The Principality of Andorra is a sovereign and independent microstate bordered by the EU member states France and Spain. Its free market economy is largely based on its duty-free and low tax environment. As a result, the local economy thrives on the financial sector and tourism. Privately owned financial institutions excel in bank secrecy and efficiency in an environment where 79% of the labor force is employed by the services industry. The financial sector is important to the domestic economy. Its considerable size and the geographical location of the jurisdiction drafted a legal framework that corresponds with EU initiatives on bank regulation. This relates to solvency, capital requirements, supervision, bank deposit and investor protection, and AML-CTF.
Deposit Guarantee Scheme (Andorra): The Andorran Deposit Guarantee Fund (FAGADI) and the Investor Compensation Scheme (SAGI) protect bank deposits and investments held with supervised member institutions. FAGADI repays eligible depositors in accordance with the Law 20/2018 of 13 September that governs the Andorran Deposit Guarantee Fund and the Andorran Investor Compensation Scheme.
Secured Deposit Limit: 100.000 Euro
Temporary High Balances: An additional protection is maximized at 300.000 Euro for specific life events and a maximum period of three months. Additional coverage is limited to deposits resulting from private real estate transactions, payments received in relation to marriage, divorce, retirement, dismissal, invalidity or death, payment of insurance benefits, or the compensation for criminal injuries or wrongful conviction. Claimants must provide supporting evidence and proof of claim ownership.
Claim Filing Procedure: AFA and AREB determine the payout event when deposits become unavailable for reasons directly related to the financial situation of the entity and the entity is unable to restart repayment in the near future. Payout events are also triggered when the entity is formally declared insolvent. The FAGADI administration contacts the creditors of the bank with a request to submit evidence of claim ownership, a certified government issued ID and a repayment instruction. Claim verification leads to approval, rejection or a request for additional information to be submitted by the claimant.
Claim Submission Timeframe: Creditors can file their claim for reimbursement within a five year period after the payout event was determined and published.
Repayment Timeframe: The repayable amount and the eligibility of the claimant must be determined. Once eligibility is confirmed, repayment takes place within seven days. However, the actual transfer of the insured amount is exclusively made to a bank account at a licensed credit institution in Andorra. The right to obtain repayable amounts prescribes after five years.
Repayment Conditions: Eligible creditors are natural and legal persons with unavailable deposits held by banking entities in Andorra who are members of FAGADI. Not covered for deposit protection are financial entities, asset management companies, pension and retirement funds; deposits and investments of which the holder has not been identified; deposits in connection with which there has been a conviction for money laundering; third party deposits to circumvent claim ineligibility.
Rejections of a DGS Claim: FAGADI may reject a claim for claim ineligibility. Within the terms and timeframes laid down in Law 20/2018, claimants may ask FAGADI to reinspect their case. New and improved information is often needed to confirm claim eligibility. After a second rejection by FAGADI, the claimant can take his case to the administrative court. The administrative court does not rule on the validity of the claim but seeks justification for FAGADI to closely examine the already provided information. A final step for wronged creditors is the highest court that does look into the position of both the claimant as well as FAGADI and rules on the repayment issue.
Financial Structure of FAGADI: FAGADI is paid by its members. By 2024, all members must have contributed 0.8% of the amount of the covered deposits to the scheme. Annual and extraordinary contributions create a buffer that allows for swift repayment to claimants when a payout event occurs.
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