Act on a Depositor and Investor Guarantee Scheme

Act on a Depositor and Investor Guarantee Scheme 1)

Hereby is published the Act on a Depositor and Investor Guarantee Scheme, cf. Act Consolidation No. 356 of 2 April 2020, with the amendments resulting from Section 14 of Act No. 2382 of 14 December 2021.

Chapter 1 Status and Scope of Operations of the Guarantee Fund

Section 1. The Depositor and Investor Guarantee Scheme is organized as a depositor and investor guarantee fund (the Guarantee Fund) consisting of four sections, cf. Section 5. The Guarantee Fund is administered by Financial Stability in accordance with this Act.

Subsection 2. The Guarantee Fund shall provide coverage for losses for depositors and investors in the institutions mentioned in Section 3, subsection 1, and Section 4, in the event of reconstruction proceedings or bankruptcy, or in cases where the Guarantee Fund has received notification from the Danish Financial Supervisory Authority pursuant to Section 245 c, subsection 2, of the Financial Business Act and Financial Stability has not assessed that the conditions for resolution, cf. Section 4 of the Act on Restructuring and Resolution of Certain Financial Undertakings, are met.

Subsection 3. Financial Stability is not liable for the obligations of the Guarantee Fund, and the Guarantee Fund is only liable for its own obligations.

Subsection 4. The assets and liabilities of the Guarantee Fund must be kept separate from the other activities of Financial Stability.

Subsection 5. The Guarantee Fund assumes all assets and liabilities from the Guarantee Fund for Depositors and Investors and enters into all rights and obligations in connection therewith, such that assets and liabilities belonging to the sections of the Guarantee Fund for Depositors and Investors will belong to the corresponding sections of the Guarantee Fund.

Subsection 6. The Guarantee Fund does not constitute an independent legal person. Financial Stability acts on behalf of the Guarantee Fund in legal contexts.

Subsection 7. Upon termination of the Guarantee Fund, the Minister for Industry, Business and Financial Affairs, with the approval of the Minister for Finance, decides on the use of the Guarantee Fund's assets. A decision on the use of the Guarantee Fund's assets is made after consultation with the contributing institutions.

Subsection 8. The Minister for Industry, Business and Financial Affairs may set detailed rules regarding Financial Stability's administration of the Guarantee Fund.

Section 2. When a credit institution is non-performing or expected to become non-performing pursuant to Section 224 a of the Financial Business Act, Financial Stability may, on behalf of the Guarantee Fund, decide to contribute to the resolution of the credit institution by providing funds or issuing a guarantee to cover all the credit institution's non-preferred creditors (bail-in). Financial Stability makes the decision in the first sentence taking into account the interests of the Guarantee Fund, when it is estimated that such resolution will impose fewer costs on the Guarantee Fund than a regular bankruptcy proceeding of the credit institution.

Subsection 2. Financial Stability may not, on behalf of the Guarantee Fund, make a decision to contribute to the resolution of a credit institution by providing funds or issuing a guarantee to cover the credit institution's share capital, guarantee capital, partnership capital, and other subordinated capital.

Subsection 3. The Guarantee Fund bears, via the credit institution section, costs associated with the bail-in itself and costs that Financial Stability assumes as executor of the scheme.

Subsection 4. A decision to contribute pursuant to subsection 1 is made by the board of Financial Stability.

Subsection 5. The Guarantee Fund's participation pursuant to subsection 1 may take place jointly with others.

Section 2 a. If Financial Stability has made a decision to apply one or more resolution tools pursuant to the Act on Restructuring and Resolution of Certain Financial Undertakings or regulations issued pursuant thereto to a credit institution or a mortgage credit institution, the Guarantee Fund shall, in accordance with subsections 2 and 3, pay to the resolution of the credit institution or mortgage credit institution.

1. The Act contains provisions implementing Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes, OJ 1997 No. L 84, p. 22, Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit-guarantee schemes (DGSD), OJ 2014 No. L 173, p. 149, and parts of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms, amending Council Directive 82/891/EEC and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, OJ 2014 No. L 173, p. 190 (BRRD).

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Subsection 2. If bail-in is applied, cf. Section 24 of the Act on Restructuring and Resolution of Certain Financial Undertakings, the Guarantee Fund pays an amount corresponding to the amount that the depositors' covered deposits or investors' covered cash funds would have been written down by pursuant to Section 24 of the Act on Restructuring and Resolution of Certain Financial Undertakings, if the covered deposits and covered cash funds had been subject to bail-in.

