Guarantee Schemes

The Law regulates the Andorran Deposit Guarantee Fund (Fagadi) as a guarantee system for deposits in the terms established in the Directive 2014/49/EU and with an additional cushion of financial resources so that the Fagadi immediately has more resources than those required by the Directive itself.

The Law, like the Directive, establishes a transitional period during which those banks that are members of the Fagadi must contribute annually the amount determined by their Management Committee in order to have financial resources of an equivalent amount of 0.8% of their guaranteed deposits before the deadline of June 30^th 2024.

The Law also foresees that Andorran banks continue to make annual contributions to the Fagadi against their income statement for a period of 8 years from 2024, in order to have an additional volume of ex-ante financial resources equivalent to 0.8% of guaranteed deposits to protect depositors.

During the aforementioned foreseen period given to provide the Fund with the ex-ante financial resources, a dual system will be in place to ensure the immediate availability of financial resources.

Thus, banks have to keep part of the deposit guarantee reserves for those already established pursuant to Law 1/2011 [Llei 1/2011] and assets assigned to these reserves can only be immediately used at the request of the Fagadi Management Committee. The remaining part of the deposit guarantee reserve held by banks under the Andorran application of Law 1/2011 on the date of enforcement of said Law, will be reclassified to unavailable reserves that can be used to cover possible risks or losses; the AFA may authorize its reclassification as available reserves.

As banks make ordinary contributions to the ex-ante Fund, these deposit guarantee reserves may be reclassified as unavailable reserves.

The main regulatory features of the deposit guarantee system are as follows:

• The coverage amount is 100,000 euros per depositor and bank, and additional coverages are foreseen in exceptional cases that guarantee, with a limit of 300,000 euros, deposits from real estate transactions of a residential and private nature, payments received by the depositor on a one off basis and linked to marriage, divorce, retirement, dismissal, disability or death, and those that are based on the payment of insurance benefits or compensation for damages and which are the result of a crime or a legal error, provided that these balances have been paid to the covered accounts during the three previous months.
• The Fagadi's ex-ante resources must reach 0.8% of guaranteed deposits by June 30^th 2024, through the bank’s annual contributions.  Additionally, as of said date, the banks will continue to make annual contributions to the ex-ante Fund so that it reaches a level of 1.6% of financial resources over a period of 8 years starting from 2024. This percentage exceeds the overall 0.8% required by Directive 2014/49/EU as well as the 0.5% that is foreseen as a possible threshold for highly concentrated banking systems, such as the Andorran one. In return, Law establishes a total limit of Fagadi resources.
• The Fagadi will receive the available financial resources corresponding to the ex-ante portion, through contributions that its members realize at least once a year. This will not prevent the obtaining of additional funds from other sources, including financing credits or loans from financial institutions or from third parties that in no case may imply that the maximum coverage limit established in the Law is exceeded.
• When the Fagadi´s available financial resources are not sufficient to reimburse depositors in cases of coverage, the Fagadi Management Committee may request extraordinary contributions from member entities; These contributions may not exceed 0.5% of their guaranteed deposits per calendar year.

• Crowdfunding services are not covered by the deposit guarantee system established in accordance with Law 20/2018.

• Finally, the Fagadi Management Committee, with prior consent from the AFA, may request higher contributions in exceptional circumstances that in no case imply exceeding the maximum limit of coverage established by the Law.

Annual report 2021

Annual report 2022

The Law sets up the Andorran Investment Guarantee System (SAGI) as an ex-post guarantee system in which, are members banks, financial investment companies, financial investment agencies, asset management companies and management companies of collective investment agencies authorised to provide administration and custody services of financial instruments for clients in the Principality.

The main regulatory features of the investment guarantee system ara as follows:

• The coverage is 100,000 euros per holder,  above the coverage level of 20,000 euros established in Directive 97/9/EC. This law also establishes a total limit of SAGI resources.
• The losses derived from the fluctuation in the value of investments are not guaranteed. The guarantee covers cases of non-recovery when the entity that provides administration services and securities custody becomes insolvent.
• The SAGI resources target is established at 1.5% of the base investment calculation as regulated by section 2 of article 18 of Law 20/2018  and with a deadline of June 30^th2020 to get to said target.
• The amount of the investment guarantee reserve that each SAGI member entity needs to maintain must be calculated annually, and must correspond to the proportion that represents the amount of guaranteed investments the entity has over the aggregate total investment guaranteed to all SAGI member organizations. In order to calculate the investment guarantee reserve, 5% of the market value of the investments held by SAGI member entities must be taken into consideration.
• The investment guarantee reserves required by Law 1/2011, maintained in the balance sheets of the SAGI member banks, must be kept as unavailable reserves and assigned to the SAGI that can be used to cover possible risks or losses; the AFA may authorize its reclassification as available reserves.
• Negotiable securities or instruments accepted for crowdfunding acquired through its crowdfunding platform are not covered by the investor compensation scheme established in accordance with Law 20/2018.
• The SAGI Management Committee, with prior consent from the AFA, may request extra member contributions for investment guarantee reserves under exceptional circumstances, which in no case may exceed the maximum coverage limit established in the Law.

Annual report 2021

Annual report 2022  

The Law regulates the Fagadi and SAGI structure and management commissions as controlling, representing and managing bodies of both guarantee systems, composed by representatives of the AFA (Presidency), the Ministry of Finance, the AREB, the Andorran banking sector and of Andorran financial investment entities.

The expenses must be borne equally by all Fagadi member organizations, while SAGI expenses must be proportionally borne by member entities based on the proportion of the amount of guaranteed investments with respect to each entity on the total aggregate of the guaranteed investments of all member entities of the SAGI.

Regulations of the Fagadi’s Management Committee                        Regulations of the SAGI’s Management Committee