We would like to draw your attention to the amendments to the Law on Deposit Guarantees approved by the Saeima (the Parliament) of the Republic of Latvia regarding safety of the customers' bank deposits, increasing the amount of compensation guaranteed by the state to EUR 50 000 (LVL 35 000). The following information in respect of the above mentioned amendments is of particular importance.

Who is entitled to the compensation guaranteed by the state?

It is the depositors who are entitled to the compensation guaranteed by the state, i.e. the customers of Latvian banks and foreign branches of these banks, as well as the customers of lending institutions, either individuals or legal entities, having rendered their monetary funds or financial instruments to the banks within the framework of the deposit services. 

What the state guaranteed compensation relates to?

The compensation guaranteed by the state relates to deposits, current account balances, salary accounts, savings accounts etc., and the overall amount deposited by one customer in any separate  bank is added up to be considered as a single guaranteed deposit. The amount of the guaranteed compensation, stipulated in the amendments to the Law on Deposit Guarantees relates to such single guaranteed deposit made by a customer in the respective bank.

In what cases compensation is to be received?

The compensation shall be received by the depositor if his/ her monetary funds or financial instruments are irrecoverably lost because the bank has not been able to fulfil its obligations towards the customer, i.e. the depositor, due to the circumstances directly related to bank's own financial position.

The fact of financial funds or financial instruments being irrecoverably lost is to be determined by the Financial and Capital Markets Commission.

The guaranteed compensation shall not be paid out in respect of:

1) the deposits made by the Central Banks and institutions attracting deposits;
2) the deposits made by the financial institutions;
3) the deposits made by the institutions that are financed from the state or local government budgets, including transit funds;
4) the deposits made by the depositors who by virtue of law are deemed related parties of the bank;
5) the deposits made by third parties in the name of or on behalf of (by virtue of an authorisation by) persons mentioned in paragraph 7) below;
6) the deposits whereby the depositors individually are awarded particularly high rates or other terms, that have contributed to the decrease of the financial position of the institution having attracted the deposits;
7) the guaranteed deposits related to legalisation of illegally obtained funds or to be considered as illegally obtained funds if the relevant judgement of conviction has taken effect;
8) the guaranteed deposits that are based on the actual or potential claim towards the institution having attracted the deposit due to the fact that the institution having attracted the deposit has entered into transactions with bearer's deposit certificates or bearer's bonds;
9) the deposits that according to the law is forming part of the equity of the institution having attracted the deposits; *

What is the amount of the compensation?

The amount of the compensation payable to one depositor shall be determined based on the following conditions depending on the time period when the deposit has been placed with the bank:

1)in respect of the period from 01.01.2006 to 31.12.2007  the guaranteed deposit amount shall be up to EUR 15 000 expressed in their Latvian lat equivalent  based on the foreign currency exchange rate stipulated by the Bank of Latvia on the date when the event of the deposit not being available has occurred;
2) in respect of the period from 01.01.2008 the guaranteed deposit amount shall be up to EUR 20 000 expressed in their Latvian lat equivalent  based on the foreign currency exchange rate stipulated by the Bank of Latvia on the date when the event of the deposit not being available has occurred.
3) in respect of the period from 18.10.2008 the guaranteed deposit amount shall be up to EUR 50 000 expressed in their Latvian lat equivalent  based on the foreign currency exchange rate stipulated by the Bank of Latvia on the date when the event of the deposit not being available has occurred.

When the compensation is paid out?

The guaranteed compensation shall be paid out within three months from the date on which the event of the deposit not being available has occurred.

What happens if the Deposit Guarantee Fund is short of funds?

If the Deposit Guarantee Fund is short of funds to pay out the guaranteed compensation it shall be paid from the Government budget.

The information is prepared on the basis of the press release of the Financial and Capital Market Commission and the Deposit Guarantee Law enacted by Saeima (the Parliament).

http://www.fktk.lv/lv/komisija/publikacijas/pazinojumi_masu_informacijas_l/20081016_par_valsts_garantetas