Regulation No. 2017-05 - Amending Regulation No. 2016-01 on the Deposit Guarantee Fund — BCSM — SM

THE DEPUTY GENERAL MANAGER
OF THE CENTRAL BANK OF THE REPUBLIC OF SAN MARINO HAVING REGARD TO Law No. 165 of 17 November 2005 (Law on Banking, Financial and Insurance Enterprises and Services), and in particular Article 39, which grants the Central Bank the power to issue measures containing binding and general provisions, and Article 100, concerning guarantee systems for the protection of depositors; HAVING REGARD TO Law No. 96 of 29 June 2005 (Statute of the Central Bank of the Republic of San Marino) and in particular Article 33 which assigns to the Central Bank the functions of supervision and protection of investors, Article 30, paragraph 3, according to which acts of the Central Bank in matters of supervision, deliberated by the Supervisory Coordination, are issued by the General Manager, and Article 14, paragraph 5, which regulates the case of absence or impediment of the General Manager; HAVING REGARD TO Delegated Decree No. 111 of 22 July 2011 (Measures to guarantee the stability of the banking system of the Republic of San Marino) as amended by Article 56 of Law No. 189 of 22 December 2015; HAVING REGARD TO the resolutions of the Supervisory Coordination and the Board of Directors by which the text of Regulation No. 2017-05, named "Amending Regulation No. 2016-01 on the Deposit Guarantee Fund", was approved; ISSUES the attached Regulation No. 2017-05 which enters into force on 1 October 2017. San Marino, 28 September 2017 Signed: THE DEPUTY GENERAL MANAGER Dr. Daniele Bernardi

