The traditional role of banks has been to act as intermediaries between users and savers. Banks, being the principal of such transactions are obligated to their depositors and bear the credit risk of their borrowers. Savers indirectly embrace this credit risk when the bank becomes insolvent because of the borrowers default the savers may be at risk above deposit insurance limits. This is furthered by the business model of the financial industry where financial institutions are allowed to lend out most money they have on deposit. Such strategies may in times of financial stress and economic turmoil result in a drastic devaluation of bank capital and trigger compulsory administrative liquidation, resolution or special administration.
Even though the Italian banking Act (385/1993 – Testo Unico delle leggi in Materia Bancaria e Creditzia) requires credit institutions to protect and maintain certain minimum capital buffers and appoint qualified and adequately competent board members, credit institutions may still experience financial difficulties that need regulatory intervention. Banks that fail may disrupt society. Deposit insurance mitigates the adverse effects of such failures and avoids panic under creditors.
The Interbank Deposit Protection Fund
The Fondo Interbancario di Tutela dei Depositi (FITD) is the Italian Interbank Deposit Protection Fund. All banks licensed and operational in Italy hold a membership of the FITD. The FITD guarantees bank deposits held by eligible creditors with the member banks. Member banks pay membership fees and premiums to provide the financial resources for the fund. Coverage levels are maximized at 100.000 Euro which may be raised up to 500.000 Euro for natural persons maintaining temporarily high account balances. The fund seeks to minimize costs and risk while maximize public confidence. It may therefore provide several administrative and financial solutions for members who experience solvability challenges.
Legal Foundations and Claim Eligibility
Under the umbrella of the principles of the European Banking Union, deposit protection in Italy follows a top down approach for maximum harmonization where national law defines local standards. The foundation for the official recognition of the FITD fund is therewith laid down in EU Directive 94/19/EC, Article 23 of Law n. 52 of 6 February 1996, and the Italian Legislative Decree n. 659 of 4 December 1996.
The Statute and Regulation governing the Statutory Bodies of the FITD outlines the purpose, scope and applicability of the fund. Article 4 of the Statute describes the subjects covered, where Article 33 entails the reimbursement of depositors. The articles explain that the fund guarantees eligible account balances held at Italian banks and of their branches in other EU countries, as well as the subsidiaries in Italy of foreign banks provided that they are members of the fund. Eligibility of coverage is limited to repayable deposits acquired by member banks in compulsory administrative liquidation, resolution or special administration.
Definitions are of critical importance to comprehend the legal frameworks on deposit insurance. Bank deposit protection is limited to deposits. Financial instruments and restricted capital only reimbursable at par or under specific agreements or guarantees are thus excluded. Other exclusions include dormant accounts, and accounts held by financial institutions and investment firms, deposits related to criminal convictions after appeal confirmed its illegality, and deposits of which the owner is unknown. Accordingly, the fund covers bank account balances held by natural persons and legal entities that qualify for reimbursement under Article 33.
Bank Deposit Protection in Italy
Following the EU directive on deposit guarantee schemes, repayment of 100.000 euro is made to eligible account holders is made within 7 working days after claim submission. An assessment of eligibility may justify an extension of this period. This also applies to accounts with temporary high balances. Claim submission and verification is based on a presentation of facts. DGS repayments in Italy are made through one of the member banks acting as an agent. Account holders can visit any of the branches of the bank in Italy to file their claim by presenting a claim form substantiated by a proof of debt. Upon approval of the DGS claim, repayment is made by bank transfer to a current account of the account holder, by bankers draft, or in cash. Incomplete or unclear claims are assessed by the liquidator of the bank. This also applies to rejected DGS claims where reinspection is justified.
Recovery of Deposits Outside the Scope of Deposit Insurance
The objectives of the Italian Interbank Deposit Protection Fund are to ensure the stability of the domestic banking and payment system by guaranteeing account balances of retail depositors. Simultaneously, preventive intervention and restructuring of the bank prevails to avoid unnecessary losses to the bank and its stakeholders and limit public support with tax payer input.
Temporary high accounts held by natural persons may be subject to special circumstances. Coverage is maximized to 500.000 Euro and is only granted for a period of 9 months following its accreditation and claim forms must be submitted to the liquidator of the bank within 60 days from the start of the liquidation procedures begin. Claims filed outside the scope of the standard DGS coverage after this period are not considered and claims are subject to the general liquidation procedures.
Bank resolution procedures in Italy include statutory administration, deposit insurance, restructuring and where needed traditional bank liquidation. Pro-active creditors can benefit from every stage of the resolution plan, while reactive account holders may derogate important possibilities for repayment. Since all stages of the resolution plan follow strict protocols and timeframes, assumptions and misconceptions may lead to missed opportunities for repayment and expensive experience. It is therefore advisable to study the regulation and retain expert advise where possible.
Contact us to Get Your DGS Claim Approved
This website is an initiative of Legal Floris LLC. With more than a decade of experience, we help international creditors recover money when their bank fails or their investments vanish. Our extensive experience working with dozens of failed banks in different countries enables us to maximize repayments and minimize risk for our customers. Find out how we can help you too to reclaim your account balance by contacting us today:
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