The main duty of the DGS administration is to serve the public interest by repaying eligible bank account deposits to creditors of a failed financial institution. The DGS acts as a paybox function that allows swift intervention and the indirect provision of liquidity into the local economy. Spending is thus facilitated and public confidence maintained. Not all claims being filed are legitimate though and some accounts are ineligible for compensation.
Information is the key determinant for the DGS administration to verify claim eligibility. Although deposit insurance alleges strict protection of bank account deposits, there is a strict framework that defines claim eligibility and avoids abuse. DGS claim verification is an important part of the repayment procedures because systemic misuse potentially disrupts public confidence. Verification of a claim can therefore lead to acceptance and repayment whilst claim rejection also remains possible.
Claim rejection can have three main reasons. Rejection can be the result of ineligibility, incomplete information provision by the creditor, and fraud. Claim ineligibility is a matter of fact. However, company information and activities can be misunderstood. This is closely related to incomplete claims that don’t allow the DGS administration to complete an accurate verification. The reasons for rejection are overshadowed by fraudulent misrepresentation and abuse. The first two reasons can therefore be objected and even appealed in the administrative courts whilst the third one justifies the verification procedures.
A request for further information and a DGS claim rejection can justify a resubmission for reinspection. New evidence of deposit ownership and eligibility must then be presented to enhance the chances of approval. When the DGS administration maintains its position and the claim is permanently rejected, creditors may take their case to court. The administrative court can only refer the case back for reinspection to the DGS administration. It does not rule on the merits of the case but merely decides whether the presented information during the resubmission justifies a closer examination by the DGS administration. When the DGS administration once again rules against the claim, the court can be asked to take a position in the dispute. The procedure is limitative. This means that the steps must be exactly followed to provide the court with jurisdiction over the matter.
It must at all times be clear that applications to the court involves time and are not free of charge. However, most jurisdictions allow the cost of the procedure to be included in the conclusion of the court. This means that a refund can be provided when the court rules in favor of the initiator of the case. The opposite is also possible, if the court rules against one of the parties, he or she is held liable for the payment of the fees of the other party.