AMENDING REGULATION
OF REGULATION NO. 2016-01
ON THE DEPOSIT GUARANTEE FUND year 2017 / number 05

Article 1 - Definitional Framework

Paragraph 1 of Article I.I.2 is replaced as follows:
“1. “T/Q cheque”: cheque for discharge and receipt, i.e., a non-transferable cheque sent by the bank to the beneficiary, attesting to a sum available to them, payable on sight by the beneficiary upon affixing, by the beneficiary themselves, a signature for discharge on the front of the cheque, and for receipt on the back of the same;
“low-risk assets”: bank deposits and financial instruments weighted for prudential supervision purposes at 0%, 20% or 50%;
“Central Bank”: Central Bank of the Republic of San Marino pursuant to Article 100, paragraph 2, of Law No. 165 of 17 November 2005 and subsequent amendments;
“EU bank”: the bank with deposits having its registered office and central administration in an EU State, as defined in this Article;
“non-EU bank”: the bank with deposits having its registered office and central administration in a non-EU State, as defined in this Article;
“San Marinese bank”: the bank with deposits having its registered office in the Republic of San Marino;
“joint account”: an account held by two or more persons, or on which two or more persons have rights, exercised through the signature of one or more of such persons;
“Supervisory Coordination”: an internal body of the Central Bank that, as the competent authority, adopts the measure of compulsory administrative liquidation;
“depositor”: the holder or, in the case of a joint account, each of the holders of the deposit;
“deposit”: a credit balance, resulting from funds deposited in an account or from transitional situations arising from banking operations (including the issuance of prepaid cheques, cashier’s cheques or similar instruments), which the bank must return according to the applicable legal and contractual conditions, including a fixed-term deposit and a savings deposit;
“eligible deposit”: a deposit that is not excluded from protection in accordance with Article III.I.2 of this Regulation;
“protected deposit”: the part of the eligible deposit that does not exceed the coverage level set out in Article III.I.3 of this Regulation;
“unavailable deposit”: a deposit that has matured and is due but has not been reimbursed by the bank according to the legal and contractual conditions applicable to it where the supervisory authority has decided to initiate the compulsory administrative liquidation procedure, with the effects set out in Article 87 of Law No. 165 of 17 November 2005 and subsequent amendments;
“financial endowment”: cash, deposits and low-risk assets, liquidable within a period not exceeding that set by Article III.I.5, and payment commitments up to the limit established by Article III.II.1;
“Fund”: the deposit guarantee fund established in the Republic of San Marino;
“payment commitments”: payment commitments of the bank fully guaranteed, provided that the guarantee:
a) consists of low-risk assets; b) is not encumbered by third-party rights and is available to the Fund;
“LISF”: Law No. 165 of 17 November 2005 and subsequent amendments;
“compulsory liquidation”: compulsory administrative liquidation as regulated in Part II, Title II, Chapter II of Law No. 165 of 17 November 2005 and subsequent amendments;
“target level”: the minimum amount of financial means available that the deposit guarantee fund is required to reach pursuant to Article III.II.1;
“Management Body”: an internal body of the Central Bank that, as the designated authority, is responsible for the management of the deposit guarantee fund;
“guarantee system”: deposit guarantee system established in an EU State;
“EU State”: indicates the Member State of the European Union or the European Economic Area;
“non-EU State”: indicates the State not falling within the definition of “EU State” set out in this Article;
“branch”: a place of business that constitutes a part of the bank, lacking legal personality and exercising in whole or in part the reserved activities for which the bank has been authorized.”
As a result of the modifications set out in the previous paragraph, any reference within the Regulation to “covered deposit(s)” is replaced by “protected deposit(s)” as well as any reference to “available financial means” is replaced by “financial endowment”.
Article 2 – Competences of the Management Body
Paragraph 1 of Article II.II.4 is replaced as follows:
“1. The MANAGEMENT BODY, referred to in the previous Article, deliberates on:
a) the general guidelines of the activity of the FUND; b) the interventions of the FUND; c) the exclusions from the FUND, subject to the binding opinion of the SUPERVISORY COORDINATION; d) the extension of protection to DEPOSITORS of BRANCHES OF SAN MARINESE BANKS operating in NON-EU STATES; e) the adherence of SAN MARINESE BRANCHES OF EU BANKS to the FUND; f) the initiation of the request to the CENTRAL BANK for recourse to financing operations charged to the FUND; g) the accumulation plan of the FINANCIAL ENDOWMENT to reach the TARGET LEVEL, as well as related updates following each intervention and the exercise of the possibilities provided for in Article III.II.1 paragraphs 2, 3, 5; h) the initiation and investigation of sanctioning proceedings;

i) any advances requested by DEPOSITORS pursuant to Article III.I.5 paragraph 4.”
2. Paragraph 2 of Article II.II.4 is replaced as follows:
“2. The MANAGEMENT BODY is also endowed with the following powers:
a) establishes the guidelines regarding the investment methods of the FUND’s FINANCIAL ENDOWMENT; b) requests at any time from its participating entities, also through the Supervision Department of the CENTRAL BANK, the necessary information on DEPOSITS and DEPOSITORS for the performance of its activity, including stress tests to be carried out in accordance with this Regulation also by means of the information flow referred to in the following Article III.I.2 paragraph 2; c) exchanges information with GUARANTEE SYSTEMS regarding the adherence of BRANCHES OF EU BANKS to the FUND and their possible exclusion from it; d) cooperates with GUARANTEE SYSTEMS in accordance with what is provided for in Article III.IV.2 of this Regulation; e) verifies that the protection offered by foreign guarantee systems to which SAN MARINESE BRANCHES OF NON-EU BANKS adhere is equivalent to that offered by the FUND, pursuant to Article II.I.4 paragraph 3; f) calculates the amount of contribution shares borne by participating entities, as elaborated by the Supervision Department of the CENTRAL BANK, proceeding then to debit the centralized account that the banks themselves maintain at the CENTRAL BANK; g) manages any further aspect related to the functioning of the FUND that is not expressly attributed to the competences of another body in accordance with the provisions of this Regulation; h) carries out the activities provided for in this regulation and prepares the related external communications, where required, using the executive structure of the CENTRAL BANK and in compliance with its internal regulations.”
Article 3 – Scope of Application of Interventions

