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Who insures deposits?
Deposits are insured by insurers, i.
e. commercial banks, branches
(departments) of foreign banks
established in Lithuania and credit
unions. Deposit insurance is
administered by the Insurance Company
- the state company Deposit and
Investment Insurance.
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What is the subject of deposit
insurance?
This is deposits of depositors -
natural and legal entities - in litas,
US dollars, euros and currencies of
member states of the European Union
held with commercial banks, branches
(departments) of foreign banks in
Lithuania and credit unions.
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Whose deposits are insured?
Under the Lithuanian deposit
insurance system, insurance covers
deposits of natural and legal
entities. The principle of deposit
insurance is that deposits of one
person are insured by different
insurers separately. This means that
deposits of one person with different
banks are guaranteed separately
according to the Law on Deposit
Insurance and Insurance of Liabilities
to Investors. Provisions of deposit
insurance are applied to the depositor
rather than the deposit. That is all
insurable deposits of one depositor
held with one bank are added up, and
insurance compensation is determined
based on the resulting amount. We
would like to point out that all
deposits of one depositor held with
all braches and departments of one
bank located in the territory of
Lithuania are added up.
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Who participates in the deposit
insurance system?
Deposits are insured by commercial
banks, branches (departments) of
foreign banks and credit unions.
Foreign banks, having set up
departments (branches) in Lithuania,
must insure deposits only if they have
not insured these deposits in their
home country or conditions of deposit
insurance of their home country are
worse than those set forth by the
Lithuanian deposit insurance system.
Currently, under the Lithuanian
deposit insurance system, deposits are
insured by
commercial banks and
branches (departments) of foreign
banks and
credit unions.
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How much and how banks and
credit unions pay for the insurance
system?
Commercial banks and branches
(departments) of foreign banks pay the
Insurance Company insurance premiums,
annually amounting to 0.45 percent of
all insurable deposits, while credit
unions pay 0.2 percent of all
insurable deposits.
The Council of the Insurance
Company has a right to lower the rate
of the insurance premium, depending on
the capital size of the Insurance
Company.
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What deposits are insured
A deposit is the sum of the
depositor’s money deposited in a
commercial bank or a department
(branch) of a foreign bank established
in Lithuania or in a credit union
under a banking deposit and (or)
banking account agreement, and other
money to which the depositor holds
rights of claim, arising from the
liability of a credit institution to
perform operations with the
depositor’s money (including the
accrued interest). In the event rights
of claim to a deposit are held by a
depositors’ group, the deposit is
divided to each of them in equal
parts, unless agreements, from which
their right of claim arise, or court
rulings provide otherwise.
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Currencies of insurable deposits
Banks and credit unions insure
deposits in litas and in foreign
currency - dollars of the United
States of America, euros and national
currencies of the European Union
countries.
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Liability limit
Liability limit is the value
setting the maximum amount, up to
which insurance compensations are
calculated for a depositor of the
bankrupt insurer. The liability limit
equals the depositor’s deposit, held
in a commercial bank or a department
(branch) of foreign banks or a credit
union on the day the bankruptcy action
has been brought, however, it shall
not exceed the following:
amount in litas equivalent to 22
000 euros - from January 1, 2008.
The liability limit is calculated
for each depositor separately, adding
up credit balances of all his deposit
accounts - current, term savings and
other deposit accounts and other
rights of claim (with the exception of
rights of claim under deposit custody
agreements), with all branches and
departments of that bank. Balances of
foreign currency accounts are
converted into litas based on the
exchange rate on the day of bringing
the bankruptcy action (see examples).
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Excluded deposits
Excluded depositors’ deposits are
deposits held with the daughter banks
of Lithuanian banks or divisions of
these banks operating beyond the
territory of the Republic of
Lithuania. Deposits in currencies of
foreign countries that are not members
of the European Union, with the
exception of the USA, are
non-insurable.
Debt securities (certificates of
deposit) and liabilities issued by the
very insurer, related to bonds
accepted by it and ordinary bonds, as
well as liabilities to the following
entities may not be the insurance
subject:
1) the Bank of Lithuania;
2) the state company Deposit and
Investment Insurance;
3) credit institutions;
4) financial brokerage companies;
5) insurance companies acting under
the Law on Insurance;
6) pension funds;
7) investment management companies;
8) companies engaging in leasing
(financial lease).
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The right to insurance
compensation
The insurer is considered to have
insured deposits when it pays
insurance premiums according to the
established procedure. When a
bankruptcy action is brought against
the insurer, a depositor acquires a
right to insurance compensation.
However, if law enforcement
institutions have been appealed to
regarding legitimacy of acquisition of
depositor’s deposit, but the ruling
has not been passed yet, payment of
the insurance compensation to such a
depositor will be suspended.
