistance from the Bank of England (BoE). As word of that support leaked to the public, the bank suffered a run by its retail depositors. On September 17, Her Majesty’s Treasury (HMT) announced it would guarantee all of Northern Rock’s deposits. On October 1, 2007, the Financial Services Authority (FSA), then the UK’s lead financial regulator, announced that the UK’s deposit insurer would abolish co-insurance and cover 100% of eligible accounts, up to GBP 35,000 (USD 71,000). The insurance scheme, called the Financial Services Compensation Scheme (FSCS), had previously insured 90% of amounts above GBP 2,000, up to GBP 35,000. In October 2008, as the Global Financial Crisis (GFC) worsened, the FSA increased the deposit insurance cap to GBP 50,000. The FSCS ultimately paid GBP 23.6 billion to depositors at five banks that failed in 2008 and 2009. The FSCS borrowed from the BoE and HMT to fund these payouts. In December 2010, UK authorities further increased the deposit insurance cap to GBP 85,000 to match their European counterparts, as required by Directive 2009/14/EC

United States: Temporary Guarantee Program for Money Market Funds

On September 16, 2008, following the collapse of Lehman Brothers, the Reserve Primary Fund “broke the buck,” meaning that its net asset value (NAV) fell more than 0.5% below the $1 per share target value maintained by money-market funds (MMFs). When the Reserve Primary Fund could not restore the NAV, investors began withdrawing funds from MMFs, leading to a$439 billion run on the MMF market. To stop this run, the US Department of the Treasury established the Temporary Guarantee Program for Money Market Funds (the Guarantee Program), which insured investors’ holdings in participating MMFs. The Guarantee Program was designed to protect assets held as of the announcement of the program on September 19, 2008. MMFs participating in the Guarantee Program paid a quarterly fee ranging from 1 to 1.5 basis points, depending on their NAV. The Guarantee Program, originally scheduled to last three months, was ultimately extended until September 18, 2009. During its year of operation, the Guarantee Program covered 93% of assets in the MMF market, equivalent to more than $3.2 trillion. There were no losses, and the Department of the Treasury did not make any payments through the Guarantee Program, generating a surplus of$1.2 billion in fees

France: Deposit Guarantee Fund

In October 2008, during the Global Financial Crisis (GFC), European Union (EU) officials urged member states to raise their minimum deposit-insurance coverage to at least EUR 50,000 (USD 68,000) to promote confidence in banks. France did not need to increase its deposit-insurance cap to meet this target, as it already guaranteed EUR 70,000. The following year, EU officials passed a directive that required all member states to permanently increase their minimum deposit-insurance coverage to EUR 100,000 by December 31, 2010. French authorities complied with the EU’s directive on September 29, 2010. The Fonds de Garantie des Dépôts (FGD), a private administrator, oversaw France’s deposit guarantee. Membership was mandatory for all deposit-taking institutions, and they paid risk-based fees to the FGD. The FGD covered most deposit types. As of February 2012, the FGD had not been activated in response to any bank failures

Australia: Financial Claims Scheme

Following the collapse of Lehman Brothers on September 15, 2008, the Australian government intervened in its own banking system, both to support domestic depositors and to keep its banking system competitive with those in countries whose regulators had already intervened. On October 12, 2008, the Australian government announced the Financial Claims Scheme (FCS) to insure bank depositors. The deposit guarantee automatically insured depositors at all authorized deposit-taking institutions and covered a range of deposit accounts. As initially announced, the FCS would provide a blanket guarantee to all depositors with no fee for participation. This blanket guarantee, however, prompted a migration of funds from managed funds and investment banks to deposit accounts. On October 24, 2008, the government formally announced that an unlimited deposit guarantee would remain available, but in two parts. The FCS would guarantee up to AUD 1 million (about USD 660,000) per person per authorized deposit-taking institution, free of charge. A separate program would guarantee larger deposits for a fee on a voluntary basis. Prior to the FCS, Australia did not have a deposit-insurance scheme. The Australian Prudential Regulation Authority (APRA) ran the program. The FCS covered deposits totaling AUD 650 billion in March 2009. During its crisis operations, no depositor claims were made on the FCS. The government originally said it would review the cap after three years. In December 2010, the Australian government said the FCS would be a permanent feature of the Australian financial system. In February 2012, it lowered the guarantee to AUD 250,000