Paragraph 1 of Article III.I.1 is replaced as follows:
“1. Pursuant to Article 56 of Law No. 189/2015, the FUND intervenes only in cases of COMPULSORY LIQUIDATION of an adhering bank, therefore the intervention of the FUND falls among the effects of the COMPULSORY LIQUIDATION.
Consequently, any cause of suspension of such effects determines the interruption of the time limits set out in Articles III.I.5 and V.I.1.”
Article 4 – Eligibility of Deposits
Paragraph 1 of Article III.I.2 is replaced as follows:
“1. The following are excluded from any reimbursement by the FUND:
a) DEPOSITS made by other banks, San Marinese or foreign, in their own name and for their own account, without prejudice to the provisions of Article III.I.4 paragraph 4 of this Regulation, including DEPOSITS deriving from own funds, as defined pursuant to Articles VII.II.2 and VII.II.3 of Regulation 2007-07;

b) DEPOSITS deriving from transactions for which there has been a final conviction for a crime of money laundering of proceeds from illegal activities or financing of terrorism, pursuant to Article 199 bis of the Penal Code or equivalent foreign criminal law provision; c) DEPOSITS of other subjects authorized pursuant to LISF, other than banks, even if already deleted from the Register of Authorized Subjects, and DEPOSITS of companies not registered in the aforementioned register but which nevertheless carry out activities equivalent to those reserved pursuant to LISF abroad; d) DEPOSITS whose holders, at the time of the initiation of the COMPULSORY LIQUIDATION procedure, have never been identified in accordance with the regulations on combating and preventing money laundering and financing of terrorism; e) DEPOSITS of pension funds; f) DEPOSITS of public authorities; g) debt securities issued by the bank (including bonds) and liabilities arising from acceptances, promissory notes and securities operations (including repurchase agreements), with the exception of TEMPORARY DEPOSITS in the technical account, instrumental to an individual asset management mandate conferred by the DEPOSITOR to the bank itself. Credits related to funds acquired by the bank do not constitute DEPOSITS and are therefore not eligible for protection by the FUND:
a) whose existence can only be demonstrated through a financial instrument, unless it is a savings product represented by a certificate of deposit referring to a specific name; b) whose capital is not repayable at par or is repayable at par only based on a specific guarantee or agreement provided by the bank or a third party.”
2. Paragraph 2 of Article III.I.2 is replaced as follows:
“2. Participating entities are required to:
a) mark ELIGIBLE DEPOSITS by DEPOSITOR, pursuant to the previous paragraph, in order to allow the immediate identification at any time by the MANAGEMENT BODY of the “aggregated position per DEPOSITOR” or Single Customer View (SCV); b) produce the aforementioned flow at least quarterly and submit it to internal verification by the Internal Audit Function, which will transmit the resulting report on an annual basis to the Board of Directors of the bank and, in case anomalies are detected, also to the MANAGEMENT BODY.”
3. The following final paragraph is added to Article III.I.2:
“4. In cases of DEPOSIT in a dedicated position held by a San Marinese or foreign trustee but uniquely attributable, by the bank, to one or more settlors who are the beneficial owners, the eligibility of the DEPOSIT as well as the amount of the reimbursable sum shall be recorded, for the purposes of the previous paragraphs, with regard to each of them; otherwise the DEPOSIT of the trustee shall be considered ineligible pursuant to what is provided for in paragraph 1, letters c) and d).”.
Article 5 – Coverage Level

