The Credit Institutions (Protection of Depositors)Regulations 1995

Explanatory Note

(This note is not part of the Regulations)

These Regulations give effect to Directive 94/19/EC on deposit-guarantee schemes. The Directive applies to EEA States which are not EC member States by virtue of Decision No. 18/94 of the EEA Joint Committee dated 28 October 1994. The Regulations come into force on 1st July 1995.

Part I defines various words and expressions for the purposes of the Regulations.

Part II of the Regulations makes provision for credit instutions authorised in other EEA States (“EEA institutions”) to participate in the deposit protection scheme under the Banking Act 1987 (“the 1987 Act”) or the investor protection scheme under the Building Societies Act 1986 (“the 1986 Act”), regulates participation in deposit protection schemes in other EEA States by institutions authorised under the Banking Act (“UK institutions”) and building societies and enables authorised institutions which are not EEA institutions (“non-EEA institutions”) to leave the deposit protection scheme. EEA institutions accepting deposits in the UK may participate in either the deposit protection scheme or the investor protection scheme if the Deposit Protection Board determines that the institution’s home State scheme affords less protection than the corresponding UK scheme (regulation 3). An EEA institution must pay a contribution to the Deposit Protection Board or notify participation to the Investor Protection Board (regulation 4). An EEA institution may withdraw from participation (regulation 5) or be excluded (regulation 6). The Deposit Protection Board’s decisions are subject to appeal (regulation 8). An EEA institution must notify its UK depositors of withdrawal or exclusion from a UK scheme (regulation 9). The relevant Board must consult the home State scheme on an EEA institution’s participation in a UK scheme (regulation 10) and may enter into agreements with that scheme (regulation 11). The Boards must maintain a list of participating EEA institutions (regulation 12). UK institutions and building societies which withdraw or are excluded from host State schemes in other EEA States must notify their depositors there (regulation 13). The 1986 and 1987 Acts are modified to allow the recovery of payments made by host State schemes and the provision of information to them (regulations 14 and 18). The Boards may enter into agreements with host State schemes (regulation 16) and on a UK institution or building society becoming insolvent a declaration is to be made to any relevant host state scheme (regulation 17). Non-EEA institutions need not participate in the 1987 Act scheme if the Deposit Protection Board decides that equivalent protection is afforded to UK depositors under the institution’s home State scheme (regulation 19). A non-EEA institution must notify non-participation in the 1987 Act scheme to the Board (regulation 20). If the Board determines that the institution’s home State scheme offers less cover than the 1987 Act scheme its participation will resume (regulation 21). The Board’s decisions are subject to appeal (regulation 22). A non-EEA institution must notify its UK depositors of non-participation in the scheme (regulation 23) and the Board must maintain a list of participating non-EEA institutions (regulation 24).

Part III of the Regulations amends the 1987 Act as required to give effect to the Directive in the UK. The principal changes relate to the calculation contributions payable by EEA institutions (regulation 27), compensation payments to depositors with UK and EEA institutions (regulation 30), the definition of insolvency (regulation 31) and the definition of protected deposits (regulation 32). Deposits with offices of UK institutions in other EEA States are protected and deposits with UK offices of participating EEA institutions are protected for the excess of the 1987 Act cover over home State cover. Deposits in all EEA currencies and in ecus are protected. Compensation will be payable in and insolvency in respect of nine-tenths of protected deposits up to the higher of £20,000 or the sterling equivalent of 22,222 ecu.

Part IV of the Regulations makes parallel amendments to the 1986 Act with similar effect. Insolvency is defined (regulation 38), the provisions for the levying of contributions and payment of compensation to investors are amended (regulations 39 and 40) and a power for the Board to obtain information is introduced (regulation 43).

Part V of the Regulations contains miscellaneous and supplementary provisions. The 1987 Act is amended to extend to ecu deposits (regulation 45), UK institutions, building societies, EEA institutions and non-EEA institutions are required to provide depositors and intending depositors with information about deposit protection under any applicable scheme (regulations 46 and 47), the deposit protection information which may be included in deposit advertisements issued in the UK is restricted (regulation 48), sanctions are introduced for breach of the Regulations and the Directive by UK institutions, building societies, EEA and non-EEA institutions (regulations 49, 50 and 51) and consequential amendments, transitional provisions and savings and transitory provisions are made (regulations 52, 53 and 54).