New Zealand: Crown Retail Deposit Guarantee Scheme

The collapse of Lehman Brothers in 2008 led to a global financial crisis. Leaders of the G-7 countries agreed on October 10, 2008, to five principles for addressing the crisis, including the need for sound deposit insurance. On October 12, Australia’s prime minister announced a deposit insurance program that his government had first publicly vetted in June. Anticipating Australia’s announcement, New Zealand’s prime minister announced its own deposit guarantee scheme on the same afternoon. The government launched the Crown Retail Deposit Guarantee Scheme (the Scheme) “to ensure ongoing retail depositor confidence in New Zealand’s financial system, given turbulence in the international financial system.” To do this, the Treasury said it would provide an unlimited guarantee of all retail deposits of eligible institutions; on October 22, it set a cap of 1 million New Zealand dollars (NZD; about USD 600,000) per depositor. Unlike Australia’s scheme and most other deposit schemes introduced during the Global Financial Crisis (GFC), New Zealand’s guarantee covered deposits in finance companies and holdings in some types of collective investment schemes. Unlike Australia’s program and most others, it was not mandatory; institutions could opt in, and all eligible institutions did so. The Scheme was intended to last two years, until October 12, 2010. However, the government ultimately extended the Scheme until December 31, 2011. When the Scheme was extended, fees shifted from a flat rate to risk-based rates. During its operation, nine nonbank financial institutions failed. The Scheme paid NZD 1.9 billion in claims. It ultimately paid out 100% of deposits to all depositors of failed institutions, despite the NZD 1 million cap, because of the administrative challenge of identifying depositors under the cap. The Scheme collected NZD 1.1 billion from receiverships and NZD 237 million in fees. New Zealand has not reinstated deposit insurance since the Scheme expired

Association for the Guarantee of Deposits Luxembourg

During the Global Financial Crisis (GFC), Luxembourgish officials in October 2008 announced plans to raise the country’s deposit-insurance cap to EUR 100,000 (USD 134,000) and eliminate co-insurance. Prior to the GFC, Luxembourg’s deposit-insurance system covered 90% of deposits in eligible accounts up to EUR 22,222, with depositors responsible for the remaining 10%. On December 19, 2008, the legislature increased the cap to EUR 100,000 and removed the co-insurance, effective January 1, 2009. The Association Pour la Garantie des Dépôts Luxembourg (AGDL), a private deposit-insurance body, administered these changes. All deposit-taking institutions and approved investment firms, except branches of foreign banks, were automatically enrolled with the AGDL. The AGDL covered most types of deposit accounts and select investment instruments. The AGDL was an ex-post deposit-insurance scheme, meaning that the scheme collected no up-front fees. During the GFC, the AGDL paid EUR 310 million to approximately 25,000 depositors. In response to criticism from the International Monetary Fund (IMF) and others, Luxembourg replaced the ex-post scheme with ex-ante funding after the crisis

Slovenia: Unlimited Deposit Guarantee

On October 7, 2008, as the European Union (EU) coordinated its members’ response to the Global Financial Crisis (GFC), its Economic and Financial Council (ECOFIN) recommended that member states raise their deposit-insurance coverage to at least EUR 50,000 (USD 67,000). Germany and Austria went further and adopted an unlimited guarantee of deposits. In response, Slovenia announced its Unlimited Deposit Guarantee on October 8, 2008. Slovenia’s national assembly adopted the program on November 11, 2008, effective November 20. The Bank of Slovenia (BoS) administered the program, as it had Slovenia’s existing deposit-insurance scheme. When an insured bank failed, fees were imposed on surviving banks to cover the first EUR 22,000 per depositor, with the government covering amounts over EUR 22,000 with taxpayer funds. Following an EU directive in 2009, Slovenia increased the amount for which banks were responsible to EUR 50,000 per depositor. The Unlimited Deposit Guarantee expired on December 31, 2010, after which a limit of EUR 100,000 per depositor came into effect. Scholars estimated that the BoS covered USD 24.4 billion in deposits in 2010, although the BoS made no payouts under the Unlimited Deposit Guarantee