Insurance compensations are not
paid to:
1) depositors, deposits of which,
by the court ruling, have been
acknowledged to have been acquired in
an illegitimate way;
2) depositors, deposits of which
have been by agreements or otherwise
(with the exception of inheritance)
assigned after the day of the insured
event;
3) heads of a commercial bank,
credit union or company
administration, heads of branches
(departments) of a bank, credit union
or company, members of a council
(observers’ council) and board;
persons holding at least 5 percent of
the bank’s share capital, or persons
holding over 50 percent of the capital
in companies holding at least 5
percent of the bank’s share capital;
persons, carrying out independent
audit of a commercial bank, credit
union or company; children,
step-children, spouses, partners in
registered partnership, parents or
stepparents of the persons specified
under this item;
4) recipients of a loan from a
commercial bank, credit union or
financial brokerage company if they do
not exceed their liabilities
(unreturned loans with interest). If
deposits of the loan recipient from a
bank, a credit union or the company
exceed the liabilities of this
recipient (unreturned loans with
interest), liability limit is
calculated by subtracting recipient’s
liabilities from the deposit, but it
may not exceed the amount provided for
in part 3 of article 9 of the Law;
5) for deposits held in anonymous
and coded accounts;
6) for deposits that the insurer
has set the interest rate for more
than twice exceeding the interest rate
for adequate deposits with the same
credit institution.
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Values of insurance
compensations:
from January 1, 2008 – 100
percent of the deposit up to the
amount in litas equivalent to 3000
euros and 90 percent of the deposit
from the amount in litas equivalent to
3000 euros up to the amount in litas
equivalent to 22 000 euros.
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Who and how calculates insurance
compensations?
Insurance compensations to
depositors of the insurer undergoing
bankruptcy are calculated by the state
company Deposit and Investment
Insurance. The Insurance Company
calculates insurance compensations
based on the insurer’s data.
Administrator (liquidator) of the
insurer undergoing bankruptcy must
within one month after bankruptcy
action has been brought against the
insurer submit exact data on
depositors and deposits to the
Insurance Company.
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How is insurance compensation
calculated?
Insurance compensations are
calculated and paid in litas.
Depositor’s insurance compensation
is calculated as follows:
1) funds owned by a depositor
deposited in a commercial bank or a
branch of a foreign bank or a credit
union under a banking deposit and (or)
banking account agreement, as well as
other money that the depositor holds
rights of claim to, arising from the
financial deposits’ operations
performed by the credit institution
(with the exception of rights of claim
under deposit custody agreements) and
the part of the money owned by the
depositor, that a group of depositors
holds rights of claim to, are added
up. This amount includes depositor’s
funds kept with all branches
(departments) of the same insurer.
2) an amount of up to 3 000 EUR is
compensated 100 percent
3) an amount over and above 3 000
EUR, but within the liability limit,
is compensated 90 percent (see
Values
of insurance compensations).
EXAMPLE
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Who, how and over what period of
time compensates insurance
compensations?
Insurance compensations of the
insurer undergoing bankruptcy are paid
to depositors from the moneys of the
Deposit Insurance Fund, administered
by the Insurance Company. Insurance
compensations are paid within three
months from to time the bankruptcy
action was brought against the
insurer. The Council of the Insurance
Company may extent this term no more
than twice, three months at a time.
The method of insurance
compensations is selected by the
Insurance Company. In every case of
insurance compensations payment the
Insurance Company will notify the
public through the media on where and
how insurance compensations will be
paid.
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What must depositors submit at
the point of collection of insurance
compensations?
The Council of the Insurance
Company announces the procedure for
paying insurance compensations in the
Valstybës Þinios. The Insurance
Company announces the place and time
of paying insurance compensations in
at least 2 Lithuanian daily
newspapers.
To get the insurance compensation,
a depositor must submit a personal
identification document specifying the
personal code (passport being the best
option).
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When and who may terminate
deposit insurance?
The Council of the Insurance
Company may without advance notice
terminate deposit insurance if the
supervisory institution of the insurer
revokes the permit of the insurer to
accept deposits. The supervisory
institution must notify the Council of
the Insurance Company about the
revoking of such a permit on the day
the decision is made.
If the insurer violates the
procedure of deposit insurance and
(or) its activity jeopardises
liquidity of the Insurance Company,
the Council of the Insurance Company
gives to the insurer at least a
12-month advance warning of the
possible termination of deposit
insurance. The Council of the
Insurance Company notifies the
supervisory institution of the insurer
of the warning to the insurer. If over
12 months after the warning the
insurer does not eliminate violations
of the deposit insurance procedure and
(or) its activity does not improve,
upon resolution of the Council of the
Insurance Company, coordinated with
the supervisory institution of the
insurer, deposit insurance may be
terminated.
The Insurance Company announced
about the termination of deposit
insurance in the supplement
Informaciniai Praneðimai to the
Valstybës Þinios.
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What are the rights of
depositors after termination of
deposit insurance?
If bankruptcy action is brought
against the insurer, the deposit
insurance of which has been
terminated, the Insurance Company pays
insurance compensations only to those
depositors, whose deposits were
accepted prior to the resolutions to
terminate insurance announced in the
supplement Informaciniai Praneðimai to
the Valstybës Þinios, but not returned
to the depositor by the day of
bringing the bankruptcy action.
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