EFDI Guidance on DSGs’ Alternative Funding Policy

On December 5, the European Forum of Deposit Insurers (“EFDI“) published a non-binding guidance paper (dated June 18, 2018) on deposit guarantee schemes’ (“DGSs“) alternative funding policy. The guidance paper can be found here.

Under Article 10(9) of the Deposit Guarantee Schemes Directive (2014/49/EU) (“DGSD“), DGSs are required to have in place adequate alternative funding arrangements to enable them to obtain short-term funding to meet their obligations. EFDI notes that, in practice, DGSs have only a few available options to enable them to implement this requirement: credit lines, bond issuances, repos, ex-post contributions and other private sources.

In the guidance paper, EFDI provides a set of recommendations for DGSs alternative funding arrangements on issues including:

  • The size of the alternative funding reserve.
  • The selection of alternative funding instruments.
  • Alternative funding instruments and ex-post contributions’ terms and parameters.
  • Concentration risks arising from counterparties.