Subsection 3. If one or more resolution tools, cf. Sections 19, 21 and 23 of the Act on Restructuring and Resolution of Certain Financial Undertakings, which are not covered by subsection 2, are applied, the Guarantee Fund pays up to the amount that the covered depositors and investors would have lost in a bankruptcy proceeding.

Subsection 4. Financial Stability determines, taking into account the interests of the Guarantee Fund, the amount that the Guarantee Fund shall pay for the resolution of the credit institution or mortgage credit institution, cf. subsection 1. The determination shall be made in accordance with Sections 6 or 7 of the Act on Restructuring and Resolution of Certain Financial Undertakings.

Subsection 5. The Guarantee Fund may not pay an amount for the resolution of a credit institution or mortgage credit institution, cf. subsection 1, that is greater than the loss that the Guarantee Fund would have suffered in a bankruptcy proceeding of the institution. The Guarantee Fund may never pay more than 100 pct. of the target level set pursuant to Section 7, subsection 2, or Section 7 a, subsection 1, for the resolution of the credit institution or mortgage credit institution.

Subsection 6. The Guarantee Fund is entitled to payment from the Resolution Fund, cf. Section 56 of the Act on Restructuring and Resolution of Certain Financial Undertakings, if a valuation, cf. Section 8 of the Act on Restructuring and Resolution of Certain Financial Undertakings, establishes that the Guarantee Fund's payment for the resolution of the credit institution or mortgage credit institution, cf. subsections 2 and 3, was greater than the loss that the Guarantee Fund would have suffered in a bankruptcy proceeding, cf. subsection 5, first sentence.

Subsection 7. The Guarantee Fund bears the payment for the resolution of a credit institution via the credit institution section and a mortgage credit institution via the mortgage credit institution section, cf. subsection 1. The Guarantee Fund's payment shall be made in cash.

Subsection 8. When bail-in is applied, cf. Section 24 of the Act on Restructuring and Resolution of Certain Financial Undertakings, Financial Stability may, on behalf of the Guarantee Fund and taking into account the interests of the Guarantee Fund, decide not to contribute to the costs associated with a recapitalization pursuant to Section 24, subsection 2, of the Act on Restructuring and Resolution of Certain Financial Undertakings.

Subsection 9. If a depositor's deposit or an investor's cash funds are transferred wholly or partially to another institution as a result of Sections 19 or 21 of the Act on Restructuring and Resolution of Certain Financial Undertakings, the depositor or investor may not make a claim against the Guarantee Fund for the part of the deposit and the part of the cash funds that are not transferred, if the transferred deposit or transferred cash funds correspond to or are greater than the amount that the Guarantee Fund would have covered, cf. Sections 9 and 10.

Subsection 10. The Minister for Industry, Business and Financial Affairs may set detailed rules on the use of the Guarantee Fund in the restructuring and resolution of a credit institution or mortgage credit institution pursuant to the Act on Restructuring and Resolution of Certain Financial Undertakings.

Chapter 2 Contributing Institutions

Section 3. The following institutions must be affiliated with and contribute to the Guarantee Fund:

1. Credit institutions.
2. Mortgage credit institutions.
3. Securities brokerage companies and investment management companies, insofar as the part of the companies' activities is covered by a permit pursuant to Section 10, subsection 2, of the Financial Business Act.
4. Managers of alternative investment funds with a permit pursuant to Section 11 of the Act on Managers of Alternative Investment Funds etc., insofar as the part of the managers' activities is covered by Annex 1, No. 3, of the Act on Managers of Alternative Investment Funds etc.
5. Branches located in Denmark of credit institutions, investment firms, investment management companies, and managers of alternative investment funds with their home country in a country outside the European Union, except for countries with which the Union has concluded an agreement in the financial sector, if the coverage of depositors and investors in the country where the branch is located does not correspond to the coverage of depositors and investors under this Act.

Subsection 2. The Minister for Industry, Business and Financial Affairs may set provisions stating that branches of credit institutions, investment firms, investment management companies, and managers of alternative investment funds with their home country in Denmark located in countries outside the European Union, except for countries with which the Union has concluded an agreement, may be exempted from being covered by the Guarantee Fund.