Malaysia: Government Deposit Guarantee

On October 16, 2008, following the collapse of Lehman Brothers and regional expansions of deposit insurance, Malaysia announced its Government Deposit Guarantee (GDG), an unlimited guarantee of deposits held at eligible institutions. Given the “soundness and strong capitalization” of the banking sector, the preemptive program was meant “to maintain the stability of the Malaysian financial system.” Prior to the crisis, the Perbadanan Insurans Deposit Malaysia (PIDM), Malaysia’s deposit-insurance agency, guaranteed up to MYR 60,000 (USD 17,291) per depositor per insured institution. The PIDM was tasked with administering the GDG. Under the GDG, the PIDM insured all ringgit and foreign-currency deposits. All domestic and locally incorporated foreign banks were eligible for the GDG, including commercial, Islamic, and investment banks and deposit-taking development financial institutions. The GDG insured instruments that the PIDM had not previously covered, such as foreign-currency deposits, and insured previously uninsured institutions, such as investment banks. To fund the GDG, the PIDM acted on behalf of the government, levying fees on participating institutions that were then remitted to the government. The GDG ended as scheduled on December 31, 2010. Ultimately, no claims were made on the GDG. The Malaysian government passed legislation in 2010 to expand its precrisis deposit-insurance scheme, which framed how Malaysian officials planned to exit the GDG

Russia: Deposit Insurance Agency (2008–2009)

Russian authorities responded to the Global Financial Crisis (GFC) in September and October 2008 with various measures to provide liquidity to the banking sector and restore market confidence. Among these, on October 13, 2008, Russia amended its deposit insurance system. This amendment increased the deposit insurance cap from RUB 400,000 to RUB 700,000 (about USD 15,000 to USD 26,000) and abolished co-insurance, increasing the guarantee’s full coverage of deposits from 90% to 100%. The Deposit Insurance Agency (DIA) administered the deposit insurance system. It covered all household deposit accounts and was mandatory for all banks operating in Russia. Banks were required to pay a quarterly premium. In 2008 and 2009, 58 institutions failed. These failures affected 599,000 depositors, totaling RUB 22.1 billion. In 2014, the State Duma further increased the deposit insurance cap to RUB 1.4 million

Romania: Bank Deposit Guarantee Fund

Following international calls to strengthen deposit-insurance systems during the Global Financial Crisis (GFC), Romanian authorities increased their deposit-insurance coverage from EUR 20,000 to EUR 50,000 (USD 26,800 to USD 67,000) on October 14, 2008, with the change coming into effect the next day. The Fondul de Garantare a Depozitelor Bancare (FGDB), Romania’s existing deposit insurer, implemented it. Membership was mandatory for all banks registered with the National Bank of Romania (NBR), and local branches of foreign banks could apply for supplementary coverage if their home coverage was below EUR 50,000. The FGDB covered most deposit accounts and charged participating institutions fees. FGDB-insured institutions were also required to extend the FGDB standby credit lines. In March 2009, the EU adopted a directive requiring all member states to increase their deposit-insurance coverage to EUR 100,000 by December 31, 2010. Economic conditions in Romania continued to worsen, and Romanian authorities signed a Stand-By Agreement (SBA) with the International Monetary Fund (IMF) in April 2009. The SBA required Romania to alter the FGDB’s funding and governance structure, eliminating standby credit lines and removing private officials from its governance structure. Romanian officials complied with the EU’s directive and the IMF’s terms in 2010. Ultimately, no institutions failed between 2008 and 2010