Paragraph 2 of Article III.I.3 is replaced as follows:
“2. The limit established in the previous paragraph does not apply, in the nine months following their crediting or when they become available, to DEPOSITS of natural persons involving amounts deriving from:
a) operations relating to the transfer or constitution of real rights on real estate units used as housing; b) divorce, retirement, termination of employment relationship, disability or death; c) payment of insurance benefits, compensations or indemnities relating to damages for intentional personal injury or for unjust imprisonment.
Paragraph 3 of Article III.I.3 is replaced as follows:
“3. For the purposes of reimbursing DEPOSITS referred to in the previous paragraph, the DEPOSITOR must submit a documented application to the Liquidator Commissioner of the bank, informing the MANAGEMENT BODY. The application must be submitted within 60 days from the date on which the effects of the COMPULSORY LIQUIDATION occur. The Liquidator Commissioner, after conducting the investigation, transmits the proposal and documentation to the MANAGEMENT BODY for decisions.”
Article 6 – Determination of Reimbursable Amount
Paragraph 2 of Article III.I.4 is replaced as follows:
“2. DEPOSITS in a JOINT ACCOUNT are computed in equal proportions among the co-holders, also for the purposes of applying the limit provided, for each DEPOSITOR, of 100,000 euros. DEPOSITS in an account where two or more subjects are holders as participants of an entity without legal personality are treated as if they were made by a single DEPOSITOR.”
Article 7 – Reimbursement
Paragraph 1 of Article III.I.5 is replaced as follows:
“1. Reimbursement by the FUND is made within 7 working days from the date on which the COMPULSORY LIQUIDATION produces its effects, pursuant to Article 87 of LISF, without it being necessary for DEPOSITORS to submit any request to the MANAGEMENT BODY, with the exception of temporarily elevated balances referred to in Article III.I.3 paragraph 2 and for advances referred to in the following paragraph 4, considering that the participating entity provides ex officio the necessary information on DEPOSITS and DEPOSITORS, pursuant to Article V.I.1.
Paragraph 4 of Article III.I.5 is replaced as follows:
“4. During the transitional period until 31 December 2023, if the FUND is unable to make the reimbursable amount available within 7 working days, upon reasoned request by DEPOSITORS to the MANAGEMENT BODY, the FUND must nevertheless guarantee within the same term, subject to what is provided for in the previous Article II.I.1, access by the latter to an advance charged to the amount due to them for reimbursement as communicated by the Liquidator Commissioner, of an amount sufficient to cover, for the additional days required for reimbursement, essential current expenses. The aforementioned request must reach the MANAGEMENT BODY already accompanied by the data provided for this purpose by the bank.”
Paragraph 5 of Article III.I.5 is replaced as follows:
“5. The FUND may defer reimbursement in the following cases:
a) if there is uncertainty regarding the right of a subject to receive the reimbursement or the DEPOSIT is subject to a legal dispute, as in the case where the DEPOSIT is subject to seizure; b) if the DEPOSIT is subject to restrictive measures imposed by a State or international bodies; c) subject to what is provided for in the following paragraph 8, if no operations relating to the DEPOSIT have been carried out, although available, in the last 24 months prior to the COMPULSORY LIQUIDATION (the account is dormant), in which case, subject to what is provided for in the following paragraph 8, the reimbursement is made within 6 months from the date on which the COMPULSORY LIQUIDATION produces its effects; d) in the cases referred to in Article III.I.3 paragraph 2, if the amount to be reimbursed exceeds the coverage level of 100,000 euros, the deferral applies only to the excess and the reimbursement is made within six months from the date on which the COMPULSORY LIQUIDATION produces its effects; e) in the cases referred to in Article III.IV.2 paragraph 1.”
The following paragraph is inserted after paragraph 5 of Article III.I.5:
“5bis. Only in exceptional circumstances, the SUPERVISORY COORDINATION, also on the initiative of the MANAGEMENT BODY and subject to the favorable opinion of the Committee for Credit and Savings, referred to in Article 48 of Law No. 96 of 29 June 2005, may deliberate, for a defined period, the suspension of the running of the time limits set out in the previous paragraphs 1, 2, 3, 4, as well as order the disbursement of reimbursements in installments. The following are in any case included among the exceptional circumstances referred to in this paragraph:
a) the impossibility communicated by the liquidator commissioner to comply, within the time limits, with what is provided for in Article V.I.1; b) the initiation by the Committee for Credit and Savings and/or the SUPERVISORY COORDINATION, in their respective roles and in the exercise of their respective prerogatives, of initiatives, even of a legislative and/or systemic nature (so-called “systemic operations”), suitable to better protect the creditor rights of DEPOSITORS compared to the guarantee provided by the FUND with its intervention within the limits set by this Regulation.”
Paragraph 6 of Article III.I.5 is replaced as follows:
“6. Any correspondence between the FUND and the DEPOSITOR is drawn up in the language used by the bank for communications with the DEPOSITOR at whose branch the PROTECTED DEPOSIT is located or in one of the official languages of the State where the BRANCH at which the PROTECTED DEPOSIT is located is established.”
Paragraph 8 of Article III.I.5 is replaced as follows:
“8. No reimbursement is provided for if there have been no operations relating to the DEPOSIT in the last twenty-four months and the value of the DEPOSIT is less than one hundred euros.”
The following paragraph is inserted after paragraph 8 of Article III.I.5:
“8bis. Nor is any reimbursement provided for by the FUND if, within the time limits set out in the previous paragraphs, the DEPOSITS, even if in another technical form, have returned to the availability of the DEPOSITORS, also following the transfer of the same to another bank.”
Paragraph 9 of Article III.I.5 is replaced as follows:
“9. Reimbursements are made, by decision of the MANAGEMENT BODY, in euros or in the currency of the State where the holder of the DEPOSIT resides. DEPOSITORS are informed of the currency of the reimbursement. If the accounts are kept in a currency different from that of the reimbursement, the calculation of the reimbursement due is made with reference to the exchange rate of the day on which the COMPULSORY LIQUIDATION produces its effects, pursuant to Article 87 of LISF.”
Article 8 – Ordinary Contributions
Paragraph 1 of Article III.II.1 is replaced as follows:
“1. The FUND constitutes a FINANCIAL ENDOWMENT by 3 July 2024 up to reaching the TARGET LEVEL, equal to at least 0.8% of the total PROTECTED DEPOSITS, through ordinary contributions paid annually by the participating entities.”
Paragraph 9 of Article III.II.1 is replaced as follows:
“9. By way of derogation from paragraph 1 of this Article, the MANAGEMENT BODY may establish a lower TARGET LEVEL, however not less than 0.5% of PROTECTED DEPOSITS, if the SUPERVISORY COORDINATION considers that the banking sector in which the participating entities operate is highly concentrated and a large amount of assets is held by a small number of banks or banking groups, which, given their size, in the event of a crisis would probably be subject to procedures other than COMPULSORY LIQUIDATION.”
Article 9 – Other Sources of Financing
Paragraph 1 of Article III.II.3 is replaced as follows:
“1. To meet the obligations arising from interventions, the FUND, and for it the CENTRAL BANK, may contract financing.”
Paragraph 2 of Article III.II.3 is replaced as follows:
“2. The SUPERVISORY COORDINATION, if it considers that the contributions referred to in the previous Article are excessively burdensome for the participating entities of the FUND, may authorize the MANAGEMENT BODY to raise the FINANCIAL ENDOWMENT from systems of mandatory contributions, indicating to each adhering bank how much part of the assets bound against other obligations has been made available for extraordinary contribution to the FUND.”
Paragraph 3 of Article III.II.3 is replaced as follows:
“3. The reimbursement of the financing referred to in paragraph 1 is regulated against the FINANCIAL ENDOWMENT constituted through contributions and on the proceeds of the FUND’s investments.”
Article 10 – Calculation of Contribution Shares
In paragraph 3 of Article III.II.4, the words “of the profiles” are deleted.
Article 11 – Information Obligations towards Depositors
Paragraph 1 of Article III.III.3 is replaced as follows:
“1. BANKS inform DEPOSITORS, actual and potential, in the case of PROTECTED DEPOSITS, on their membership in the FUND or other GUARANTEE SYSTEMS, on the levels of protection and on the exclusions from the relative protection.”
Paragraph 2 of Article III.III.3

Regulation No. 2017-05 - Amending Regulation No. 2016-01 on the Deposit Guarantee Fund

Lineage: In force

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