Section 4. Branches located in Denmark of credit institutions, investment firms, investment management companies, and managers of alternative investment funds with their home country in countries within the European Union or countries with which the Union has concluded an agreement, may affiliate with the Guarantee Fund as a supplement to the home country's guarantee scheme, if the Danish scheme mentioned in Sections 9-11 is more favorable than the home country's scheme. The Minister for Industry, Business and Financial Affairs sets detailed provisions regarding this.

Chapter 3 Sections of the Guarantee Fund

Section 5. The Guarantee Fund is divided into four sections: the credit institution section, the mortgage credit institution section, the investment and management section, and the restructuring section.

Subsection 2. The credit institution section covers the institutions mentioned in Section 3, subsection 1, No. 1, and affiliated branches, cf. subsection 6.

Subsection 3. The mortgage credit institution section covers the institutions mentioned in Section 3, subsection 1, No. 2, and affiliated branches, cf. subsection 6.

Subsection 4. The investment and management section covers the institutions mentioned in Section 3, subsection 1, Nos. 3 and 4, and affiliated branches, cf. subsection 6.

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Subsection 5. The restructuring section covers the restructuring and resolution of the institutions mentioned in Section 3, subsection 1, No. 1, that have become non-performing.

Subsection 6. Financial Stability decides which section the branches mentioned in Section 3, subsection 1, No. 5, and Section 4 shall be affiliated with.

Section 6. In the event that a contributing institution is placed under reconstruction proceedings or goes bankrupt, or in the event that the Guarantee Fund has received notification from the Danish Financial Supervisory Authority pursuant to Section 245 c, subsection 2, of the Financial Business Act, the contributions, including guarantees, from the institutions in the section to which the relevant institution belongs are used to cover the section's obligation under the Act.

Subsection 2. If the contributions mentioned in subsection 1 are not sufficient to cover a section's obligations under the Act, the credit institution, mortgage credit institution, and investment and management sections may take loans from each other in proportion to the sections' total contributions.

Subsection 3. The restructuring section may take loans, but not from the other sections. The other sections may not take loans from the restructuring section.

Subsection 4. A section may borrow an amount corresponding to 50 pct. of the requirement for the size of the other sections' liquid holdings, but at most 100 million DKK per section, to cover obligations arising in a single financial year.

Subsection 5. The Minister for Industry, Business and Financial Affairs may, with the approval of the Finance Committee, provide a guarantee for loans taken by the Guarantee Fund to fulfill its obligations.

Subsection 6. If a distribution is made from the bankruptcy estate, the distribution first belongs to the sections that have provided loans in accordance with subsection 2. The remaining amount is added to the section to which the bankrupt institution belongs.

Chapter 4 Determination of Contributions

Section 7. The credit institution section is financed by annual contributions from the institutions mentioned in Section 3, subsection 1, No. 1, and affiliated branches, cf. Section 5, subsection 6. This does not preclude additional financing from other sources.

Subsection 2. The target level for the credit institution section is 0.8 pct. of the covered deposits covered by Section 9, subsection 1. If the assets in the credit institution section exceed the set target level, the obligation to contribute ceases in accordance with subsection 1. The obligation to contribute is resumed, however, if the assets no longer exceed the set target level.

Subsection 3. The contribution for the institutions mentioned in Section 3, subsection 1, No. 1, and the affiliated branches mentioned in Section 3, subsection 1, No. 5, must be determined based on the institution's covered deposits covered by Section 9, subsection 1, and the institution's risk profile. Financial Stability may, on behalf of the Guarantee Fund, decide that up to 30 pct. of the credit institution section's assets may consist of payment obligations.

Subsection 4. If a credit institution ceases to have covered deposits during the relevant calendar year, a proportional part of the credit institution's paid annual contributions is refunded. The proportional refund is calculated from the quarter after the credit institution's withdrawal until the end of the calendar year. Refund of contributions pursuant to subsection 1 cannot take place if the covered deposits from the institution, which ceases to have covered deposits, are transferred to another institution that is affiliated with the Guarantee Fund, or if the credit institution section has made payments or transfers as a result of the withdrawing credit institution becoming non-performing within the last 12 months prior to the termination of membership. Refund of contributions beyond the cases mentioned in the first sentence cannot take place.

Subsection 5. If a credit institution withdraws wholly or partially from the credit institution section, and the institution instead affiliates with another recognized deposit guarantee scheme within the European Union or countries with which the Union has concluded an agreement in the financial sector, the relevant institution's contributions are transferred to the affiliated deposit guarantee scheme. The transfer only covers contributions paid within the last 12 months prior to the termination of membership, and does not cover contributions paid in accordance with subsection 6 or contributions paid by the branches affiliated pursuant to Section 4. A credit institution that intends to affiliate with another recognized deposit guarantee scheme within the European Union or countries with which the Union has concluded an agreement in the financial sector must notify Financial Stability of this at least 6 months in advance.

Subsection 6. Financial Stability may, on behalf of the Guarantee Fund, collect extraordinary contributions if the credit institution section's assets are not sufficient to make a payment or transfer pursuant to Section 16. A credit institution's extraordinary contribution may per calendar year amount to at most 0.5 pct. of the institution's covered deposits covered by Section 9, subsection 1. Financial Stability may, on behalf of the Guarantee Fund and with the consent of the Danish Financial Supervisory Authority, in extraordinary circumstances demand a higher extraordinary contribution than mentioned in the second sentence. The Danish Financial Supervisory Authority may decide to postpone wholly or partially an institution's payment of contributions covered by the first sentence, if the contribution can endanger the institution's liquidity or solvency.

Subsection 7. If the credit institution section's funds are used in accordance with Sections 2, 2 a, or 16 and as a result are reduced to below two-thirds of the set target level, cf. subsection 2, the credit institutions' annual contributions must be set so that the target level can be reached within 6 years.

Subsection 8. Financial Stability may, on behalf of the Guarantee Fund, at any time request the institutions affiliated in the credit institution section to submit necessary information about any depositor's entitled deposits.

Subsection 9. The Minister for Industry, Business and Financial Affairs may set detailed rules on contributions, including the time of contribution collection, and the use of payment obligations.

Section 7 a. The Guarantee Fund's funds must, for the mortgage credit institution section, consist of cash contributions and guarantees and must amount to at least 10 million DKK. The section's target level for cash contributions must amount to at least 0.8 pct. of the mortgage credit institutions' covered cash funds, cf. Section 10. Financial Stability may, on behalf of the Guarantee Fund, decide that up to 30 pct. of the section's cash contributions may consist of payment obligations. The mortgage credit institutions' individual cash contributions are calculated based on the institution's covered funds and risk profile. The mortgage credit institutions' individual guarantees are calculated based on covered funds and covered financial instruments.

Subsection 2. The Guarantee Fund's funds must, for the investment and management section, consist of guarantees and must amount to at least 10 million DKK. The institutions mentioned in Section 3, subsection 1, Nos. 3 and 4, have individual guarantees calculated as a fixed guarantee for each company and a variable guarantee based on the companies' relative size.

Subsection 3. The Guarantee Fund's funds must, for the restructuring section, amount to 3.2 billion DKK in guarantees from the institutions mentioned in Section 3, subsection 1, No. 1, for use in resolution.

Subsection 4. The credit institutions' total contributions to the restructuring section may within a financial year amount to at most an amount corresponding to 2 per mille of the institutions' deposit base.

Subsection 5. The Minister for Industry, Business and Financial Affairs may set detailed rules on cash contributions and guarantees, including the time of contribution collection, and the use of payment obligations.

Section 7 b. It is the responsibility of Financial Stability, on behalf of the Guarantee Fund, to ensure that the available financial funds in the credit institution section are at all times proportional to the section's potential obligations. If the section does not fulfill the first sentence, Financial Stability must notify the Minister for Industry, Business and Financial Affairs of this as soon as possible.

Subsection 2. Financial Stability must, on behalf of the Guarantee Fund, invest in low-risk assets.

Section 8. Financial Stability must, on behalf of the Guarantee Fund, notify the Danish Financial Supervisory Authority if an institution fails to fulfill the obligations that the institution has as a member of the Guarantee Fund. If a branch has affiliated with the Guarantee Fund, cf. Section 4, the Danish Financial Supervisory Authority notifies the competent authorities in the branch's home country.

Subsection 2. The Danish Financial Supervisory Authority may revoke an institution's permit to conduct business if the institution does not comply with the Act's rules or regulations issued pursuant to the Act.

Chapter 5 Scope of Coverage of the Guarantee Fund

Section 9. In the institutions mentioned in Section 3, subsection 1, No. 1, and the branches of credit institutions mentioned in Section 3, subsection 1, No. 5, which are affiliated with the credit institution section, the Guarantee Fund covers registered deposits in the institution up to an amount corresponding to 100,000 euros per depositor.

Subsection 2. In the institutions mentioned in Section 3, subsection 1, No. 1, and the branches of credit institutions mentioned in Section 3, subsection 1, Nos. 5 and 4, which are affiliated with the credit institution section, the Guarantee Fund covers the deposits mentioned in subsections 3-6.

Subsection 3. The Guarantee Fund covers deposits that, in accordance with the law, have a social purpose and are linked to special events in life, up to an amount corresponding to 150,000 euros per depositor. The deposit is covered for up to 6 months from the depositing of the amount.

Subsection 4. The Guarantee Fund covers deposits as a result of compensation or reimbursement in accordance with the law for damages caused by crime or wrongful conviction up to an amount corresponding to 150,000 euros per depositor. The deposit is covered for up to 6 months from the depositing of the amount.

Subsection 5. The Guarantee Fund covers deposits as a result of transactions regarding real estate up to an amount corresponding to 10 million euros. The deposit is covered for up to 12 months from the depositing of the amount. It is a prerequisite that the real estate has been used primarily for non-business purposes or is intended for primarily non-business use.

Subsection 6. The Guarantee Fund fully covers pension savings accounts in accordance with the law.

Subsection 7. The Minister for Industry, Business and Financial Affairs sets detailed rules for which deposits and products are covered by the Guarantee Fund pursuant to subsections 1 and 3-6.

Section 10. In the institutions mentioned in Section 3, subsection 1, Nos. 2-4, and the branches of credit institutions and investment firms mentioned in Section 3, subsection 1, Nos. 5 and 4, which are affiliated with the mortgage credit institution section or the investment and management section, the Guarantee Fund covers cash funds in the institution up to an amount corresponding to 100,000 euros per investor.

Section 11. In the institutions mentioned in Section 3, subsection 1, and branches, which are affiliated with the Guarantee Fund pursuant to Section 4, the Guarantee Fund covers losses that an investor has suffered as a result of the institution being unable to return financial instruments belonging to the investor, which are stored, administered, or managed by the institution, with up to the counter-value of 20,000 euros per investor. However, an investor may at most receive coverage up to an amount corresponding to the value of the financial instruments that could not be returned by the institution.

Subsection 2. Financial instruments are understood in this Act as instruments mentioned in Section 4 of the Capital Markets Act.

Section 12. Claims for coverage from depositors and investors, cf. Section 9, subsection 1, and Sections 10 and 11, are calculated after deduction of their due obligations to the relevant institution.

Section 13. The Guarantee Fund does not cover deposits, cash funds, and financial instruments that belong to

1. the institutions mentioned in Section 3, subsection 1,
2. financing institutions,
3. insurance companies,
4. collective investment institutions,
5. pension funds and pension funds,
6. public authorities, and
7. foreign financial companies, companies, and public authorities corresponding to the companies and authorities mentioned in Nos. 1-6.

Subsection 2. The Guarantee Fund does not cover

1. an institution's or a foreign institution's capital base and other subordinated capital,
2. deposits, cash funds, and financial instruments that originate from transactions in connection with which a judgment has been passed in connection with money laundering, and
3. deposits and cash funds if the holder has never been identified.

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Section 14. Where several persons are registered as holders of an account or a deposit, each person shall be regarded as an independent depositor or investor for their share in the calculation of the limits set in Sections 9-11.

Section 15. Depositors and investors must be informed about the scope of coverage of the guarantee scheme that an institution is affiliated with. This also includes information about the deposit guarantee scheme of the branches mentioned in Section 3, subsection 1, No. 5, and Section 4 in the home country.

Subsection 2. From the receipt of an orientation as mentioned in Section 206 of the Financial Business Act, depositors and investors have a period of 3 months during which they can withdraw or transfer, free of charge, the part of their deposits or cash funds that are no longer covered pursuant to Sections 9 or 10, as a result of a merger covered by Section 204 of the Financial Business Act.

Subsection 3.